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.
[textblock style=”6″]
[/textblock]
