IA has analysed a Finance Department report, which the Morrison Government would prefer was kept hidden. Alan Austin found that its secrets confirm the worst fears of former Treasurer, Peter Costello.
IS PETER COSTELLO CORRECT? Does the Coalition have any economic narrative at all? Or are most Australians – those not in the top ten per cent – losing out because it is the wrong narrative for the times?
After a gap of three months, the Commonwealth Finance Department released its monthly update on the health, or otherwise, of Australia’s economy late on Friday night. Unfortunately, it shows otherwise.
These are the dismal numbers:
The 2018 Budget is on track to yield another deep deficit, despite the booming global economy and record revenues flowing into Federal coffers.
Total revenue for July and August was a thumping $76.3 billion. That is $5.7 billion higher than for the same period last year and up $15.2 billion on 2015. Yet still, they can’t produce a surplus.
Australia is now a stand-out failure in this area — just as it was the stand-out success through the global financial crisis (GFC) from 2008 to 2013.
Of the 36 developed countries in the Organisation for Economic Cooperation and Development (OECD), five were in surplus in 2014 — Germany, Denmark, Estonia, Norway and Luxembourg. Three returned to surplus in 2015 — New Zealand, Switzerland and Sweden. Seven more were back in the black by 2017. Another eight look like posting surpluses this year.
Hence, Australia is in the minority still in deep deficit.
Had Labor’s policies continued after 2013, Australia would have been in surplus in 2016-17. That’s according to former Treasury Secretary Martin Parkinson and former Finance Department Secretary David Tune.
Net debt at the end of August was $352.5 billion. That is $20 billion deeper than a year ago. It is $96.3 billion more than when current PM Scott Morrison became Treasurer. And it’s $191.3 billion – or 119 per cent – more than the level at the 2013 election.
Here again, Australia has gone from being close to the best-performed economy in the OECD in 2013, to almost the worst now.
As Independent Australia revealed recently, of the 36 OECD countries, only Mexico’s gross debt has deepened further than Australia’s over the last five years relative to gross domestic product. The net debt data now shows similar dismal global comparisons.
Net worth highly negative
Hidden in the Finance Department report [Table 1, second last line], this number gets very little attention. Maybe if it had collapsed during Labor’s tenure the mainstream media may have shown some interest.
Net worth is the measure of all federal government assets minus liabilities. Assets include cash, investments, land, buildings, equipment, infrastructure and heritage and cultural assets. Liabilities include government borrowings, debts to suppliers, superannuation and other employee debts.
So it is a neat indicator of how well – or how poorly – the Government is managing the economy.
Australia’s net worth tumbled in the two years Tony Abbott and Joe Hockey were PM and Treasurer by a staggering $114.6 billion — down from negative $205.9 billion to an appalling, negative $320.5 billion, the lowest ever to that point. With all developed countries out of recession and the global recovery well underway, there was no excuse for that loss.
Under previous PM Malcolm Turnbull’s leadership with Scott Morrison as Treasurer, net worth continued to plummet until it reached a new zenith in September 2016 of negative $443.5 billion. It recovered thereafter and has fluctuated over the last two years between negative $385 and $435 billion.
By way of contrast, the lowest this ever reached under Labor was negative $263.8 billion in September 2012 during the worst global recession in 80 years. It then recovered over the next 11 months to negative $205.9 billion at the time of the 2013 election and appeared set to continue its climb back to positive values.
Friday’s number was negative $424 billion — a total decline since Morrison became Treasurer of $103.4 billion. And a total loss since the Coalition won office, of $218.1 billion.
This is truly astonishing given the steady recovery from the GFC and three solid years now of exceptional trade volumes, commodity prices, corporate revenues and gross profits.
The final forlorn figure from Friday’s Finance factsheet was the net interest on the debt for the foreseeable future. This is forecast at $17.8 billion for this financial year. That is more than will be spent supporting people with disability and five times the allocation to overseas aid.
The Coalition’s actual economic narrative
As IA has regularly reported, the decline in Australia’s economic fortunes is due primarily to wage stagnation for the majority of workers over the last five years and wage cuts for many. Pensions and benefits have failed to keep pace with costs. Unemployment and underemployment remain entrenched. The tax burden has shifted from corporations and high-income individuals to wage and salary earners.
Hence, most Australians no longer have the disposable income they once had. This impacts retailers immediately and then flows on to wholesalers, manufacturers, importers, primary producers, transport, tourism, entertainment and other sectors.
Peter Costello is right:
“... it is very, very weird.”
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