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Fair Share Economics Versus the Galloping Opportunism of the Mid-Year Economic and Financial Outlook (MYEFO)

By Denis Bright 

Paul Keating assisted with the launch of Fair Share: Competing Claims and Australia’s Economic Future by Professor Stephen Bell from UQ’s School of Political Science and International Studies and Dr Michael Keating AC, former Secretary of the Department of Prime Minister and Cabinet (1991-96). The authors are long-standing advocates of more inclusive economic growth for Australia as a middle ranking economy in a globalised era.

Published by Melbourne University Press on 26 February 2018, Fair Share is a gold standard reference for all public and personal libraries that seek critical and clear milestones on just where Australia is headed. Particularly outstanding is the broad-brush reconstruction of old hopes for Australia as a fair society rather than just another developed economy within the straight-jacket of a worn out market-ideology.

Like Charles Conder’s Holiday At Mentone (1888), insights improve with the passing of time. Old rigidities are challenged as they are no longer relevant to the demands of changing times and more vibrant environmental settings which no longer demand formal dress for strolls on Melbourne’s beaches.

The authors of Fair Share come to terms with the big picture of these possibilities as shown in this broad-brush extract from Chapter 3 on Globalisation, Economic Growth and Restructuring:

For most of the last thirty years, Australian economic growth has reflected the domestic consumption model, typical of the economies of English-speaking countries. Nevertheless, an important difference is that Australian consumption has been financed mainly by wage growth and not debt. Overall, however, the major shift in Australian economic strategy has seen a change from the postwar wage-leg growth model, dominated by manufacturing growth and greater equality, to a new system that has improved Australian competitiveness and encouraged productivity growth. This has been associated with greater market-based inequality and greater reliance by households on mortgage debt, which have both fuelled and responded to property price appreciation.

According to the latest data from the Australian Council of Social Service, this market utopia, as defined by conservative political elites, has become very stressful for lower income workers and marginal regional economies. The regional income and social divide also permeates the rural sectors across Australia. This fuels the One Nation vote in disadvantaged polling booths, particularly in Queensland without offering real policy momentum to an incoming government.

The perspectives of the broad-brush perspectives from Stephen Bell and Michael Keating of stresses in our market oriented society can be tested by the emergent trends in the Australian national accounts from the September Quarter of 2018, several months after the publication date of Fair Share.

Economic growth levels have faltered under pressure from global investment volatility to produce the worst quarterly result since the re-election of the federal LNP in 2013. Should these patterns be repeated before the release of the next quarterly data on 6 March 2019, pressures might mount within federal LNP ranks for an opportunistically early election. This would protect the favourable projections in MYEFO before modifications are required in preparations for a 2019-20 federal budget in April.

Thanks to Greg Jericho’s coverage in the The Guardian readers can make their own assessment of the effects of a cooling off in the national economy in new ABS data for the September Quarter of 2018.

Greg Jericho’s splendid analysis of the components of the reduced GNP growth in the September Quarter of 2018 also reveals the extent of the Morrison Government’s vulnerability in a slowing economy with an overall 0.25 per cent GDP growth rate.

Improved commodity prices of 3.7 per cent in the September Quarter 2018 were based on improved prices for gas and manufactured goods (+12.9 per cent) plus good results for coal and iron ore (+6.5 per cent).

Australian unemployment rates will be negatively affected by the trailing off in capital expenditure over the last two quarters after three good quarters in 2017:

MYEFO offers an embedded offensive against government or public debt which is mentioned 189 times in the entire document. In real economic terms, debt concerns should cover government debt, current account deficits, corporate debt and of course household debt levels.

Austerity programmes against the public sector are trumpeted as success stories for market ideology.

There is no guarantee that the Australian Budget will return to a marginal surplus in 2019-20 as projected in the current MYEFO:

Out of the current volatility on global financial markets even Christine Lagarde, as Managing Director of the IMF, is uncertain about future trends but remains somewhat optimistic that negotiations between President Xi Jinping and Donald Trump at the recent G20 in Buenos Aires might lead to reform of trading and monetary policies which are causing tensions between China and the US as the contemporary global superpowers.

There have been no major statements on such issues from Christine Lagarde since 6 December 2018 who has an even-handed approach to the conflicting opinions between the global economic powers.

