Australian Futures Arising From That Bad News Week: Is More Austerity the Right Policy Prescription?

By Denis Bright

Last week offered real leadership tests for policy elites in the corridors of power and for professional commentators in the mainstream news states. The real challenges arose from the interpretation of media releases from the federal treasurer and the RBA Governor Michele Bullock relating to lack luster economic growth data in the June Quarter National Accounts for the June Quarter.

There is always able scope for differing styles of interpretation of these bad news stories. Here are some thoughts from my perspective to promote more discussion on presenting growth and investment problems.

Michele Bullock’s assessment at the Arkia Foundation’s Fund-Raising Lunch (5 September 2024) did offer some bleak but timely warnings on behalf of the most marginalized five per cent of mortgages and others who are caught in the unsustainable rental market. Thanks, Michele, for such a frank assessment. Your technical staff are doing Australians a real service in warning of the consequences of such future social disasters which NSW Premier Jack Lang sought to avoid almost a century ago during the Great Depression (RBA site):

Although this group is fairly small overall, those in it have had to make quite painful adjustments to avoid falling behind on their mortgage repayments. This includes things like cutting back on their spending to the more essential items, trading down to lower quality goods and services, dipping into their savings or working extra hours. Some may ultimately make the difficult decision to sell their homes.

ABS National Accounts data (4 September 2024) showed that household consumption (-0.2%) fell to the weakest growth rate since the Delta-variant lockdown affected September quarter 2021. Discretionary spending fell 1.1%, following a rise in March.

Treasurer Jim Chalmers was equally frank in his assessment of the situation (ABC News and Treasurer’s Media Statement 4 September 2024). As with the comments by the Shadow Treasurer Angus Taylor, readers should take advantage of the full texts of those comments by perusing the relevant media release sites. It is not my place to spare everyone from the excitement of their own investigations.

Labor might be just slightly ahead after preferences on the latest Morgan Poll (4 September 2024) but there is little stability in these results. The 2025 election could still go in either direction or even impose a minority government to prolong the agony.

As the Australian economy slows, the spectre of a Peter Dutton-led government brings the prospect of another round of austerity budgets as mentioned in this year’s address-in-reply speech.

Peter Dutton’s address in reply speech kept the electorate away from the quest for noble policy conservative solutions. Government spending is certainly not out of control as shown by the extract from the most recent budget papers.

Budget Discipline recorded in Budget Paper 3

 

Given the essential expenditure from other levels of state and local governments, a public sector spending of well over 30 per cent of GDP is far from irregular by international standards of comparable OECD countries. Which areas of government spending will Peter Dutton chose to axe in any future LNP budget? (Liberal Party 16 May 2024):

The reason interest rates have gone up twelve times is because the Government can’t control its spending – and because of its reckless energy policy.
In three Labor Budgets, the Government has lifted spending by a staggering $315 billion – or $30,000 per Australian household.
The Reserve Bank Governor has sounded the alarm on inflation being home-grown.
In the last 48 hours, every credible economist has issued scathing assessments of this Budget because Labor has us in an inflationary hole and is still digging.
Make no mistake, any further increase to interest rates and inflation also now rests squarely on the shoulders of this Prime Minister and Treasurer.

Writing for The Weekend Australian (6-7 September 2024), Paul Kelly appropriately called for a more proactive investment agenda to address the downturn in investment as revealed in the latest National Accounts data. Higher global interest rate regimes and geopolitical tensions in the global economy are certainly having their impact on trade and investment. These problems were not generated in Canberra (Image: ABS National Accounts):

 

Opening the economy to more market influences as suggested by Paul Kelly in the Weekend Australian (7-8 September 2024) can have many new parameters. Engagement with the market need not require a return to the austerity of a decade ago when the global economy was performing better and strategic tensions were declining due to engagement with China.

Any return to austerity measures is likely to affect the most vulnerable members of the Australian community.

Our Australian Treasury and Finance Departments should be frank about available alternative options which are probably being discussed at executive policy levels behind closed doors in the corridors of power and influence. Releasing these options can only raise the standard of critical discussions before the full election season evolves.

Perhaps the National Party can be the weak link in the Coalition’s outreach towards those rusty austerity policy levers as cutbacks in regional infrastructure and community spending would be disastrous for already struggling communities.

