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The Good News according to Josh

It has been the legacy of Conservative governments over the past 50 years to deliver underperforming economies to incoming Labor governments while at the same time, flaunting false credentials, refusing to acknowledge their own failings.

How it is, that they have been able to convince the public that they are better economic managers, while systematically undermining the living standards of the average household, is something that requires a good deal of in-depth analysis. But as each week passes, we continue to see their form on display.

Take our current Energy minister, Angus Taylor who argued fiercely on Insiders last Sunday that Australia’s greenhouse gas emissions were coming down.

Notwithstanding that our emissions have increased every year since 2013, the year Tony Abbott, as prime minister, abandoned the carbon tax, Angus Taylor was quite emphatic that they were coming down.

He did so on the strength of a slight reduction in the December Quarter of 2018. Minister for the Environment, Melissa Price made the same observation a few days later. It was classic Liberal spin.

Today, on the release of the December quarter GDP figures which revealed a disappointing 0.2% growth, (annualised at 2.3% but just 0.9% for the second half of last year), our Treasurer, Josh Frydenberg interpreted this as good news, by reminding us that Australia was growing faster than any G7 country, except the US.

By using that twisted logic, he was avoiding the underlying truth. One can interpret a set of numbers any way one likes. But in doing that, Frydenberg ignores the reality that our economy is slowing. Choosing to boast some meaningless international statistic rather than face up to the microeconomic impact of life at home, is more classic Liberal spin. Josh Frydenberg needs be reminded of that, although it’s doubtful he would listen.

The microeconomic impact of today’s GDP numbers is that we are now in a per-capita recession. That means economic growth per person has been in decline now for two successive quarters. That is the real news. The only reason we are not in a full-blown economic recession is because of population growth and government spending.

How ironic is it, that while this government has done its level best to cut back on spending wherever they can, the only reason we are not in recession is because they haven’t cut back far enough?

“Government final consumption expenditure grew 1.8 per cent, with ongoing expenditure in health, aged care and disability services,” Frydenberg said in addressing the GDP result.”

Does he really have any idea what he is saying?

Our economy is retracting, an increase in unemployment is just around the corner, the only thing saving us from a recession is government spending and he is preparing a budget where he intends to spend even less, just so he can produce a surplus!!

What madness is this? The economy is being starved of money, forcing households to draw down on savings while our treasurer is doing his level best to starve us of even more money. By what economic measure can this be a good thing???

Dissecting the numbers released today, we can see that consumer spending is outpacing income growth, which means households are taking on more credit or drawing down on savings, something that cannot be sustained, individually or collectively. But that’s okay, because Josh Frydenberg tells us that our economy is out-performing six of the G7 nations.

It is highly likely that the March 2019 quarter will be negative. But we won’t know that until the first week of June when, in all likelihood, a new Labor government will have only just been installed.

Once again, Labor will have to inject stimulus money to revive a weak economy and suffer the misfortune of an electorate that believes them to be an inferior economic manager. The irony is gobsmacking.

It happened in 2007, in 1983 and in 1972. It seems to validate the claim that Labor governments have to be twice as good as conservative governments, to be judged their equal.

Falling living standards are always the result of fiscal austerity, something for which conservative governments can pride themselves in excelling. This is what Labor will inherit. Once again, they will have to do the same job all over again.

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22 comments

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  1. New England Cocky

    What has the Liarbral Party ever done anything to promote egalitarism?

  2. whatever

    They are trying to present the Governor of the Reserve Bank as some kind of Willy Wonka who will give you low interest rates only if you are good boys and girls and vote Liberal.

  3. Yvonne Robertson

    Two things. A mainstream media who have an investment in a conservative government. They are in business after all and lets face it – Murdock is the king of them all in this country and he is most immoral of them all from what I can see as well as being the most influential. This is the way that we ordinary mortals get our news unless we’re smart and search out a venue or venues we can trust. Of course the ABC is no longer entirely trustworthy either. Outlets like the Guardian which aren’t rampantly right wing, don’t ask the sorts of questions which would illuminate necessarily but what would be the point? Only the slightly more discerning go there and I used to just about gag every time I read a Katharine Murphy article about Malcolm.

    The second thing is a population with the intelligence and interest in politics of a woolly sheep. Whenever one of them jumps the others follow suit so that unexamined, falsehoods such as the LNP being superior economic managers, continues to play in the pubs and suburbs of the nation. We force these people – may of whom could not even tell you who the Prime Minister of the country is, to vote. We need a different electoral system. Even a random selection of candidates like a citizen’s jury could be a better bet, with a limited tenure – no more than two terms. At least it would shake things up a bit.