Amidst this global uncertainty, Australia’s MYEFO offers a rosy picture of the election year ahead:

Nominal GDP is forecast to grow by 4¾ per cent in 2018-19, stronger than forecast at Budget as a result of higher-than-assumed non-rural commodity prices.

A decline in the price of metallurgical coal is still assumed to occur, though later than assumed at Budget. This contributes to a forecast moderation in nominal GDP growth in 2019-20 to 3½ per cent.

The global economy has continued to grow at a solid rate since the start of the year. Global growth of 3¾ per cent is expected in 2019 and 2020, while growth in Australia’s major trading partners is forecast to be 4 per cent in each of the next two years.

Completely overlooked in Australia’s MYEFO are the alarming trends in household debt levels (news.com.au 31 October 2018). The near-hysterical concerns of the federal LNP about levels of Australia government debt is severely misplaced. Despite the best ideological efforts of the federal LNP, budget debt levels are still somewhat higher than in 2013.

In juxtaposition to the moderate levels of Australian government deficits, Australian household debt levels are outrageous and at the heart of the social divide in every community.

Australian Household debt burdens are huge compared with most other developed economies.

While Australia’s MYEFO totally overlooks the enormous problem of housing affordability, full credit must be given to Bill Shorten for taking up this issue at his address to Labor’s National Conference in Adelaide:

Bill Shorten used his opening address to Labor’s national conference to unveil new subsidies to promote more affordable housing at a cost of $6.6bn over a decade.

Shorten took the opportunity of his opening pitch to the delegates and onlookers gathered in Adelaide for the three-day event to commit to a target of 20,000 houses built in the first term of a Labor government.

The policy, unveiled on Sunday, offers 15-year subsidies of $8,500 a year to investors who build new houses, with the taxpayer support conditional on the dwellings being rented to eligible tenants at 20% below market rent.

The cost of the measure is $102m over the forward estimates to 2021-22, and $6.6 bn over the decade to 2028-29. The program would provide support for 250,000 new units and houses over its lifespan.

Shorten planned to tell conference delegates Labor’s mission between now and the next federal election is not only to secure government, but also “rebuild trust in our democracy” and “restore meaning to the fair go”.

“We must revitalise around the nation what we in this hall hold as an article of faith: the idea that government has the power to bring meaningful progress into people’s lives,” the Labor leader will tell delegates, according to a speech extract circulated ahead of Sunday’s address.

“A hidden struggle in this country is being fought by the hundreds of thousands of our fellow Australians who can’t afford to live anywhere near where they work. They’re spending over a third of their pay packet on rent – and plenty more on petrol each day they travel.

“Rental affordability is a national challenge and it demands national leadership. Building more affordable housing is infrastructure policy. It is cities policy. It is jobs and productivity policy. And it is population policy”.

Shorten says the policy will provide certainty for property investors to build new dwellings knowing that subsidies are available for a decade. The program builds on the existing national rental affordability scheme.

The Australian Housing and Urban Research Institute estimates there is currently a shortfall of more than 525,000 affordable rental properties in Australia.

The Labor leader says access to housing stands as one of the biggest challenges in addressing intergenerational inequality. “There is a persistent and increasing wealth gap which is locking Australians out of the housing market”.

In the lead story of The Australian (17 December 2018), the cumulative projected budget surpluses in MYEFO for the next four years even prior to the release of the Outlook Report from the Australian Treasurer and Finance Minister on behalf of the Australian Treasury.

The ongoing plan to project economic competence with the assistance of questionable projections in MYEFO contrasts with the measured approach of Stephen Bell and Michael Keating in Fair Share. The unresolved questions is about which scenarios for Australia’s market economy will prevail in 2019 after weeks of scare campaigns through mainstream media outlets before the December Quarter National Accounts are released on 6 March 2019.

If 2 March 2019 prevails as the national election date as recommended by Malcolm Turnbull, the December Quarter Outlook will be edited out of the campaign equation for our future.

Denis Bright is a registered teacher and a member of the Media, Entertainment and Arts Alliance (MEAA). Denis has postgraduate qualifications in journalism, public policy and international relations. He is interested in advancing pragmatic policies compatible with contemporary globalisation.

 

22 comments

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  1. Leila

    Denis, that is why we need an election with a Labour victory as soon as possible.
    People no longer see a surplus as necessary to our economic well being. They would rather have money put into the basics of health, education, infrastructure, jobs , social support & public housing.
    Roll on the next federal election. Great article

  2. Mia

    Thanks Denis for exposing the propaganda model of politics which has a long history in Australia

  3. Chris

    Australian impressionism brought new hopes in pre-1914 Australia. Its vision is relevant to politics.

