By Denis Bright
Without access to the vast resources of the federal LNP in Government, Labor has raised sobering realities to deflate the political excesses of the last Mid-Year Economic and Financial Outlook (MYEFO) before the 2022 election.
MYEFO still provides a window of political opportunities for the Morrison Government as economic indicators show a temporary rebound in the September Quarter in GDP growth, a temporary growth in capital expenditure in mining on real estate and property markets and improvements to business confidence as the holiday season approaches after a lengthy period of COVID-lockdown.
A December Quarter rebound is likely to be a feature of a March election campaign. It is due for release on 2 March 2022.
MYEFO has Machiavellian elements. The most obvious concern is the $16 billion set aside for unannounced election promises as released during the heat of the election campaign as in 2019 in electorates under siege from Labor.
There is also the obvious repeated ruse of our official unemployment figure in the Treasurer’s media statements to talk up MYEFO. The 4.6 per cent unemployment rate needs more qualifiers. Australians from all age groups on training programmes or working on a trial basis for employers do not feature in the official jobless data. Adding the underemployed to the official jobless rate, translates to 13.1 per cent of the workforce. The situation is worse in the most disadvantaged federal electorates.
Besides these obvious lapses are the wildly optimistic assumptions about the post-COVID recovery in the Australian and global economies despite the global shadow posed by the Omicron variant with its record level of cases in Britain.
The Treasury is also over-optimistic about economic relations with China and Hong Kong despite months of sabre-rattling and patrols by Australia through the disputed waters of the South China Sea and the Taiwan Straits:
In China, GDP is forecast to grow by 8 per cent in 2021 before moderating to 5 per cent in 2022, reflecting the strong recovery to date. Growth has eased recently owing to a slowdown in the property sector and the impact of multiple provincial virus outbreaks on consumption. Despite a high vaccination rate, China has continued to pursue an elimination strategy, imposing aggressive local containment measures and strict international border controls to suppress and limit outbreaks
A third of Australian trade also plies these disputed maritime routes. MYEFO also notes that Australian deposits in the Asian Infrastructure Investment Bank (AIIB) which help to fund China’s Belt and Road Investment is currently running at $4 billion. Former Liberal Treasurer Peter Costello was a member of the International Advisory Council of the China Investment Corporation (CIC) between 2014 and 2018. The AFR announced on 26 August that Australia had just withdrawn substantial amounts of Australian Future Fund Investments in the CIC to support the sabre-rattling campaigns against our strongest trading partner.
All this suggests that the federal LNP is playing domestic politics in its strategic disputes with China that cuts Australia off from profitable investment partnerships within Australia and in the global economy.
Restrictions on overseas investment on security grounds have contributed to the downward trends in investment flows on the LNP’s long financial watch since 2013. Australian net capital inflows have never fully recovered from the GFC on the RBA’s latest chart series:
Current capital flow data is worse than the RBA charts disclose because the resultant investment is highly concentrated in the mining, real estate and property sectors which make little contribution to the building of a more sustainable and diversified economy. Labor shares Peter Costello’s enthusiasm as Chair of the Future Fund in his 2020-21 Annual Report:
As a result of the Board’s careful long-term positioning, the Future Fund has generated a 10-year return of 10.1% per annum against a target of 6.1% per annum. Since inception, investment returns have added $136.3 billion to the original contributions from the Government.
At 30 June 2021 the Board of Guardians invested over $245 billion across the six public asset funds for which it is responsible for the Commonwealth Government. Each fund has exceeded its target return over every time-period.
The Medical Research Future Fund (MRFF) generates earnings to provide grants to support medical research and medical innovation. The MRFF delivered a return of 10.9% in 2020–21 and was valued at $22.0 billion as at 30 June 2021.
The Aboriginal and Torres Strait Islander Land and Sea Future Fund returned 13.9% for the year, taking its value to $2.2 billion. The Future Drought Fund and Emergency Response Fund have also performed well, delivering returns of 14.0% and 13.9% per annum respectively.
The Disability Care Australia Fund also continued to perform in line with its Mandate, delivering a return of 0.4%.
The opening up of new subsidiaries of the Future Fund and state-controlled investment funds to corporate hedge fund capital avoids fractious debates about additional taxation burdens. Labor’s National Policy mentions investment seventy times. Sceptical constituents might well ask for more details on the origin of this investment capital. More specific mention of investment options has come with the release of Labor’s affordable housing agenda:
An Albanese Labor Government will create a $10 billion off-budget Housing Australia Future Fund to build social and affordable housing and create thousands of jobs now and in the long term. Each year investment returns from the Housing Australia Future Fund will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to pay for social and affordable housing projects. Over the first 5 years the investment returns will build around:
20,000 social housing properties.
4,000 of the 20,000 social housing properties will be allocated for women and children fleeing domestic and family violence and older women on low incomes who are at risk of homelessness.
10,000 affordable housing properties for frontline workers.
A Social and Affordable Housing Fund (SAHF) is operated by the NSW Government. A proportion of the investment returns will fund annual service payments that will reward community housing providers over 25-years to bridge the gap between rental revenue and operating costs. These are far from being radical initiatives and stake out a broad support base that existed prior to the Labor Split of the 1950s.
In The Boom-and-Bust Traditions of Conservative leaders, MYEFO conceals the likelihood of a near trillion-dollar public debt in 2024-25 as private sector investment falters while government spending programmes move southwards after the election to reduce the economic boost from deficit spending which has contributed to favourable short-term MYEFO indicators.
I hear the confidence of Bill Hayden in the enthusiastic responses of Dr. Jim Chalmers to the current MYEFO. The adjacent seat of Oxley became a safe Labor seat for the first time after the defeat of the Liberal Health Minister in 1961. Being taken for granted, both then and now, raises Labor’s enthusiasm for the possibility of a change of government this time around despite all the media hype in MYEFO and in the future December Quarter economic indicators.
This public relations advertisement warns everyone about life delivering curved balls during the cricket season. Take good advice from leaders who are on our side is already a strong feature of Labor’s media agendas. This style of narrative advertising could be broadened with inputs from other cross-sectional characters who are committed to level-headed critical policies that are appropriate for a middle-ranking Australian economy with a still underdeveloped financial sector.
This would be a variation of the It’s Time Advertising from 1972. This campaign was challenged fiercely by the Federal LNP. Labor’s victories in twelve new seats were partially offset by losses to the LNP in Bendigo, Forrest, Stirling and Sturt. Out of this mix, Labor secured the seat of Cook which is Scott Morrison’s current seat.
State of the art advertising can attract attention and fire the appetite for change over that conventional wisdom offered by the LNP to justify more market ideology and militarism to worsen the Australian social divide. Readers might take a few minutes to evaluate this style of the public announcement by checking the You Tube Channel.
Narrative advertising should be endorsed by members of Labor’s Shadow Ministry, high profile candidates and popular Australians as in 1972.
A call to electoral enrolments is the first step in getting sceptical potential constituents onside before the rolls close in early 2022 as the voting returns in many Labor heartland electorates were unbelievably soft at the last election.
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