Australia’s net worth is the latest number to confirm that the Turnbull government is among the least competent economic administrations in the developed world. And, needless to say, the most disastrous in Australia’s post-war history.
Australia’s net worth tumbled in the two years Tony Abbott and Joe Hockey were PM and treasurer — by a staggering $114.6 billion. It has collapsed by a further $76.2 billion since Turnbull and Morrison replaced them.
This is truly astonishing given that the last four years have brought steady recovery from the global financial crisis. The last two have posted exceptional trade volumes, commodity prices, corporate revenues and gross profits.
Virtually all economic indicators show that the current global boom is benefiting only the minority of Australia’s rich entrepreneurs and the large, mostly foreign corporations. The majority of Australians are going gradually backwards.
[Hard data confirms inequality is growing, with corporate Australia the clear winner]
The latest net worth figures confirm Australia’s economy overall is also suffering badly.
Net worth is the measure of federal government assets minus liabilities. Assets include cash, deposits, investments, land, buildings, equipment, infrastructure and heritage and cultural assets. Liabilities include superannuation and other employee liabilities, debts to suppliers and government borrowings.
The numbers are released monthly by the Finance Department — with a frustrating three-month break between May and August. Unsurprisingly, this data is released late on a Friday evening.
Last Friday night’s update — for August 2017 — shows net worth at -$396.7 billion. This makes 20 consecutive months deeper than -$340 billion. The lowest this ever reached under Labor was -$263.8 billion. That was at the depths of the GFC, the worst recession in more than 80 years.
The history of net worth is quite instructive. As much as any indicator, it highlights the stark contrast between Labor and the Coalition. This is why it is rarely, if ever, mentioned by the mainstream media.
Net worth remained negative throughout most of the dismal Howard years, despite the rivers of gold from the mining investment boom. And despite the healthy global trade in meats, wool, minerals, energy and other commodities. This is attributable partly to the extensive sell-off of profitable public assets — usually at bargain prices.
After fluctuating between -$30 billion and -$75 billion for most of the period from 1999 (when this data set began) to 2005, the value crept up through 2006 to break even in April and May. Between May 2006 and November 2007, net worth fluctuated between -$1.7 billion and $22 billion.
At the time of the 2007 election, it was a lowly $15.2 billion. But at least it was positive — at last.
Then came that extraordinary period of energetic reform which rocked the economic world — but which the Australian media steadfastly refused to report accurately.
In the brief period between gaining office in November 2007 and the onset of the GFC, the outcomes achieved by novice PM Kevin Rudd and treasurer Wayne Swan were impressive.
In their first nine months, 225,500 new jobs were created. Gross debt had been stuck around $60 billion for four years. Rudd’s regime reduced it to $52.4 billion within a year and increased the net money in the bank from a puny $22 billion to $48 billion.
Former treasurer Peter Costello had set the 2007-’08 budget parameters for a surplus of $10.6 billion. Swan re-jigged things and delivered an actual surplus of $19.8 billion — the highest in Australia’s history.
[Turnbull spins ‘debt is good’ as Australia’s net worth collapses to an all-time low]
Exports rose quickly after relations with trading partners were restored. This enabled Labor to achieve a trade surplus within its first year, thus ending a string of 77 monthly trade deficits.
Net worth surged from the modest $15.2 billion Howard left behind to a record $36.1 billion in six months. From that level in May 2008 it surged again by August to $74.6 billion — more than three times higher than the Coalition’s peak.
It stayed above $64 billion until December 2008, by which time all developed economies, including Australia’s, were in close to free fall following the collapse of the world’s stock exchanges, the bankruptcies of major bank and finance groups and the dramatic disintegration of trade and commerce.
Net worth declined through the GFC along with most other indicators — although, surprisingly, neither GDP growth nor employment levels suffered badly in Australia.
Net worth reached its nadir in September 2012, at -$263.8 billion. With employment relatively buoyant and the economy still in positive growth, this gradually improved thereafter. By April 2013, net worth was back above -$250 billion and by July had lifted above -$200 billion.
At the time of the 2013 election, net worth was -$205.9 billion and headed steadily towards positive territory again as the last of the developed countries emerged from recession.
But instead of continuing to surge ahead, as the Coalition promised, the opposite happened. Dramatically so.
Net worth fell below -$250 billion in July 2014, then below -$300 billion in January 2015. By August 2015 it had collapsed to -$320 and economists heaved a sigh of relief when the Coalition sacked its leader and treasurer.
