For many it’s something we have known for some time, but for the broader community the evidence became crystal clear this week with the release of the latest private investment data from the Australian Bureau of Statistics.
The March quarter showed that new capital expenditure fell by 4.4% (5.3% for the year to March 2015). It also showed that investment in buildings fell, along with investment in equipment, mining and manufacturing.
What makes it worse is that expected future expenditure on capital, on building, on equipment, plant and machinery is lower than that indicated by firms for 2014-15, in some cases by as much as 27%.
What this data reveals is that Joe Hockey’s May fiscal statement (budget), suggesting that non-mining investment would grow by 4% in 2015-16 is deeply flawed. Therefore all the associated assumptions on revenue stemming from that are also flawed.
Economist, Professor Bill Mitchell, who like many others was highly skeptical of Hockey’s forecasts, is convinced we are heading for a recession. “Now that we have more data, the reality is starting to look like recession if the Government does not rather radically alter its fiscal settings (from austerity to stimulus).”
The figures paint a grim picture for the March quarter GDP numbers due to be released this week. They could show a negative figure. If it does and it is repeated in the June quarter we would be officially in recession.
If that happens, Joe Hockey might well reflect on his own behaviour as a partial cause. He must surely rue the days he spent talking down the economy prior to the 2013 election.
His subsequent bluster about lifters and leaners and his reckless 2014 budget, convincing everyone to stop spending and start saving, has had a dramatic impact on the present position.
After more than three years scaring people with talk of a budget emergency, he suddenly emerges with a new message urging us to start spending. Really?
How simple is it? If you frighten people into thinking they will have less disposable income, what are they going to do? Stop spending of course. If, twelve months later, you then tell them all is well with no evidence to back it up, what will they do? That’s right. They won’t believe you.
Joe Hockey has snookered himself, shot himself in the foot, demonstrated all too clearly he doesn’t know what he’s doing and now expects us to trust his management unquestionably.
All this while he accepts $270 a night from the taxpayer, for accommodation in a house part-owned by his wife, while he criticises people claiming paid parental leave from both government and employer.
The hypocrisy is astounding and he should not be treasurer.
When the country goes into recession as it surely will and people lose their jobs because their firms cannot move product, what will he tell us then? That’s right. It’s all Labor’s fault?
That will be the mother of all excuses. But will he then propose a stimulus to restore employment and growth? Unlikely.
In today’s Age newspaper, Ross Gitten’s exposes more flaws in Hockey’s fiscal statement (budget). The “illusions and padding” outlined include real growth in spending estimated at 1.1% through to 2017-18.
John Daley of the Grattan Institute says, “This would be remarkable restraint given long-term growth is more than 3 per cent each year,” he says. “It would be particularly remarkable in a period that spans an election year.”
Saul Eslake, from Bank of America Merrill Lynch and Dr Mike Keating from Insight Economics Pty Ltd have also pointed out that from 2020-21 Hockey has annual net earnings from the Future Fund counted as revenue rather than an increase in the fund itself.
In other words, Hockey is raiding the Future Fund.
This accounts for more than half of Hockey’s highly questionable surplus estimates for 2024-25 and 2025-26 and makes Tony Abbott’s claim that the budget is on a credible path back to surplus, a mockery.
And this is what we call having the adults back in charge.