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Worst debt blow-out in the developed world refutes Coalition claims of economic competence

By Alan Austin

Last Friday morning, just as Scott Morrison was spruiking his credentials on 3AW, Treasury updated Australia’s gross debt – a thumping $874.2 billion. The Coalition has now added a neat $600 billion to the nation’s debt.

Morrison told Melbourne voters “we know how to manage money” and “we will always manage better than Labor” and “Australia one of the strongest economies in the advanced world” and “you’ve got to keep control of your expenditure.”

Simultaneously, the debt data declared emphatically, “No, you don’t; no, you won’t; no, it isn’t; and yes, but you didn’t.”

There is no justification for adding $600 billion over the last eight and a half years, most of which has been global boom times. Over that period, all well-managed nations repaid much of the debt they needed during the global financial crisis (GFC). When the Coalition took over from Labor in 2013, Australia’s gross debt was just $271.7 billion. Labor had the misfortune to govern for only ten months of benign global conditions before the GFC whacked the world. Over that period, Labor reduced the debt by $4.7 billion.

Between the crisis hitting in late 2008 and the end of the GFC, which coincided with the end of Labor, the government borrowed an average of $43.5 billion per year. All of that was needed.

In the ensuing recovery, from the 2013 election until August 2018, when Morrison became PM and Josh Frydenberg Treasurer, debt increased by $53.4 billion per year to $538.6 billion. None of this was justifiable. During the Morrison years, which included the pandemic, debt blew out by $94.9 billion annually to today’s $872.4 billion. Some of this was warranted.

Why does debt matter?

There are two answers to this question – economic and political.

In economic terms, debt requires interest payments which in Australia today effectively replace spending elsewhere. Interest this year, according to last month’s budget, will be $17.5 billion, increasing to $26.3 billion by 2025-26. That’s money not available for health care, infrastructure or other priorities.

Interest payments also send wealth and income offshore. Last Friday’s Treasury data shows nearly half goes to non-residents. To the extent these are wealthy, foreign donors to the Coalition parties, this will be regarded by some as perfectly fine. To those troubled by the accelerating flow of wealth offshore, this is undesirable.

The debt does not pose any risk of Australia defaulting on repayments. Australia issues bonds in its own currency and can always print more Aussie dollars.

Coalition and media treachery

The real damage inflicted by debt in Australia is political. The Coalition and the mainstream media successfully persuaded millions of voters at the last four elections that debt under Labor was “spiraling out of control”, a “debt time bomb”, “skyrocketing”, “terrible economic mismanagement”, a “budget emergency” and “Gillard’s debt disaster.”

Of course, this was all malicious fabrication. The International Monetary Fund has published time series debt data for all 38 wealthy members of the Organisation for Economic Cooperation and Development (OECD). In Labor’s last full year, 2012, Australia’s general government gross debt was just 27.5 per cent of GDP, the OECD’s fourth-lowest. Only Estonia, Chile and Luxembourg had borrowed less.

It is now a thumping 77.0 per cent, ranking 23rd out of those 38 developed countries. That explosion of gross debt by 49.5 per cent of GDP is the worst in the OECD by far. Second worst is Costa Rica (41.2), then Greece (38.5) and Spain (30.4). Countries which reduced debt from 2012 to 2022 include Denmark, the Netherlands, Germany, Ireland, Iceland, Portugal and Hungary. See green chart, below:

 

 

So why no screaming headlines about disaster and destruction today? Because the purpose of economic data, according to the mainstream media, is not to provide information but to destroy Labor’s reputation by falsifying it.

The current campaign

If this is a general principle – that data is to be manipulated to condemn Labor – then is this occurring in other areas? The answer is yes.

Morrison said in Friday’s radio interview, “we need to keep going in the way we have, which has made Australia one of the strongest economies coming out of this pandemic in the advanced world.”

This has been a constant refrain since Morrison became Treasurer in 2015 and is the opposite of the truth. It has never been queried by any mainstream “journalist”. By any measure, Australia’s economic strength has slumped dreadfully since 2013.