  4. pierre wilkinson

    It is sad how the MSM repeats ad nauseum the drivel about economic DNA belonging to the Libs.
    Where has the old fashioned investigative reporting gone?
    oh that’s right, ABC bias dictated that the COALition should offer cut backs and replace good staff with sycophants
    But what about the Independent Inquiries?
    oh that’s right, they filled the boards with their own cronies and still had to hide the negative reports
    at least. at last, in sheer frustration, some in the media are calling out the more blatant lies
    oh for an election soon
    followed by a federal ICAC and a bloodletting that will shake the foundations of politics in this country… >sigh<

  5. Rossleigh

    Basically, the Liberals repeat the mantras which every middle class family tells it’s children: Don’t go into debt because you’ll have to pay for it later; depriving yourself now for a reward later is good, etc.
    The trouble with this is that what is usually good advice for an individual isn’t necessarily good advice for a government or a company.
    That’s why they managed to badmouth Labor for steering us through the GFC without going into recession. “We went into debt! Our children will all be sold into slavery to pay it off!”
    Of course, nobody reports any modelling to show what Government debt levels might have been had Australia gone into recession with the rest of the world.

  6. Alcibiades

    Ooh, looking at him pumping those manly fists, ooh, such a strong leader. Ooh, ahh.
    Um, er, that other fella is delivering his usual stump speech, no-one is interested in that!
    I’ll finish covering Malcolm, oh, isn’t this photographic montage I’ve posted of five Malcolms in one, simply marvelous ?
    Off now for a cup of tea and then we’ll be right back into the Live Election Blog …

    :- Katherine Murphy, informing voters of what they needed to know to cast an informed vote, 2 days out from the 2016 Federal election. sigh

    Have perceived in the Graund, even the rest of the corporate MSM, a very gradual lessening of their rabid partisan ‘reporting’ since December, even a few freudian slips against the narrative of the last 6 years, ie “IF the Coalition wins the next election
    .
    One expects this process will gradually accelerate as we approach the polls, as more stenographers, posing as journalists, break from the pack, so as to manufacture a record of a pre-election appearance of having been less blatantly partisan, given the anticipated outcome … pending … unforeseen events, dear boy.

    The ABC now has quite a number paid IPA presenters and commentators, not to mention guests … for ahem, ‘balance’.

    If it wasn’t obvious to individual ABC staff prior to the public events re Milne, Guthrie and Fifield, re sacking & shooting reporters lacking a LNP bias, it certainly is now. Message loud & clear: Don’t cover politics without being inanely bland, uninformed as well as, crucially, obsequiously incurious.

    In the “Game of Mates”, the billionaire owners of our corporate MSM, such as it is, obviously benefit financially directly and indirectly from the status quo of LNP misrule. It serves their self-interest. The public’s or even the true national interest, let alone serving the public trust, be damned.

    When ‘Honourable’ Ministers of the Crown can publicly get away, without any repercussions, with charging the Commonwealth ongoing exorbitant overnight allowances for sleeping in their own home, and that of fellow ‘overnighting’ Ministers, because the ‘legal’ owner is their spouse. And furthermore deliberately, conduct supposed charity ‘Pollie-Pedals’ annually, where every expense possible, and more, from meals to communications to accommodation, is selflessly billed to the Commonwealth … then we have reached banana republic equivalence.

    Oh, and then there is, Barnaby ‘Caaarp!’ Joyce, too.

  7. Ibn Al Khatib.

    Yes, the released current figures are a nasty surprise for them on the eve of an election. No wages, no spending.

  8. Terence Mills

    The publicity about Christmas Island is getting through. When the Nine Network’s Renae Henry asked an Indonesian people smuggler what he thought of the reopening of the Christmas Island centre, he seemed to regard it as encouragement to restart the boats.

    “In my opinion if it is reopened I agree and am ready to ferry,” he said.

  9. Harry

    Another well argued article John. I have suggested for a while that a recession was likely due to stupid or evil neoliberal economic policies which remove more money from the economy than is injected.

    If economic activity was red hot with unemployment say about 3% or lower and there were capacity constraints apparent, taking money out MAY be prudent to avoid demand inflation. Hardly the case now!

    Instead we may see the RBA serve up more of the same increasingly ineffectual interest rate cuts.

    Of course the neoliberal ideologues of the Coalition don’t do fiscal policy do they. They have painted themselves into a corner as they demonised the previous Labor government’s wise and effective stimulus (which did not go far enough and was wound back too soon).

    I hope Labor has learned to ignore the debt and deficit nazis within the financial and business community and focuses on reducing unemployment, fully funds social programs such as health, welfare and education (all should be free), introduces a Job Guarantee and so on.

