By Denis Bright
Those Morrison years (2018-22) were a crucial turning point for Australians on both strategic and economic fronts. It will take time to recover from those aberrations in our national political life.
Federal budget spending as a percentage of GDP peaked at well over 30 per cent during the COVID-19 crisis in 2020-21. This national emergency brought the highest public sector allocation since the wartime emergency in the 1940s. Adding spending by state and territory governments brought the public sector to almost 45 per cent of GDP during 2020. This public sector spending has flattened to an estimated projection of 35.3 per cent in 2024-25 (Aaron O’Neil for Stastica 3 May 2024).
Mainstream reporting overstates the capacity of incoming governments to change these priorities as shown by data from the Parliamentary Budget Office (PBO):
Current federal spending priorities of 26.4 per cent of GDP for 2024-25 are not exceptional. The federal public sector will drop back to 26 per cent in 2027-28. There is no certainty in this forward estimate in a very volatile global economy presided over by leadership changes in the domestic politics of the USA, Britain and Europe.
In former bastions of the centre-left in France, public option drifted to the populist far-right and to the Left Popular Front in results comparable to elections in the mid-1930s.
Back home, the Albanese Government proceeded cautiously in the management of fiscal policies as noted in Budget Paper 1:
This caution is justified as our key trading partners in Asia confront similar problems which are shown up in projections from the same budget paper.
Of the emergent Asian economies, only China had a capacity for net overseas investment. The Quad arrangements with India, Japan and Canada have little capacity to offer alternatives (LinkedIn). The possibilities of more capital inflow investments from East Asia are lost in strategic rivalries between Japan, China and Taiwan China over the ownership of rock outcrops and atolls.
A combination of domestic and international factors was responsible for the economic setbacks facing the Chinese overseas investment sectors. The setbacks for China had significant impact on Australia’s growth projections as shown by the illustration from Budget Paper 1:
Australia had a quite nuanced approach to achieve a real balance between commitment to the China Australia Free Trade Agreement at a time when commitment to economic nationalism was on the rise in both the Trump and Biden administrations in the USA. There is no evidence that overseas investment in Australia is dominated by China even by the addition of investment originating in Hong Kong and Macao (ABS 1 May 2024):
Keeping the investment multiplier afloat during times of global market instability is state of the art financial policy in the absence of a more highly developed Australian financial sector. Domestic investment delivers 85-90 per cent of Australian capital expenditure as measured by other ABS sources of data. The domestic investment sector was ironically in decline as a full decade of LNP administration commenced in 2013 and long before the arrival of the COVID-19 crisis. An upward trajectory has been restored in the Albanese years but as Jim Chalmers correctly tells us, there are dark clouds on the financial horizon.
Too much emphasis on the argy-bargy of political life and mainstream media reporting of these partisan antics can distract a better understanding of the rationale for current financial policies that are still inadequate to meeting the needs of states and territories for the delivery of essential services and cost-of-living relief.
The financial dependence of the states and territories on federal funding allocations is not widely reported in the mainstream media. In Queensland, the largely Murdoch controlled commercial media offers support to the state LNP in proposing to trim the growth of the state government’s own essential spending. Almost 42 per cent of the state’s record levels of spending, capital works and cost-of-living assistance for 2024-25 is derived from the sharing of GST revenue and special grants from Canberra.
Every dollar lost to ATO through canny tax avoidance procedures by individuals, businesses and of course multinational companies is at the expense of these essential financial allocations from the federal government to the states and territories.
Those less than patriotic military companies like Cubic Defense of San Diego have the resources to keep the ATO waiting for the settlement of tax accounts. These processes extend to 800 multinational companies on the ABC’s annual list of companies with a commitment to tax avoidance (ABC News 8 November 2023).
Tax avoidance also takes from the financial resources of Medicare. Despite increases in Medicare incentives to promote bulk-billing at local clinics, practice costs have increased for skin cancer procedures requiring initial biopsies and excisions. One MBS Item Procedure 31361 attracted a Medicare rebate of $174.70 on an invoice I perused. This resulted in out-of-pocket expenses of $300 with no refunds offered by the private health care insurer for procedures performed in a local surgery for a family paying $6048 a year in private health insurance.
Our political leaders can tone down the divisive argy-bargies in political life by a smoother framing of their own political agendas with an emphasis on commitment to the real needs of the electorate as required by current cost-of-living challenges.
