While the prime minister offers another economic vision today to the press gallery in Canberra, there’s a broader context for one of the themes of his speech (at least as reported ahead of delivery), that the economy has to be weaned “off the medication” of support “before it becomes too accustomed to it”.
Morrison might be referring to the government’s stimulus and support packages to get us through the current pandemic crisis, but the economy has been on “medication”, and much stronger, since 2008. Labor pumped around $190 billion of deficit spending into the economy between 2008 and 2013.
Since then, up until February — and despite the Coalition’s claim that it would produce a surplus in its first year and every year after that — the current government has pumped around $170 billion into the economy. The dramatic increase in deficit spending this year and next will send that to over $300 billion.
Despite that fiscal stimulus, the economy has struggled. The last time GDP was over 4% annual growth was under Wayne Swan. It has only exceeded 3% in three quarters since then — insufficient to generate enough jobs to get unemployment below 5%, which we last reached in 2011. In 2018 and 2019, as the government cut its deficit spending back to around $10 billion, aiming to reach surplus, growth slumped to average 0.5% per quarter
And growth slumped despite ever looser monetary policy from the Reserve Bank (RBA). The cash rate hasn’t been above 2.5% since the brief restoration of Kevin Rudd. It hasn’t been above 2% since Tony Abbott was PM. Even 1.5% proved too high last year. The RBA now suggests it will remain at 0.25% for three years. And that’s in addition to a major program of quantitative easing to keep bond rates and business lending rates low.
Medication? The economy has been on fiscal and monetary life support for years.
Not so according to the government — the economy was “strong”, it insisted before the last election; these days, Treasurer Josh Frydenberg frequently states that growth was increasing at the end of 2019. It wasn’t.
Even an immediate, miraculous recovery from the pandemic will only restore the economy to its comatose state of late 2019, when what were at that stage emergency low interest rates accompanied regular calls from the RBA and business for fiscal policy to be re-upped to stimulatory levels.
Accompanying that has been a slump in productivity growth since its surge under Labor, to the extent that productivity actually went backwards last year.
The government’s refusal to accept that the economy has been stagnating even with fiscal and monetary support — and, for that matter, the media’s reluctance to report that — lends a surreal element to the current debate about the post-pandemic economy. Will there be a new era of big government? Yes, the left choruses; no, call the last of the neoliberals from the pages of the Financial Review.
But the era of big government never went away. The last time spending as a proportion of GDP was below 24% was — again — when Swan was treasurer. It was above 25% until Malcolm Turnbull became prime minister and remained at 24.6% of GDP in 2019. What will it reach this year? 27% 28%?
Tax to GDP has risen steadily under the natural party of big government in Australia — the Liberals — from 21.3% under Labor to 23.8% last year. While the government insists that prior to the virus, we had a strong, small-government, low-tax economy, the economic debate is proceeding under false pretences.
It’s now nearly three weeks since we normally would have had a budget, complete with its lock-up silliness (which, hopefully, we’ll never have to endure again). We’ve had a fairly pointless economic statement from the treasurer, and today’s Press Club effort from the prime minister, but we’ll have to wait until next month for a proper economic update and until October for the 2020-21 budget.
Given we’ve emerged from the lockdown much more quickly than expected — so much so that Treasury has massively downgraded its forecast expenditure on JobKeeper — there’s no excuse for delaying the budget until summer is almost upon us.
If the government really is serious about some sort of economic reset, four-plus months of uncertainty and thumb-twiddling, punctuated by the occasional vague speech of policy aspiration, simply isn’t good enough.
An August budget — just like olden times — should be achievable. Malcolm Turnbull readily pulled the 2016 budget forward — indeed, he didn’t even bother telling treasurer Scott Morrison first. Morrison should bring the 2020 budget forward, and at least go one better and let Frydenberg know in advance.
Well Bernard one thing you can be sure of is that every economic down turn or government fiscal stuff up will be blamed in short order on COVID-19 and most will believe them, ’cause they’re great economic managers. However, it will make a change from blaming Labor!
To pinch a phrase from Robert Manne (talking about something else) the mention of economic strength is an essential part of the liberals “relentless drumbeat” of propaganda. The illusion of good economic management is central to their electoral success. They’ll just keep saying it, over & over &….
Hi! BSA Bob…you would think by now the sheeples out there might work out that with millions un- and under- employed, perhaps they should stop listening to the ‘propaganda’ spewed forth by ‘Sooty from Marketing’ and his band of less than average muppets!
If only!!
Should be interesting to see what happens when our so-called government reverts to austerity measures, removing Jobkeeper and reducing Jobseeker. That direct hit to those millions of people mentioned before just might do it…if not, we are doomed.
I live in hope that said sheeples will wake up very soon!!
If you look at Michael West’s analysis of just exactly how much Smirko and the muppets spent keeping their bums on the leather of the BMW’s and the lawns of Kirrabilli House it is enough to make you ill. Sorry Medicare doesn’t cover the consultation or anything else.
Now we have the same malicious truth twisters attempting to emulate Bob Hawke’s accord and yes, the spittoon is not far away.
Compare and contrast the circumstances.
Bob Hawke, former leader of the ACTU, popularly elected with a resounding majority after leading the party for less than 6 weeks.
Bill Hayden, probably the best and most genuinely decent man, stood aside as leader, so that there would be no ballot and he certainly made one of the best Governor General’s we have ever had.
Bob and Paul had a plan to modernize Australia and to build a strong social security safety net and they hit the ground running. We were with them and the wind was at our back.
In contrast: The M for Morrison of the 3rd term ATM government, slid into a one seat majority after emptying our coffers of an estimated 8.1 billion dollars of grants and rorts during a period of 6 months when Morrison, suffering from a self- inflicted wound of minority government, had discovered the joys of spending without any inconvenient questions being asked by parliament.
