By Ad astra
The Coalition can’t manage money. No, that’s not a misprint. The conventional wisdom, peddled by the Coalition, aided and abetted by opinion polls that always rate the Coalition ahead of Labor in managing the economy, is that ‘Labor can’t manage money’. During the election campaign, that was echoed endlessly by PM Morrison, Treasurer Frydenberg, and sundry other Coalition advocates in parliament, in the mainstream media, and on social media.
Of course, during the campaign truth was irrelevant to the Coalition. It followed the oft-quoted dictum attributed to Joseph Goebbels: ”If you tell a lie often enough the people will believe it, and the bigger the lie, the more it will be believed”. As the people already believed that ‘Labor can’t manage money’, it was a simple line for the Coalition to parrot day after day, knowing their supporters would, like kittens, lap it up like warm milk.
The Coalition constantly ignores the verifiable fact that Labor’s agenda of bank guarantees and a graduated fiscal stimulus rescued us from the dangerous depths of the Global Financial Crisis. It did this more efficiently than any other developed country. And it did so against the resistance of the Coalition, which vigorously opposed the second tranche of the stimulus that it labeled as ‘reckless’. So much for its claim of financial wisdom!
Let’s look at the Coalition’s economic record.
Writing in Crikey, Politics editor Bernard Keane neatly sums up the Coalition’s legacy in Australia’s lost decade beckons as productivity, investment and wages slump. I have drawn heavily on his article, which is well worth a thorough read.
He begins: ”Australia now has a real productivity crisis. So where’s the wailing and gnashing of teeth that accompanied the fake crisis claimed to have happened under Labor? In a damning report, the Productivity Commission’s latest examination of the economy reveals that Australia has endured six years of poor productivity growth and wage stagnation, and slumping investment augurs poorly for a recovery any time soon.”
The Commission’s 2019 Productivity Bulletin itemises an alarming policy failure since 2012. Productivity levels are falling in crucial industries with no end in sight to the chronic wage stagnation that has frustrated workers since 2013.
Keane spells this out in Wages are going nowhere. And the entire governing class is to blame. The Productivity Bulletin confirms that the labour productivity surge under the Rudd-Gillard governments has been replaced with an extended period of declining productivity under the current government, with it not merely well below long-run levels, but falling every year between 2015 and 2018.
Take a look at Table 3.1 of the Bulletin. (As it’s a long pdf file, search for ‘Table 3.1’.) You will see that every wage measure shows a decline over the six years that the Coalition has been in power.
Keane continues: “Accordingly, it offers no hope to workers that wage stagnation, predicted by Treasury and the government to vanish over the next two years, will end any time soon; the only comfort is that over the long-run, the Productivity Commission thinks that it’s ‘improbable’ that wage stagnation will get much worse over the course of the next decade. Australian workers must be weeping with gratitude.
What’s fascinating is that there was an alleged “productivity crisis” when Labor was in power, with acres of commentary in the media, economists and even the Productivity Commission, often on the purported failings of the Gillard government and the Fair Work Act and how to fix them.
Keane concludes: ”That ‘crisis’, it turned out, didn’t exist, as Treasury itself confessed years later. Not merely does it now appear that the Labor years saw a big lift in productivity from the depths created by WorkChoices (which Treasury famously warned Peter Costello would harm productivity) but that it has been replaced under the current government by a very real ‘productivity crisis’ of the kind business and the commentariat whipped itself into a frenzy over eight years ago – one with no end in sight.
Now we have the Reserve Bank cutting the official cash rate to 1.25%. RBA governor Philip Lowe commented that …“while the outlook for the global economy was ‘reasonable’, the risks stemming from the trade war between China and the US, and weak international trade growth, prompted the bank to cut.” He said the Australian economy was still expected to grow by about 2.75 per cent in 2019 and 2020, but there was still uncertainty about the prospects for household consumption, “affected as it is by a protracted period of low income growth and declining housing prices. Some pick-up in growth in household disposable income is expected and this should support consumption.”
The New Daily quoted BIS Oxford Economics’ head of Australia macroeconomics, Dr Sarah Hunter: The cut “confirms that in the RBA’s view the economy has slowed down over the past six months. Despite employment figures continuing to lift, weak income growth and the ‘negative wealth effect’, where people tighten their spending due to devaluation of their assets due to falling house prices, are both bad signs for the economy.”
Writing in Crikey on 5 June, Keane spells out the situation even more stridently: ”The need for stimulus for the so-called ‘strong economy’ was demonstrated three hours before the bank cut rates yesterday when the Australian Bureau of Statistics released April retail sales data. That showed a surprising fall of 0.1% (the market had been expecting a 0.3% rise). Worse was what is happening in NSW, where retail sales fell 0.4% in seasonally adjusted terms. And the decision was confirmed by today’s GDP numbers, showing the economy grew a miserable 0.4% in the March quarter, mainly because of government spending, bringing annual growth down below 2% to 1.8%, its lowest levels since the aftermath of the financial crisis. There was better news on the current account deficit: the March quarter deficit fell sharply, thanks to the highest trade surplus ever recorded in a quarter. That added 0.2 percentage points to the GDP data and pushed our terms of trade up 3.1%, on top of the same in the December quarter, thanks to higher iron ore prices and the slightly weaker dollar.”
In case Coalition members had missed the bad news, and still could not see how poorly it had managed the economy, in an article in ABC News, ominously titled Australia’s economy slows to levels last seen during the GFC, business reporters Stephen Letts and Michael Janda rammed home the message: “Australia’s economy has slowed further, with GDP growth tumbling under 2 per cent over the past year. The economy grew at 0.4 per cent in the first three months of the year, to be up 1.8 per cent over the year – the slowest growth since the September quarter in 2009.”
Although his neoliberal-minded colleagues were furious at the rate cut, Treasurer Frydenberg applauded it, and insisted that the government is augmenting the bank’s monetary stimulus by providing fiscal stimulus, namely tax cuts and building infrastructure. In contrast, Shadow Treasurer Jim Chalmers pointed out that “…if the Liberals were doing such a great job managing the economy, the Reserve Back would not have had to cut rates today to get the economy moving again.” Take your pick.
So there you have it. Only one-eyed Coalition supporters could construe the deteriorating state of our economy as somehow acceptable, as having nothing to do with the stewardship of the government. Instead, they will likely insist that the Coalition knows what it’s doing, has everything under control, and that we’re all doing fine. They will extract any morsel of ‘good news’ from the economic data to bolster their conclusions.
They will go on insisting that ‘The Coalition is the superior economic manager’, although the evidence inexorably leads to the conclusion: The Coalition can’t manage money.
This article was originally published on The Political Sword.
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