Poll Bludger (30 June 2024) summarises the state of play in national politics from the latest Newspoll:
The Australian reports the latest Newspoll finds Labor recovering a 51-49 lead on two-party preferred, after the last result three weeks ago recorded a draw. However, both sides are down on the primary vote, Labor by a point to 32% and the Coalition by three to 36%, with the Greens up two to 13%, One Nation steady on 7% and others up two to 12%.
Anthony Albanese is down one on approval to 42% and up three on disapproval to 53%, while Peter Dutton is down one to 38% and up five to 54%. Albanese’s lead as preferred prime minister is 46-38, unchanged from last time.
The poll also finds 42% support for Peter Dutton’s proposal of building nuclear power plants in seven locations announced last week, with 45% opposed.
The nimble financial footwork of the Albanese Government and Treasurer Jim Chalmers needs to be supplemented by state-of-the-art framing of the federal government’s pragmatic agendas on our behalf. Something is wrong with the communication outreach of Labor’s spin doctors and mainstream media reporting when winnable federal seats particularly in Queensland are firmly held by LNP members.
Similar seats in NSW like Macquarie in Outer Metropolitan Sydney and the Blue Mountains are firmly held by Labor with an extraordinary vote for local member Susan Templeman. The results after preferences in the Katoomba Booth show just what happens when excellence in political communication confronts a fractured political divide riddled with communication diversions.
Researching this article has given me a better appreciation of the outstanding work of Jim Chalmers and his financial support networks in steering Australia away from All the Way With the USA perspectives on national finances and multinational tax avoidance.
Regional federal electorates from Peter Dutton’s seat of Dickson to Leichhardt can be brought back into the Labor fold with state-of-the-art political communication with a focus on needs-based politics in this cost-of-living era. What Paul Keating achieved at the 1993 election requires a full-rerun of The Victory of the True Believers.
All those hours spent by electors with mainstream commercial networks continue help to implant populist interpretations of our national identity until better models of political communication emerge (Canberra Times 13 January 2024).
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thanks Denis, helpful analysis. Tax avoidance should be made illegal – everyone pays tax at the point of earning – just like every PAYG taxpayer – companies, small business, EVERYONE. Afterwards they can put in their claims for deductions. It seems so bleedin obvious.
But of course the friends of business, the Coalition, and the pollies themselves, will never agree to it. Negative gearing on more than one property should also be the ONLY deduction. Once this has happened and the electorate at large sees the positive results in the budget, it will be a no brainer to keep voting Labor – the only decent economic managers
Our Treasury Jim Chalmers is a big fan of Paul Keating: Australians are fortunate to have some independently minded leaders now and through our history.
Keeping up bulk billing payments to GPs is so important. Procedures for skin cancers save hospital costs later and are a most important health measure. I am pleased that this issue has been raised .
Thanks for the balanced perspectives on recent economic trends with an eye to their future implications. Chinese corporate firms are not big players in major investment projects here and merely compete on he property market in our cities and tourist resorts.
Great synopsis
Yes Denis,
I entirely agree. Labor’s need for a better comms model leading to excellence in political communication is imperative, especially given the anti-Labor bias and misdirection in the mainstream media. They ought have learned a thing or two from the ‘Voice’ catastrophe.
Whilst communications from within govt has likely never been more complex and challenging, I do see signs of the message improving, but they need to hit the straps big-time soon. Keeping the powder dry for too long in these days of political fragmentation would appear to be very high risk.
The banishment of Senator Fatima Payman to the cross-bench was a terrible error.
Where is Labor’s commitment to an Australian popular front as in France? Australians face similar challenges with the LNP relying on preferences from the far-right to creep back to power under Peter Dutton. Of course, Senator Payman would support recognition of Palestine. How could she in conscience vote with apologists of Netanyahu?
WA Labor developed a real head of steam in 2022 with the election of three Labor senators and a potential united front with the two Green senators from WA and five senators from that state.
WA gave Labor its absolute majority in the Lower House with nine out of fifteen Labor members.
All that risk-taking by the state Labor Government during those bleak COVID-19 years created great goodwill.
In the Aussie spirit, some risk-taking and willingness to bend old protocols to current circumstances pays dividends.
In supporting Senator Payman, I would express reservations about Labor ministers who reply too much on conventional wisdom from commercial consultancies and even lobbyists associated with that ANZUS Forum (https://aukusforum.com/).
Great to see The Guardian through Katherine Murphy and others communicating reservations about the rebirth of US militarism: Almost 40% think Australia should dump US alliance if Donald Trump returns as president, poll finds: and
Survey finds 47% believe Aukus locks Australia in to supporting the US in an armed conflict, while concern about conflict with China has fallen
Great point Denis. Why do people in disadvantaged regional townships support the National Party?
