Australia's fiscal health under Labor reaffirmed in latest IMF rankings

The latest International Monetary Fund (IMF) survey shows Australia rapidly recovering from the nine disastrous Coalition years, Alan Austin reveals.

THE IMF'S half-yearly report on fiscal policy released last Wednesday contained a strong endorsement of the Albanese Government and Treasurer Jim Chalmers. Every file related to Australia confirmed that economic outcomes had suffered year by year under the conservative Coalition but are now advancing rapidly under Labor.

This was hard, cold, objective evidence showing what is actually happening in the economy. So, naturally, most of Australia’s media ignored it.

The report opened with the observation, made by IA in early February, that more voters will go to the polls in 2024 than in any previous year.

It then warned against electoral bribes:

‘Even as the global economic outlook is stabilizing, fiscal policy continues to struggle with legacies of high debt and deficits, while facing new challenges. Public finances risks are acute this year as over 80 economies and economic areas are holding elections, amid increased support for high government spending.’

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Improving budget balances

The IMF provided data on several fiscal measures for 116 countries. These include all G20 and all Organisation for Economic Co-operation and Development (OECD) members except Costa Rica.

Treasurer Chalmers highlighted the finding that among the powerful, high-population G20 countries, Australia was second-best in its strong budget position, just behind Canada.

He stated that:

'Australia had the second strongest budget balance as a share of GDP among G20 countries last year, up from equal 14th position in 2021, the IMF Fiscal Monitor released overnight shows. This dramatic rise is a testament to the Albanese Government’s responsible approach to budget management.'

Only a few news outlets reported this accomplishment, including The Guardian and ABC’s 7.30 Report.

As with virtually all its “stories” on economics and politics, Sky News got it wrong. This time, however, its falsehoods inadvertently favoured Labor. A beaming presenter claimed Australia’s "budget position is the second best in the world" and got guest economist Ross Greenwood to agree excitedly that this was correct.

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Of course, that’s not true. Australia is second only among G20 countries, as the Treasurer carefully specified — and as Sky’s printed text got right.

For the record, Australia’s ranking was 42nd among all 116 countries surveyed, up from 107th in 2019 under the Coalition.

Zooming up the global rankings

This column has always preferred comparisons between the 38 wealthy democracies comprising the OECD, so it shall stick with that here.

Last year, according to the IMF, Australia ranked ninth among OECD members on overall budget balance for federal and state governments:

(Source: IMF Fiscal Monitor | data.imf.org)

The IMF tracked outcomes from 2015 through to the present, enabling rankings over time to check how governments managed prevailing conditions.

Ninth last year is not as good as a top-four spot, which Australia enjoyed in the late Howard period and the Rudd/Gillard years. But much better than 29th-ranked in 2016 after Tony Abbott’s two years as PM and vastly superior to the appalling 35th – third last! – in 2019, when Scott Morrison was in charge. (See ghostly pale columns in the chart above, inserted for comparison.)

Only six countries had stronger budgets in 2023 than in 2019, pre-COVID-19. Of these, Norway achieved the best gain with 7.66% of gross domestic product (GDP). Australia was next best with a satisfactory 3.46% gain.

Please note that this chart, showing Australia ranking ninth with a small deficit, differs from the chart IA published last month, showing fifth ranking with a surplus. The previous chart reflected only federal budgets, which are now in strong surplus.

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Debt declining — at last

The IMF’s net debt data shows only a few OECD economies reduced debt significantly in each of the last two years. Australia was one of them, with a contraction from 35.6% of GDP in 2021 to just 28.3% in 2023.

It confirms that the years between the global financial crisis and the COVID-19 downturn were ripe for debt repayment. Australia under the Coalition was one of only six loser countries that deepened net debt every year from 2016 to 2020. The others were Chile, Finland, Japan, Türkiye and Donald Trump’s USA.

From third-best in the OECD during the Gillard years, debt ranking slipped to 12th by 2015 — and to 15th in 2020 and 2021. The change of trajectory has been underway since the May 2022 Election, with Australia now back at 12th.

Government incompetence and waste

The IMF also confirms the Coalition’s wasteful spending. In 2015, Australia ranked 11th on government expenditure to GDP, down from seventh at the end of the Gillard Government in 2013. By 2017, our ranking had dropped to 13th, then to a dismal 15th in 2019.

Under Labor, spending is now eighth lowest at just 37.1% of GDP last year. That compares with 38.9% in 2019, pre-COVID-19. The only countries now with lower spending to GDP are Ireland, South Korea, Chile, Mexico, Switzerland, Türkiye and Colombia.

IMF advice and warnings

Officially, the IMF offered this sound counsel to the world’s finance ministers:

‘Countries should boost long-term growth with a well-designed fiscal policy mix to promote innovation more broadly, including fundamental research and facilitate technology diffusion. Durable fiscal consolidation efforts are needed to safeguard sustainable public finances and rebuild buffers.’

Its embedded warning to Australians is this: Never vote for the Coalition again. If you do, expect wasteful spending, budget deficits, ballooning debt, lower economic growth, reduced incomes and lower personal wealth.

Unfortunately, Australia’s budget is not second-best in the world, as Murdoch's minions assert. But it is definitely on track.