  4. paul walter

    Why are they so desperate to have everyone in debt up to their eyeballs? Musn’t it end in tears one day?

    Isn’t the paradigm government debt reduced not through effective revenue development but the beggaring of the unemployed and the like through apparatus like the Robodebt?

    Sado economics has been with us since Thatcherite times, when the likes of Paddy McGuinness proselytised on its behalf in the Murdoch rags The underlying pathology has not changed, but the appetite for blood remains unrequited.

    John Howard talked of “thrift” at the very time when his policies ramped personal and corporate leveraging to current extreme levels.

    I suppose the housing bubble popping somewhat is instructive… the mugs who hung on are now in strife but others saw the writing on the wall and got out, understanding that hot air rising must eventually cool and sink down.

  5. Paul

    Hi Denis,

    Thanks for the excellent article!

    Looks like the government is benefiting from not being able to pass some of its reforms. You don’t hear them say that though.

    Fingers crossed for a financially strong 2019.

  6. Rubio@Coast

    Definitely a logical case of LNP attempts to manipulate the outcomes of election 2019. People in debt get stressed out after the holiday season. Will they grasp at exotic independents to deny Bill Shorten a chance to govern with a comfortable majority? Then there is the ongoing problem of numbers in the Senate as only half the senate is being re-elected. Having a punt on another team in the Senate may complicate outcomes.

  7. Chrissy

    Injustice is a product of a boring market economy in which the vision of thirty pieces of silver dashed utopian hopes

  8. Wun Farlung

    High personal debt and casual jobs are an employer’s utopia.
    The wage slave isn’t going to cause any ‘trouble’ when he/she is struggling week to week to pay off loans and living expenses

  9. James Robo

    The LNP’s prime objective is just surviving the next election. Nothing else matters.

  10. Tessa_M

    Most families are in debt. Thanks for noticing, Denis. It is a terrible burden that is imposed by the property market.

  11. Mia

    Thanks Rubio , Labor must anticipate the stresses caused by excessive household debt to lead the electorate towards majority government in both houses.
    That is the essence of the politics of hope and change.

  12. Stella

    Denis, thank you for your article on fair share economics and the mid year economic review. A good summary of the economic situation in Australia to end 2018.

  13. Reshaping Politics

    Most LNP MPs come from families with great assets who know how to manage personal debt to create more wealth through the use of family trusts and other legal investment processes to build enormous fortunes to cover the cost of mansions at the better end of country towns,access to the leafy boarding schools as well as university colleges for sons and daughters.

    Of course, such elites do not need government services as they have access to the best that money can buy in health, personal welfare and legal services to maintain their advantages.

    Leaders on both sides of politics seldom talk about the real debts faced by lower income families in both town and country.

    This is not a choice made for longer-term commercial gain but a necessity. Now is the time to make household debt an issue that is fuelled by un-affordable housing, high rents and wage theft associated with below award payments for work.

    Empathy towards rising household debt levels can vastly improve Labor’s primary vote in elections for both houses of parliament. It will re-affirm faith in the value of mass trade union membership which once made regional electorates like Kennedy and Leichhardt absolute Labor strongholds.

    Spare us a thought, Bill Shorten, as your advisers prepare to respond to the forthcoming LNP scare campaign about government debt. The electorate will have second thoughts about voting for local political barons who claim to be independent but are really quite conservative. What indeed can an independent member for Mallee do for rural communities?

    Concern about involuntary household debt can re-shape Australian national politics in 2019. Is anyone listening to our pleas?

    As the article tells us MYEFO telegraphs the LNP’s forthcoming scare campaign about a minor level of government debt without mentioning involuntary household debt.

    Cheers too for the roles played by Sally McManus in designing a progressive union campaign with a focus on Us as the Mother Teresa of Australian Politics.

  14. Harry

    Whilst Labor is much preferable in almost all respects than the appalling Coalition “regime” (does not deserve the title of government), I sincerely hope that Labor does not keep its promise to bring down a bigger surplus than the Coalition. Taking much needed money out of the economy will only hurt those already doing it tough.

    Its also hugely disappointing that Labor has not committed to an increase in Newstart to the poverty line but has only promised a review within 18 months of election.

