By Denis Bright
Five months after those photo opportunities associated with the 2019-20 Budget, the LNP’s plans for the future of a hands-off open economy are not working. The missing variable is a productive investment multiplier that is concealed by good commodity and service prices in the current account surplus and largesse from a treasury that is accidentally awash with funds because opposition parties in the senate refused to cut company taxes.
Successful use of fear strategies prior to the federal election on 18 May 2019 easily got the government over the line particularly through swings to the LNP in Tasmania, Queensland and WA.
The federal LNP is continuing to perfect this top-down approach to financial governance in an electorate which scans the news quickly to avoid the policy details. Large sections of the electorate are still convinced the federal LNP is the more responsible economic manager even though the prescription mix is highly suspect and locked into the ideology of the Menzies era.
Greg Jericho does not hold back in highlighting the grim statistics for Australian investment trends:
If you take away government spending, the economy would have shrunk in the June quarter. So much for ‘remarkable resilience’
Today the government has been madly attempting to spin the GDP figures as good. So, let’s cut straight to the point – the figures are terrible and are among the worst we have seen this century. But what makes it worse is this government would have us believe they saw them coming.
How bad are things? Today’s figures show the worst annual economic growth for 18 years. GDP per capita is now lower than it was a year ago, productivity is plunging, and the economy is pretty much staying above water purely because of government spending and a drop-in imports due to weak investment and household spending.
Data from the ABS for the June Quarter 2019 confirms the extent of the slow-down in the Australian economy as business tries to survive by running-down inventories instead of embarking on ambitious private sector capital investment which should be the strong-point of any centre-right government like the federal LNP:
The national accounts for the June Quarter are particularly appalling when consideration is given to the components of the 0.5 per cent improvement in GDP:
Neoconservatives will continue to speculate about which conventional policy levers should be pulled to make the economy more vibrant at a time of global trade wars and growing militarism. Will lower interest rates and more defence spending on strategic hardware really assist in making our future rosier?
From the heart of the USA, the pragmatic McKinsey Global Institute has warned Australians of the global headwinds that the federal LNP chose to ignore even prior to the May 2019 election with its strident support for old-time capitalism.
Need to Break with Menzies Era Market Ideology
Both Robert Menzies and Margaret Thatcher succeeded in promoting images of a mythical ethically based small business economy based on the thrift and dedicated community service. Scott Morrison gives this small business network a quasi-religious authority to justify nasty economic prescriptions for the common-good.
There is little mention of the forthcoming impact of the digital revolution which is transforming workplaces and about to eliminate many basic skill jobs in the service sector to complement the existing changes in farming and manufacturing.
The CEO of Oi Glass on an annual salary of $7 million according to State Secretary of the Queensland Branch of the ETU at the picket rally.
Here, trade union resistance to an erosion of traditional working conditions has gone on for nine weeks.
Cheered on by the federal LNP, employers like Oi Glass claim a moral authority to withhold productivity increases on the shop floor in the national economic interest.
Screening of potential recruits by small businesses through job provider agencies is a real disincentive to a revival of mass trade unionism despite its compromises with job safety on new construction sites.
Employees at a nearly completed unit construction site in Sylvan Road, Toowong (Brisbane) advised that overseas workers routinely worked twelve-hour shifts. This made it difficult for qualified local employees to ask for fair wages and conditions. The alternative at a time of reduced investment in building and construction was no job at all.
It is convenient for the federal LNP to justify such practices in the long-term economic interests of Australia as a middle-sized open economy. Current rallies on Australian and international share markets, also appear to justify what is really unsustainable: A disciplined small business network which is justified by quasi-religious values.
Just prior to the Australian election, the McKinsey Global Institute telegraphed warnings of the avalanche of changes in the Australian workforce:
Powerful new automation technologies such as machine learning, artificial intelligence (AI), and advanced robotics are already transforming the Australian economy, workplace, education system and community. These technologies present an enormous opportunity to restore momentum to the Australian economy and extend the nation’s 30-year economic boom in an inclusive way.
In a new report, Australia’s automation opportunity: Reigniting productivity and inclusive income growth [PDF–6.7MB], McKinsey outlines the impacts of automation across three scenarios, including slow-paced adoption, mid-point adoption and fast-paced adoption. The report sets out why and how Australia must push for the win–win scenario of inclusive growth by pursuing actions that both accelerate automation and adoption and share its benefits.
Automation and AI will be disruptive, just as other technology adoptions have been disruptive in the past. While some jobs will be lost and others created, all jobs will change. As automation technologies integrate into the workforce, the mix of skills required in all jobs will shift.
Aside from the current fear strategies being applied by the federal LNP with the support of small business, the far-off but essentially pro-business McKinsey Global Institute in New York has prepare a map of the Australian communities which are most receptive to digital automation and are skewed towards mining and large-scale farming and grazing operations:
Continuation of the unplanned corporate digital revolution should indeed be improving working conditions and hours of work required of employees. However, under the patronage of the federal LNP, McKinsey Global Institute anticipates an alarming economic divide in wage rates between skilled and unskilled workers in the more unequal Australian society of 2030. Ironically, these changes in a market economy will be accompanied by reduced real GDP levels of the type which is already apparent in the June 2019 national accounts data which is the very opposite of current LNP aspirations for our future.
Simply asking for more economic stimulus as favoured by traditional Keynesian policies with q 1950s vintage are easily outmanoeuvred by scare tactics from the federal LNP that worked well, particularly in depressed regional areas of Australia on 18 May 2019 with the support of preferences from One Nation in Queensland seats like Dawson and Capricornia.
In a world of reduced post-GFC global capital flows, progressive governments must learn to foster a more humane form of capitalism. This option is certainly in the pipeline of next week’s OECD seminar in Paris despite the willingness of the willingness of the current US and US Governments to return to the La La Lands of old style market-economics with the support of smaller players like Scott Morrison who somehow gained observer status at the G20 Meeting in Biarritz:
Harvesting the remnants of reduced global capital flows in the post-GFC era can bring corporate capital injections to support progressive infrastructure and community development programmes into public sector investment funds which operate quite successfully in Canada and Singapore to steer economic activity in progressive directions.
These are challenging times and advocates of responsibly alternative directions for social market capitalism need every encouragement. Now, 30 years after the fall of the Berlin Wall, it is time for policy innovation to flourish before Australians are thrown more heavily into the market ideology which has been foreshadowed by the McKinsey Global Institute in its reports on Australia 2030.
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