    The budget balance is basically irrelevant and no debt should be issued to “cover” deficit spending.

  10. whatever

    Glencore has hired Crosby Textor data mining company to spread the Gospel of Coal on social media.
    This may be the source of the fanciful ‘New Power Stations for Hunter Valley’ story. Also the recent ‘China Bans Aussie Coal’ hysteria could be traced to these third-rate hackers.

  11. Matters Not

    Glencore is an Australian icon – for all the wrong reasons. The number one tax dodger but that rarely gets a mention.

    Glencore Investment Pty Limited

    Headquartered in Baar, Switzerland, the history of this global miner and commodities trader has all the hallmarks of a gripping corporate thriller, if anybody were game to write it. Founder Marc Rich was indicted in the US on federal charges of tax evasion and striking controversial oil deals with Iran during the Iran hostage crisis.

    It is the largest coal miner in Australia, operates a maze of companies and has been under investigation by the Tax Office for shifting up to $25 billion to the tax haven Bermuda via cross-currency interest rate swaps. This particular Glencore entity managed to wipe out all but 0.39 per cent of its total income and on the $108 million recorded in taxable income, paid zero tax.</ blockquote>

    https://www.michaelwest.com.au/companies/tax-dodgers/glencore-investment-pty-limited/

    No doubt all sides of the political aisle will today beat that political drum re tax dodging. But probably not. Although we may hear from The Greens.

  12. Peter F

    @Harry …”The budget balance is basically irrelevant ” Correct, it is BASICALLY irrelevant. I like to counter the argument pro surplus economics by asking people whether they know that th SNOWY scheme was constructed during years of budget deficit under Menzies. There were few, if any surplus years. The rest is political spin to frighten voters.

  13. Kaye Lee

    Without the high level of government spending on infrastructure projects at the moment, we would be in actual recession, not just per capita recession.

    The government and opposition talking about surpluses now is madness as is the business community’s continual war on wages. If people have less disposable income then businesses have less customers. Big comanies are making record profits but that is not filtering through. Whilst unemployment is comparatively low, underemployment and insecure employment are a great concern, leading to a class of working poor.

    It is naked self-interest and greed that makes the rich demand more and more in profit as they pay less and less in taxes and wages.

  14. Zathras

    Economic Management?

    Australian Recessions since 1970:

    1971-72: Liberal
    1975: Labor
    1977: Liberal
    1981-82 Liberal
    1991: Labor

    I make that 3 Liberal, 2 Labor…

    Selling revenue producing assets also forces the Government to borrow more, creating perpetual debt while services continue to decline.

    As for the Snowy under Menzies, it was a Labor scheme that Menzies strongly resisted but was too late to stop by the time he came into power, yet his name appears on plaques.

  15. Andreas Bimba

    What is even more crazy is that federal government surpluses inevitably deliver recessions under the economic circumstances Australia faces which leads to lower taxation revenues and higher social support expenditure as more people seek unemployment benefits and gain higher family tax benefit payments for example which then rapidly leads to the surplus becoming a deficit which only gets worse UNTIL the federal government finally decides to stimulate the economy with an even larger deficit until growth eventually returns.

    The phenomenon of recessions leading to falling taxation revenues and increasing social support expenditure is actually beneficial as these ‘automatic stabilisers’ act to reduce the recessionary pressures arising from government surpluses by forcing the federal government back into an economically beneficial deficit. The reverse happens in growth phases where taxation revenues increase and social support expenditure decreases leading to an automatic reduction in federal government deficits or even surpluses which acts to dampen down economic booms.

    The bottom line is the federal government must in general run deficits to compensate for any currency leakages and to enable economic growth, unless the business cycle is in an excessive boom phase which it certainly isn’t in currently, in fact we are heading towards a recession. The main currency leakages applicable to Australia’s current circumstances are ongoing substantial current account deficits (which comprises our international trade and capital flow balance) and increasing net savings which results from Australia’s wealthy increasing their wealth/savings even faster than most of us are reducing our savings to meet rising living costs. Further as our population is increasing it is necessary that the economy be allowed to grow which means our deficits need to be even larger than that needed to just compensate for any currency leakages.

    If federal government deficits are nearly always necessary what size should they be?

    Sufficient that the economy delivers full employment – is the answer and the most effective way of automatically setting the optimum deficit is with a federal Job Guarantee. The JG acts as a powerful automatic stabiliser that expands during economic downturns and contracts during growth phases. It also sets the income floor at a liveable wage, provides a pool of immediately employable and trained workers, and greatly reduces the waste of human output and talent and the appalling social costs of mass unemployment and underemployment.