Things then worsened rapidly: -$350 billion was breached in January 2016 and -$400 billion in September 2016.
The Coalition has thus doomed future administrations to crippling interest payments on the bad debt, or cuts to services, or punitive tax hikes, or all of the above.
Net worth confirms as clearly as any measure that Coalition fiscal policies that seek to grow the economy by serving the big corporations first and foremost in fact have the opposite effect.
The mystery is why none of this gets reported elsewhere? Could it be that ‘net worth’ is such a difficult concept to comprehend that the average non-economist simply has an eye-glazing moment at the thought? However, as Crikey continually reports, this is just another economic indicator which has gone backwards since 2013, so it should come as no surprise. Why does no one else report details of the other poor economic indicators under this Govt?
That Wayne Swan ‘re-jigged things and delivered an actual surplus of $19.8 billion — the highest in Australia’s history’ would make a great pub trivia question, although no one would believe the true answer.
Again Alan . . . good grist for the mill. Both content, and further exposure as PaulM identifies. It is absolutely true that the greater damage inflicted upon our democracy by mainstream media is not bias, untruth or deceitful obfuscation; rather the unchallengeable omission of essential knowledge/information. Thereby excluding, denying reader/electorate participation/contributing to public discourse. A prime component of why Australian democracy is in decline.
Under this government of coal worshippers? Pass the goat….
…. and Turnbull? What a waste of naked ambition?
No quibble with your main gist, Alan, that this Coalition government’s economic stewardship is downright shocking. But correlation isn’t causation, and the economy’s weakening isn’t all down to Abbott/Hockey and Turnbull/Morrison (and I say that without the slightest intention of defending them, as politicians, or as people).
Of equal note to the Coalition’s obvious retrograde and misguided policy decisions is that since they came to power many major resource projects worldwide have come on line, flooding ‘our’ minerals and energy markets, driving prices down; our terms of trade have consequently shifted adversely (and not been anywhere near sufficiently offset by currency depreciation), sharply reducing our national income; China has slowed – for us considerably – as it commences its pivot away from export dependency; the EU continues to teeter on, just, depriving us of what should be a massive growing market; Brexit happened, and is now beginning to come home, ominously; and Trump’s America is starting to unravel, perhaps soon both home and away, even more ominously; and so on, and so on.
So, you’ll get no dispute from me that Howard/Costello squandered the better part of the resources boom with profligate middle class welfare and fantastically irresponsible tax cuts. But it was Rudd/Swann/Gillard Labor who should have defused that extraordinary time-bomb, and they simply didn’t. And it’s frankly cold comfort to know that the Coalition government is suffering from that legacy now. So to suggest now (or to imply by elimination) that we should put our trust in Labor – because ‘the data’ – I’d humbly suggest is a little bit of an insult to the intelligence of Crikey readers.
We know what’s wrong with the Coalition’s economic management (and thank you for painting so much of that story). But, with the greatest respect, Alan, what’s the alternative policy platform – rather than party – and why?
Why would you want the domestic government non-government sector to be in deficit with respect to the federal government? That is the logical corollary of Austin’s wish for the federal government to be in surplus with respect to the domestic non-government sector.
Uhgg?
Fair questions, Will. Thanks.
Note the last sentence: “Net worth confirms as clearly as any measure that Coalition fiscal policies that seek to grow the economy by serving the big corporations first and foremost in fact have the opposite effect.”
That was a contraction of the first draft of this piece which read: “Net worth as clearly as any indicator confirms that industry, employment, wage and taxation policies implemented by the Coalition which seek to grow the economy …”
The main differences in the policy settings between reformist centre left parties like Australia’s ALP, the UK’s Labour, Canada’s Liberals and Labour in NZ and pro-business conservative parties are in those four specific areas.
Evidence from all of those countries shows policies which shift wealth and income from the rich minority to the poor majority advance not only the immediate recipients, but the health of the economy overall.
Compelling evidence for this emerged when the New Zealand’s conservative Government in 2011 copied the policy settings of Kevin Rudd and Wayne Swan and saw a dramatic improvement in virtually all economic indicators – including for the rich.
See here:
https://uat.crikey.com.au/2016/12/12/treasury-publishes-dodgy-anti-labor-research/
And here:
https://uat.crikey.com.au/2017/01/24/nz-data-proves-company-tax-cuts-hurt-the-economy/
Happy to discuss, Will.