Terrible road accident in North Queensland involving pass passengers. Bad road surfaces may have contributed to this accident. Heavy vehicles carrying freight on our highways need to be replaced by rail containers. The Gold Coast and Sunshine Coasts are totally dependent on road transport of freight.
The just released Minutes of the RBA Board for 18 June 2024 emphasize the importance of overseas factors in maintaining high interest rates schedules in Australia. From where does Angus Taylor get his economic advice to blame the Australian Government for continued high interest rates?
Trade tensions and high interest rates in both the US and Britain are a real factor as are the Biden administrations tariffs against Chinese goods:
‘Indicators of activity for the Chinese economy had softened a little following strong growth in the March quarter, but the staff’s outlook for growth in 2024 had not changed. China’s external demand remained strong and was being supported by the nascent recovery in activity in advanced economies. Members observed that the recent announcement of new US and EU tariffs on some Chinese imports was further evidence of the increasing risk of broader trade tensions.’
From RBA Minutes in June 2024
Thanks Denis for an interesting and well-researched article.
More details from the Financial Times on the isolation of China with impacts on capital investment in Australia (FT 1 July 2024)
Statistics relating to our future welfare are not boring and need to be communicated. Great work Denis on your research with this new article.
Sparked my memory on what one assumes has been the inspiration for US hard right faux ‘free market’ policies, versus social market and/or ‘engineering’ the freedom & liberty types accuse centrist governments of.
Atlas – Koch Network’s economic muse and ‘segregation economist’ James Buchanan who created ‘Public Choice Theory’ ‘
The public choice theory applies economics to political decision-making and defies the conventional beliefs that politicians act in the best interest of their constituents. It evaluates how incentives and personal gain shape politicians’ choices.
Buchanan’s insights into human nature and political outcomes provide an understanding of the perks that motivate political actors and allow for more accurate predictions of political decisions.’
https://www.investopedia.com/terms/j/james-m-buchanan-jr.asp
Sounds anodyne and citizen friendly but suggests that any support and safety nets are government overreach and/or totalitarian; a back door to decay social security, Medicare etc. for lower taxes and smaller government, how?
By promoting through RW MSM, lobbying and/or supporting individual MPs, Ministers, advisors and committees to adopt policies that may not be good for society, but good for rewards and personal gain….
Like dec. white nationalist John Tanton of Tanton Network infamy, Koch Network’s muse James Buchanan has also sailed under the radar, yet could be described using the words of former Reagan aide Linda Chavez in NYT to describe Tanton as ‘The Most Influential Unknown Man in America’, the Anglosphere, Europe and elsewhere?
Thanks to readers for putting up with a heavier article. However, the maintenance of investment levels is a really topical issue.
The Business Faculty at UQ is hosting a Rountable on Capital Flows within Shifting Geopolitics on 2 August 2024. Shifting Geopolitics is a bit of an understatement while Donald Trump and LNP Populists are making grabs for power.
‘Professor Shaun Bond, Frank Finn Chair and Deputy Head of UQ Business School, will moderate an expert panel exploring the current state of investment management in Australia and around the world.’
The business lunch with a request for business attire is beyond my price range. At this stage, it is not being videoed for access through You Tube at this stage.
The issues are very important and media access is also important to take in the wisdom of the three guest penellists covering:
This discussion will explore:
-The impact of geopolitical tensions on cross-border capital allocation.
-How divergent foreign policy orientations affect investment decisions.
-Potential risks to financial stability arising from rising geopolitical tensions.
Progressive commentators must strive to be on top of these issues and take a critical note of what talented leaders are saying about our Australian Future Options.
Denis, thanks for your reporting and painstakingly researched analysis, and for engaging with your readers …
BUT: (and I recognise that this may well catapult me right out of the realm of the plausible) as I convinced myself over three decades ago: CAPITALISM NEEDS TO BE CONSIGNED TO THE HISTORICAL GARBAGE BIN. No amount of number crunching can change that basic fact
Hoping that Professor Shaun Bond, Frank Finn Chair and Deputy Head of UQ Business School, or Federal Treasurer Jim Chalmers, or any other distinguished luminary of the establishment, will somehow be able to facilitate the rearranging of the deck chairs of Australian and global capital investment so as to prevent the boat (read: the planet) from going down amounts to exactly so much futile flogging of (nearly) dead horses with the carts hitched before them.
The luminaries might be able to buy a little additional time, which we do need, and should urgently use to figure out how to get ourselves beyond capitalism. But do not rely on them to fix the situation.