    Having an optimal deficit also provides more fiscal capacity to the federal government to improve government services such as education, healthcare and pensions for example; and also to fund improved infrastructure and the needed transition to environmental sustainability is an important example; and also provides the means to improve federal funding support for the states and local government.

    Unfortunately neither of the major party blocs have understood or adopted this fiscal reality but clearly the conservatives are worse as they inevitably strive to deliver surpluses even during economic downturns and recessions (or they claim that they do) whilst the ALP strive to deliver surpluses during growth phases that ‘pay for’ the deficits needed during the economic downturns. So one is wrong and the other is generally half wrong. Note that federal deficits do not actually incur any debt as they were funded by currency issuance by the RBA and not by the issuance of treasury bonds and similar securities as most mistakenly believe.

    Both party blocs have also accepted high levels of ongoing unemployment and underemployment presumably because that is what the business sector wants because it reduces their input costs and creates a desperate and compliant underclass. The reality is however that most of the business sector would also gain from the increased sales that arises from the increased aggregate demand that results from full employment and from wages that rise with any increases in productivity.

  16. Harry

    Terrific post Andreas. I wish more of us understand all this. As you say, Labor have it half right and it’s a no brainer to prefer them to the elitist, business arse kissing Coalition.

  17. Cameron Frye

    There are a lot of people hanging a lot of hope on a Federal ICAC. As much as I like the thought of one going after all those greedy politicians and their mate and locking them up and making them bend over for the soap, the reality is that I’m betting it will do 2/10ths of SFA. Let’s face it, Labor, the LNP (and the Greens for that matter) aren’t going to kill the golden goose and they have learnt from their State counterparts how to control a recalcitrant watchdog. It’s called TREASURY.

    I’ve consulted into the Qld State Govt for years and have been around the traps for a while now to know that all the watchdog agencies up here don’t like turning over rocks. “They don’t have the budget for it”, “not part of their focus”, “doesn’t fall into their remit” – I’ve heard them all before. I know for a fact that some of the recent scandals happening in Qld where all brought to the attention of management at various watchdog agencies here in Qld by underlings and the result? Crickets. It’s all too hard and heaven forbid if you upset the Govt and find your budget is slashed next year. So now most of the agency’s management positions are filled with sycophants who’s only skill is polishing their own turds and will only remove their tongue out of someone’s arse to find out which way the political wind is blowing.

    Yes, I’m sure Labor will love setting one up and having a dabble at settling some old scores. Hey, they might even sound out the LNP on some possible payback Malcolm (oops did I say that out loud?? I meant) candidates. But once the fanfare is over and the dust settles, there will be the odd sacrificial lamb offered up every now and again when it all gets a bit too much. But the reality is that the gravy train has long since moved on from that station and is merrily heading towards destination Pork.

  18. guest

    So, we are supposed to be afraid of foreign investors in coal in Oz. Really? Is that the issue?

    Might not the real issue be what we see when we look at the pollution in China, with citizens walking about with face masks and being encouraged to stay inside. Is that a good look for us to create and encourage?

    And it is our “first class coal” which has contributed to that.

    How long are the Chinese wanting to put up with it?

    How long before the Chinese say enough is enough?

    My bet is it is not very far into the future. What value coal then?

    And India the same. Heading down the solar path.

    How dare anyone stuff up Oz – and the rest of the world as well – by shipping billions of tonnes of coal to be burnt.

    That is the hypocrisy – that we sell coal and then point to China for putting out so much emissions – and then use it as an excuse not to lower emissions (we do not want to be the only country reducing emissions).

    This the narrow-minded, national sovereignty self-interest which cuts ourselves off from UN global agreements. (Because they think Climate Change is a UN conspiracy for world domination). We will decide how much coal we burn and the means by which we burn it.

    Good luck with that. And what will be the cost of cooking the planet?

  19. Andreas Bimba

    Unfortunately Cameron’s views on a Federal ICAC are probably realistic. If it were to be a part of the federal judicial system, a Federal ICAC might escape most political interference and being a small part of a larger budget would make it less vulnerable to budget cuts. Will a Labor government structure it this way? Probably not.

    The terms of reference of the Federal ICAC and the laws to be applied to the conduct of political representatives are another weak link that must gain the support of the government of the day and a majority in both houses of parliament.

    The Greens have been the main drivers for a Federal ICAC as well as allied areas such a lobbyist reform and political donations reform and have always been blocked by the parties in government. Bill Shorten’s proposals are better than the Coalition’s but we will probably soon see how far he is willing to go.

    https://greens.org.au/platform/democracy

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