Using the usual metric, annual GDP growth, Australia ranked in the OECD’s top nine through most of Labor’s tenure. In 2009, Australia was first. Ranking has tumbled steadily since then and is currently 27th.

Employment furphies

Morrison claimed, “We’ve actually got unemployment down in the middle of an economic crisis. Under Labor it went up.”

That is a barefaced lie – which the media should expose but won’t. Unemployment did not decline during the Covid crisis. It soared from 5.1 per cent in February 2020 to 7.4 per cent in June 2020. That was one of the world’s worst blow-outs, pushing Australia down the OECD table to 22nd placing. It has come down since then to 4.0 per cent. That currently ranks a modest 14th.

In contrast, Labor’s jobless rate increased during the GFC from 4.6 per cent to peak at 5.9 per cent. That ranked ninth, close to Australia’s best OECD placing ever. By December 2010, Labor’s jobless had recovered to 4.9 percent, which ranked fourth in the developed world, a new all-time high.

Deterioration across the board

Outcomes on wages growth, productivity, retail sales, median income, interest rates, the tax burden, budget deficits, spending, infrastructure investment and housing have all been demonstrably worse under the Coalition. The main variables to have improved since 2013 are export volumes and values, corporate profits and personal wealth.

So, are Australia’s mainstream economics writers just incompetent hacks? Or are they also deliberate malicious liars?

 

Alan Austin writes regularly for Crikey, Independent Australia and Michael West Media.

 

 

 

 

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15 comments

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  1. pierre wilkinson

    Don’t let facts and the truth interfere with the MSM Liberal narrative….
    who can arrest this misinformation barrage?

  2. Michael Taylor

    The media has successfully convinced my young neighbour that Labor are bad for the economy. The saving grace for my neighbour is that he’s not too fond of the Morrison government, either.

    The latter is comforting. The former is disturbing.

  3. Harry Lime

    Does any of this information feature in Labor’s campaign?If not,why not?
    And for Christ’s sake stop featuring photos of the smirking jerk,it’s overkill on this site.

  4. wam

    Well done, Alan, a beaut read.
    If a journalist or editor wants to keep his/her job they must give scummo positives and labor negatives(even labor positive stories have negative headers) at a ratio of at least 4lnp stories to1
    The saddest 9 years when there has been no labor plan to combat the debt lie that the rabbott and the media hammered every day of gillard’s stint as PM. The corporate memory of labor originates from gough’s ‘khemlani’ debacle and juliar’s debt. Your young neighbur hasn’t got a chance to counter the paper. Labor should have been priming up its grassroots in how to counter debt bullshit but SFA for 9 years and I bet nothing in the next 6 weeks.
    But our danger is the bandit. What did you glean from the bandit at the press club??
    Be brave and ask your neighbour about the greens.
    ps
    oh why didn’t any of the 17 lead for boak against the crows????

  5. Michael Taylor

    wam, because like the government, our forward half was a rabble. ☹️

  6. Michael Taylor

    Harry, unavoidable. If the articles are about Morrison then he’s the obvious choice. There’s going to be a lot more of it.

  7. Michael Taylor

    wam, Labor doesn’t receive a high percentage of votes in my electorate. For the last few elections it’s been a fight between the Liberals or our independent. The current independent, Helen Haines (a virtual unknown in the 2019 election) scraped home over the Liberals thanks to preferences.

    I think she’ll bolt it in this election.

    She’s a good mix of progressive Labor and the Greens.

  8. wam

    Michael, my daughter was in indi for 20 years from the time when the rabbott declared sophie as one of the exceptions to the god given 25% inequality of women. We were happy when Cathy rolled mirabella. It should be no change this time as helen has been terrific.
    Don’t agree with your mix as progressive labor country party is a fair assessment but the greens are at 3% and that fits with the bandit’s extremists who have nothing to offer indi and, in my opinion, are just glossy aec cash gatherers.

  9. Jack sprat

    What happen to all those “back in the black ” coffee cups that the LNP bought ? Are they showing up at cash converters ?