Dictatorial tendencies that we have seen much more of!
Helped into his second term as Prime Minimal by a self aggrandizing member of the long defunct white shoe brigade and Joh’s old spin doctor, Clive Palmer.
The Face Book campaign featured the grim reaper and targeting the mining communities with false claims of a secret death tax.
My guess is, that, that is what Clive is frightened of.
Food for thought.
Morrison has got a taste of being “el Presidente” and I wait with skepticism to see the outcome of any talks between interested groups.
I think that once the health emergency is considered under control, I don’t think anything constructive will come out of the talks because if you scratch him, you will find, under the veneer a man who believes that god directs his every move.
It must be noted at this point in time at least 425 deaths have been directly attributed to the bush fire smoke. No one is putting numbers on those injured or damaged by either the smoke or the fires or the trauma of either fighting the fires or leaving their homes, animals and lifetimes to be burned.
Morrison as the treasurer of the T for Turnbull part of the 3rd term ATM government rejected the repeated requests from the fire chiefs who had fought and
co-ordinated the response to the Black Saturday fires, for the Australian Government to acquire 2 or 3 very heavy lift water bombing aircraft because the country was beginning to dry out and the fire danger was rising exponentially.
The Garnaut report recommended the purchase of Australian water bombing planes.
This now 13 year old report was commissioned by the last Royal Commission into the last disastrous and deadly fire season and came eerily accurate down to New Years Eve of 2020, when the residents of Malacoota were on the beach/ in the water and in dinghies cowering from the raging firestorm.
Answer, from Smirko, NO! We hire planes and it’s a state responsibility and so, under Morrison we gave our old Hercules heavy lift planes to Indonesia instead of converting them.
The sheer arrogance and ignorance of this shape shifter when he bought his one seat majority was helped by the Labour Party acting as if they had been beaten into the ground.
The wailing around whilst heaping ashes on their heads.
The sheer drama could probably only have been outdone by a Shakespearean production. I was beginning to wonder about getting some of them professional help.
Anyhow, Morrison will think that after the Royal Commission, which was funded so that no one could ask him questions regarding his “Not Panicking” response, his “Go on holiday to a Hawaii response”, his “Call in the Army reserves without asking or informing the Rural Fire Chief” OR, the make big noting promises and wait for the announcements to finish to tell anyone except friends of the National Party that they were ineligible for any money, go beg from a charity.
I was explaining to a friend of mine who is an Australian citizen of Malay Chinese heritage as he was having discussing with me why I thought that the population was being so, compliant with the Covid19 protocols, when normally getting patients to be compliant is like herding kangaroos.
He looked shock when I said that the general population will do anything to help their community, as long it is seen by everyone as a social responsibility and for the common good.
The outbreaks of Moronovirus are able to be both contained and viewed as a form of stupid for which there appears to be, currently no cure.
If the general population of Queensland decide that they can tolerate them no more. Queensland will happily export them and close our borders to them, possibly forever.
He was laughing so hard I thought he may lose his ear lobes.
I was not joking about closing our borders to Pauline and Ashby, hopefully the next time they try to get funding from the gun lobby in the US.
Poor Nauru!
“Morrison, … discovered the joys of spending without any inconvenient questions being asked by parliament.
When the chickens come home to roost he won’t know what’s hit him.
It must be agony for BK to admit that the last fiscally sound & productivity enabling government was Labor.
Since 2013 it’s been downhill by all the criteria usually mentioned, productivity, workforce participation, debt to GDP and tax take to GDP.
Pity that consistency has never been his forte.
Fair enough, but the references of spend to GDP and tax to GDP are pointless, and suggest or implies that lower is better.
The obvious rejoinder is “Why”? The rate of spending and tax is a political decision, not an economic one. Higher or lower is not better or worse, except to the extent that the higher tax and spend Scandinavian countries seem to be doing everything we used to aspire to, free education, equality of opportunity, free health care and a civil society.
Civil society?
What about the bombings in Sweden?
https://www.theguardian.com/world/2020/jan/25/bombs-blood-feuds-malmo-explosions-rocking-swedens-cities
They are so frequent that they are no longer reported on internationally.
Here’s a quote from the link …”The bombs are also usually timed and placed in such a way that no one is killed or injured. “What we see is the explosions are mainly in some way to threaten others… to scare them in some way,” he said. “They’re not doing this to hurt one another.””
As bombings go, that sounds like a fairly civil approach !
There’s an economic philosophy that recognises that growth economics is unsustainable, that the boom and bust of it only benefits the super rich in the long run. Going by the somewhat quirky name of the Doughnut Model, it espouses a kind of circular economics, where what’s coming in is balanced by what”s going out. It incorporates social justice and environmental responsibility. Hmmm far too simple and sensible for our politicians who are far too influenced by the super rich. They’d do well to remember that theoretically they only have one vote at the ballot box. Even if they do use their money for influence, the politicians would do well to remember that these ordinary Aussies have the capacity to pull the whole house down.
I doubt that “ordinary Aussies have the capacity to pull the whole house down.” – in theory they have the right & the power to do so but “capacity”?
I think/fear not.
Had they two connectable brain cells, they’d have not voted as they’ve done so consistently for too long.
Given today’s victory for the Nation in the High Court deciding in favour of historian Jenny Hocking’s right to access the 1975 Dismissal papers it seems that “Maintain the Rage” was all the rage at the time – and proved not to be worth a pinch of the proverbial.
Four times the Rodent was (s)elected.
The Abbottrocity won in 2013 and even, though the Right held their collective nose, even Talcum won in 2016.
I forget what happened in May 2019 as by then I’d been transported to Planet Zog…or so it seems from the result.
Capacity implies ability but I see little evidence of that, collectively or individually.