Just eight weeks after the release of the 2015-16 Federal Budget, one that the MSM will tell you was well received, serious doubts are now beginning to emerge not just with growth estimates generally, but also with revenue targets; doubts that are coming from a variety of qualified sources.
If we are able to look beyond the recent scare campaigns being waged, we see the current trend in overall growth is well below the level necessary to bring unemployment down. Wages growth is stagnant, business investment is sluggish and household spending is restrained.
By now, Joe Hockey would have realised that dramatic spending cuts are not the smartest way to manage an economy particularly when those cuts take money away from people who actually spend it.
Having spent most of his time in opposition bagging the economy, then taking a machete to it at the first opportunity when in government, Joe Hockey’s scare campaign has achieved the opposite of a boost in spending and investment.
One part of the domestic sector is saving or paying down debt, the other is postponing expansion and development plans. Both private sector components hold little confidence in the long term future.
But it gets worse. Both Hockey, Tony Abbott and the rest of those charged with managing our economy, simply don’t know what to do. They have no idea how to stimulate growth, or if they do, they refuse to acknowledge it. They listen to people who don’t know and turn a deaf ear to those who do.
The ABC’s business editor, Ian Verrender describes their position similar to that of an ostrich with its head in the sand, while IPA Research Fellow, Chris Berg just pleads for a better understanding of the importance of growth. We can add to these, Reserve Bank Governor Glenn Stevens who, in his customary deadpan way, is trying to alert them to the real nature of the problem.
These and other comments from seasoned economists like Bill Mitchell who are not stricken with the neo-liberal approach, but simply state the bleeding obvious, ably represent the chorus of people who see our economy heading toward the abyss.
At a recent address to the Anika Foundation, Glenn Stevens said, “In the interim, the somewhat more restrained attitude to debt and spending by households, combined with a similar attitude by the government sector, has meant that there has not been quite enough domestic demand to achieve full employment, in the face of the fall in business investment.”
He warns that households are moderating their spending patterns to offset mortgage commitments. They are preferring to de-leverage rather than spend.
ABC’s Ian Verrender says, Joe Hockey’s self-proclaimed credible path back to surplus, “was to be achieved by way of a magic wand, through an unexplained sudden return to trend growth. From 2.5 per cent last year, the economy would gather momentum this year, expanding by 2.75 before rising to 3.25 per cent next year and then to its long-term growth trend of 3.5 per cent.”
Such estimates fly in the face of Glenn Stevens’ earlier statements that record low interest rates can only do so much and that trend growth could settle below 3%, well under that estimated in the budget.
To further illustrate the dilemma, when a senior fellow at the IPA begins to question the coalition’s performance, you know something must be wrong. Chris Berg says, “That the Government can propose higher taxes and proclaim its desire for lower taxes in the same breath isn’t a failure of messaging, it reveals an absence of purpose.” Berg complains that the government has no central economic agenda.
In the end it matters little that the MSM doesn’t highlight the failings of this government. In terms of the economy it is the people who feel it first; the unemployed, those who are reduced to part time work, those whose wages are suppressed, those whose debt levels become unmanageable, those who suddenly find buying essentials is as much as they can afford.
Politicians who enjoy entitlements the way ours do, don’t seem to notice these things even when they are staring them in the eye.
But when they fail to listen to experts, pretend they know better and create fear campaigns to deflect our attention, their lack of credibility becomes all too obvious to the voters and even to members of the IPA.