There are indeed overseas alternatives to austerity measures from other OECD countries which are hardly radical in their orientation. Let’s look at policy options from Denmark where the post-COVID 19 recovery continues but with a reduced rate of GDP Growth (Trading Economics data to the March Quarter 2024):

Denmark GDP Annual Growth Rate

 

Despite Denmark’s much larger public sector compared with Australia, its government debt level is of government debt to GDP level was only 29.3 per cent.

As in other Scandinavian countries, Denmark operates a multi-functional public sector investment fund (IFU). This Fund supports domestic community development initiatives, infrastructure, sustainable energy investment and overseas assistance programmes compatible with UN Climate Goals. The exchange rate of the Danish kroner to the Australian dollar is approximately 22 cents.

 

 

Denmark is no radical left-leaning country. The Social Democrats as the largest party for the second time at the most recent elections late 2022 have shared cabinet posts with centre-right rural Venstre Party and the Moderate Party rather than left-wing parties in the interests of stability.

Federal conservative parliamentary representatives across regional Australia must be well aware of the pockets of economic and social disadvantage in their electorates. Social disadvantage stalks many of the regional electorates which are represented by the Federal Coalition parties.

These levels of disadvantage were captured in the ABS Census data long before the last election date on 21 May 2022.

The pockets of disadvantage in Maranoa are less severe than some other regional electorates but there are pockets of real disadvantage on the fringes of country towns in an electorate that is more than twice the size of Italy.

 

 

This problem of regional disadvantage is repeated across the other safe conservative regional federal electorates (Image: Electoral Pendulum results from Wikipedia):

 

 

State of the art communication rhetoric from the Coalition Parties keeps many disadvantaged voters in the conservative fold particularly through the allocation of preferences from the minor far-right parties. The broader Labor Movement needs to sharpen up its conventional marketing strategies in juxtaposition. Winning every booth in Maranoa except for a 43-43 tie in one booth is quite an achievement:

 

 

Progressive candidates should not be afraid to use similar techniques to appeal to the droves of disadvantaged voters across regional Australia.

Under the leadership of David Littleproud, the Nationals are confident enough to tilt at windmills within the Coalition on issues like the need for more trade with China as well as cost and environmental problems with the route of the Inland Railway when Scott Morrison was in government (National Party site 30 May 2024):

Nationals Leader David Littleproud has welcomed news that China will lift its ban on five Australian beef exporters, effective immediately.

Mr Littleproud said China’s decision is a positive step for Australian beef farmers and producers and a huge boost for the beef industry.

“I would like to thank the Chinese Ambassador for turning the page on this crucial issue,” Mr Littleproud said.

Another area of bipartisan commitment is the investment by the Albanese Government in the Future Fund’s Drought Fund of $519.1 million which will be available from 1 July 2024 (Beef Central 7 May 2024).

Potential bipartisan co-operation could establish a Media Fund within the Future Fund to promote quality media coverage of music, drama, news programmes and documentaries for use by public broadcasting and commercial networks. Existing funding sources for public television do not keep pace with trendlines in the cost of delivery and the absence of entertainment venues across regional Australia due to the tyranny of distance.

Progressives and conservatives can also agree on the need to challenge inappropriate online violence from those streaming channels operated largely by multinational media outlets. Community concerns about violent crime and domestic violence should be extended to the promotion of alternatives to misogynistic and violent lyrics from the popular stars of overseas hip-hop communities. YouGov has identified the streaming channels which are popular with Australian audiences: Among local video streaming platforms, Nine Entertainment’s Stan (14%) is the most popular, followed by Foxtel Now (6%) – a joint venture between News Corp and Telstra.

Applying the populist marketing style of the National Party to fight for environmental and social justice in towns like Barcaldine is the best defence of the Labor Movement in the regions. The Woorabinda community in the Flynn electorate near Rockhampton is identified as one of Australia’s most socially disadvantaged communities as identified in the 2021 Census.

If the Danish IFU Fund operated here, multinational media and fast-food outlets would want their names up in lights as investors in Australia’s Future Fund to address these crippling examples of regional poverty. Instead, a tragic cat and mouse game is being played with the ATO to minimise or contest taxation payments as noted by ABC News (8 November 2023).

Also absent from LNP communications are the forward plan of Australian conservatives for their environmental, infrastructure and community development plans for the regions and disadvantaged outer metro electorates. In the traditions of Paul Kelly’s assessment of the recent National Accounts data, engagement with the market should be broadened to engagement with the needs of Australia’s most marginalized voters living in outback towns and in fringe communities nearby.

 

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Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.

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