    Sure, Labor strategists are no doubt acutely aware of being wedged on a number of issues but a rise in Newstart has support even from the conservatives. Unless Labor is worried about the aspirational voters, some of whom may subscribe to the notion that the income taxes etc they pay are funding those who are “not trying hard enough to get a job”?

    Seems absurd and heartless to basically do nothing about this glaring problem when it should be one of the first items to be tackled.

    Putting more money in the pockets of those who income is ridiculously inadequate to live decently is also good for the economy overall.

  15. Ross in Gippsland

    It may be worth noting that Australian federal governments have run budget deficits for around 80% of the last hundred years. If today’s mania of representing a budget deficit as an economic failure is applied then obviously 80% of federal governments from the last hundred years have all been abject failures as economic managers.
    It’s a rubbish statistic just as the latest fetish that the federal government must always run a surplus budget is rubbish.

  16. Bill

    More indirect sabotage from LNP?
    https://www.abc.net.au/news/2018-12-19/apra-to-remove-interest-only-benchmark-for-residential-mortgage/10633748

    APRA came out of the Banking Inquiry looking like they were half asleep.
    Last month the LNP reappointed Wayne Byers as head of APRA for another term.
    Many onlookers expected APRA would implement changes to limit the excesses of the banks.
    And they did for a brief period.

    Now APRA decides to further loosen credit availability at a time when Australians have record levels of debt.
    Interest-only credit should only be available for new build, currently about 10 per cent of the market.
    Funding existing property with IO loans is purely inflationary, it does little for construction activity.

    On the other hand and putting common sense to one side for a minute:
    If APRA is happy with:
    1. record breaking personal debt levels, and,
    2. the threat posed to a banking system exposed to too much foreign sourced debt,
    what else could they do?

    No more proof is needed that APRA is a waste of public monies.

  17. Rubio@Coast

    The politics of fear waged by the federal LNP encourages a commitment to these irrelevant budget surpluses: Meanwhile the big corporate end of town and the respectable families on Nobs Hill in every country town are deeply into managed debt for wealth creation. Political education about the role of debt in a capitalist society is so essential to prick the fear strategies which have served the conservatives well for the past century and beyond.

  18. Joe Abby

    Yes Labor need reminding that those on the lowest end of the spectrum need immediate help even the proposed $75/week is not enough to battle the rent-seekers. The obvious tactics that both the LNP & Murdocracy will apply to all of us is becoming less influential than in the past but a true ‘leader’ would set the narrative regardless of the scare campaigns.
    The housing proposal while a step in the right direction is no where near enough they should aim to build 250,000+ Public housing not offer even more incentives to rent-seekers and maybe provide loans or rent to buy schemes at 25% of income to the poor to give them the best chance of improving their wealth if nothing else at least ensure they’ll have a HOME for the future.
    The current ponzi schemes including the continual population growth will end up in tears for many especially the environment.
    Federal ICAC with actual teeth is a must and it will be interesting to see how many on all sides of politics will finally be held to account for their deeds as our country is nowadays so corrupt I fear for my kids future if this continues. (banking/finance/aged care/hospitals/education/environment-all need cleaning up from these parasites)
    A job guarantee with infrastructure and enviro projects as a starting point could alleviate some of the issues but doubt either of the major parties will listen

  19. totaram

    Rubio@ coast: Managed debt is indeed the way all businesses and households function. It is only government debt that is seen as undesirable (simply through wall-to wall propaganda). As a matter of fact, because our government issues a fiat currency, government “debt” is just an illusion created by accounting practices carried over from the time that currencies were backed by gold. So properly “managed” government debt is the solution to proper funding of health, education, infrastructure and welfare. The fixation on “surplus budgets” is just a ploy by the neoliberals to carry on dismantling the welfare state, while reducing revenue by giving tax cuts to the top end of town.

  20. Rubio@Coast

    Thanks Kronomex: Hopefully the electorate will react negatively to the antics of LNP communication. Meanwhile, elite families are using planned debt strategies to build up their fortunes by offsetting gains from profitable investment portfolio often with the special protection offered by family trusts. Somehow, this message is not getting across in the disadvantaged postcodes of regional electorates. These pockets of disadvantage exist in safe LNP electorates like Maranoa. In Charleville (Q) the protest vote went to One Nation in 2016.

  21. Paul Davis

    No thank you AIMN. I will not sign your petition requesting neither the government nor the opposition change the rules relating to Franking Credits.

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