  10. Andrew J. Smith

    Agree with Mr. Austin’s analysis but one would add that the media, including supposed economists and/or business journalists, don’t seem to understand basic demography and politics.

    Australia is ageing with the above median age vote becoming dominated by retirees/pensioners for a potential ‘gerontocracy’ fueled by ‘pensioner populism’, ‘collective narcissism’ and low or not taxes.

    However, OECD population data trends explain very clearly the dynamics (vs. the ABS’s UNPD derived data ‘snapshots’), working age population has passed the demographic ‘sweet spot’ (pre Covid) with increasing numbers exiting for retirement, but the working age cohort is central to personal or household investment and spending, plus PAYE taxes (not increasing numbers of retirees/pensioners who have passed peak spending & investment).

    Maybe the LNP could try what some GOP are demanding, (no doubt low income) seniors to pay taxes. The Oz working age data is here compared with similar nations https://data.oecd.org/chart/6GfQ

  11. Coopsnz

    Labor tax me more than liberal , so not voting Labor

  12. Kaye Lee

    Coopsnz,

    That is incorrect.

    The data shows that the Coalition under Mr Howard was the highest-taxing government of the last 30 years, with an average tax-to-GDP ratio of 23.5 per cent.

    Over its first four years — prior to introducing the GST that put up the price of everything by 10% — that rate was 22.5 per cent.

    In second place was the current Coalition government, whose average rate was 22.2 per cent (excluding the 2021-22 financial year, for which only estimates are available).

    The Hawke-Keating Labor government placed third, with an average rate of 21.8 per cent over its 13 years.

    Rounding out the list was the Rudd-Gillard Labor government, with a rate of 20.9 per cent.

    Gillard also increased the tax free threshold from 6,000 to 18,200.

    https://www.abc.net.au/news/2021-12-13/fact-check-is-the-coalition-australia-s-second-highest-taxing-go/100686194

    Excellent article, thanks Alan.

  13. Jaybee

    Coopsnz,

    Unfortunately, you, like most of the Oz population, don’t do any research. You simply listen to the main stream media.

    So, despite being a higher taxing government and the following, you’ll vote for the LNP?
    the LNP’s pathetic performance with climate change,
    the fires, COVID in aged care and the vaccines,
    its inability/refusal to introduce a proper ICAC (why? – obviously doesn’t want all its rorts & corruption exposed),
    it slashed $14M from the budget of the Australian National Audit Office,
    it greatly increased financial and social inequality,
    Morrison’s 52 + lies to the electors,
    massive handouts to LNP donors,
    the political donation joke (only report over $14,000 and 18 months later),
    refusal to release info under FOI statutes,
    the LNP’s revolving door policy with industry especially fossil fuels and armaments industries,
    increasing emissions problems despite Morrison’s attempted cherry picking of the truth,
    with Howard’s government the 2 highest taxing governments in our history despite the LNP’s continual claim that the ALP is the highest taxing party when in government,
    the 3 major rorts for the last election,
    protecting an accused rapist,
    no renewable energy policy – taxpayers pay for the polluters,
    cutting back funding for public schools whilst greatly increasing funding for private schools (refusal to implement the independent Gonsky report),
    refusal to investigate Porter’s “donation” after he pulled out of his stunt motivated anti ABC attack,
    Grassgate (illegal clearing) & Watergate ($80M) rorts for minister Angus Taylor,
    the billions given to companies & private schools which had made profits during the pandemic (the only government in the world which gave money to profitable companies & schools),
    based on its own figures, it won’t be increasing employment despite fooling the masses that it will
    etc, etc.

    Many in the legal profession have claimed this is the most corrupt government in our history.

  14. Jane Rayner

    Unless coopsnz earns a great deal more than the average wage earner, the claim that he pays more tax under Labor than the Liars is patently untrue.
    For the average wage earner, tax cuts are neither use nor ornament, worth little more than a cup of coffee a week.

  15. Michael Taylor

    Coopsnz, if you were to learn that it was in fact the other way round, I’m guessing that you won’t be voting Liberal.

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