Despite the News Ltd media and the Coalition talking down our economy at every turn, Australia truly is an economic marvel. Matthew N. Donovan crunches the numbers.
THERE HAS been a lot of misinformation around lately regarding the situation Australia currently finds itself in economically.
It seems to be happily fanned for cynical purposes by Tony Abbott and the Coalition as well as sections of the media — with even more doom and gloom coming today from our old friend, the Ashbygate co-conspirator, Steve 'Scoop' Lewis.
The fact of the matter is you will struggle to find a country that is more envied for its financial position than Australia.
The Global Financial Crisis that struck in September 2008 with the collapse of Lehman Brothers was the biggest financial shock the world has seen since the Great Depression. Global credit markets froze, global economic growth fell off a cliff, unemployment began to slide and people started losing their homes and the quality of life they were used to.
Let's remember how bad it got. Australia got off lightly.
Through it all Australia remained top of the heap on almost every count.
The Government and the Treasurer have been talking about the attributes we should be proud of, when it comes to our economy, for years.They are right when they say we have:
- low debt;
- low unemployment;
- AAA credit rating from all three major ratings agencies;
- low inflation; and
- trend growth
Australia's debt is the second lowest in the OECD. Gross debt stands at 28.9% of GDP.
This compares to Japan at 224%, Greece at 193.2%, Portugal at 133.1%, Italy at 129.6%, Ireland at 127.7%, United States at 113%, France at 108.2%, UK at 110.4%, Canada at 85.5%, Spain at 100.2% and Germany at 86.2%.
We do not have high levels of debt. It is a red herring.
Here's an oldie but a goodie from the 2010 election campaign.
Did our debt go up during the last few years? Sure it did, as it did everywhere else in the world. What also happened?
Tax receipts received by governments plunged off a cliff as business started being impacted by the international pressures of the GFC and banks stopped lending.
Over the last 5 years or so our government revenue from tax receipts has decreased $160 billion plus.
There were two options. Allow the Australian economy to free fall as growth and employment crashed or act to stimulate growth to avoid recession and save jobs.
If the former happened predictions were unemployment of over 8% and recession. To do nothing would have been reckless and harmful to our nation's future.
Stimulus was enacted and as a result Australia did not experience a painful recession. Hundreds of thousands of jobs were saved.
Talking about the amount of debt in isolation to the rest of the world and separate to how much it is in comparison to our almost $1.6T economy is deceptive. But that's the point isn't it? It's a fear campaign without merit.
This talk of a surplus over the last 5 years is very counter productive. If the government had acted to stay in surplus through the GFC that would have meant severe cuts in spending. Spending on education, health, social security, and other crucial and expected services. That would have meant severe austerity that would have done more harm than good and been hard to break out of.
Just look to Europe to see what severe austerity looks like. They only difference? Sadly, they need to do it because their debt really is out of control.
Australia's unemployment is the eighth lowest in the OECD at 5.4%.
Let's look at the other end of the spectrum.
This compares to Spain at 24.9%, Greece at 24.4%, Portugal at 15.3%, Ireland at 14.6%, Italy at 10.9%, France at 9.8%, United States at 8.2%, UK at 7.8% and Canada at 7.3%. Youth unemployment in most of these countries is significantly worse.
Our jobs market is strong. This is exeplified by the record monthly increase of 71, 500 jobs to start 2013. A new record dating back to 2000.
There are definitely some pressures within the market place and some structural shifts occurring but we as a country have a good story to tell on jobs. The historically high Australian dollar has played a large part in putting significant pressure on our export, manufacturing and tourism industries.
Actions taken during the GFC protected jobs. It wasn't an accident.
926,000 jobs have been created since Labor first came into power in December 2007.
The GDP per capita is $42,400. Once again putting us at the top of the world at sixth in the OECD.
AAA credit rating
Australia is one of only 11 other countries of the over 200 in the world to have a AAA credit rating from Moody's, Fitch and Standard & Poors. Not only that but we have a stable outlook.
The other countries are Canada, Denmark, Finland, Germany, Luxembourg, Netherlands, Norway, Singapore, Sweden and Switzerland.
The definition of AAA credit rating is "The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has an exceptional degree of credit worthiness and can easily meet its financial commitments."
This is a further sign of international confidence in our economy and something John Howard and the Coalition didn't achieve during their 11 and a half years in office.
If Australia was in such bad shape, as Abbott and the fear mongers like to say, we wouldn't fit this description would we?
The inflation in Australia of 2.1% is well within the lower half of the 2 - 3% band the Reserve Bank focus on at their meetings.
This makes it 11th lowest in the OECD.
When it comes to growth Australia is currently at 3.1%, or trend growth. This is 3rd highest in the OECD.
This when a lot of the world's economies are very sluggish. Growth in Australia is up from 2.5% and 2.1% respectively in 2010 and 2011.
Once again compare this to Switzerland at 0.8%, Germany 0.9%, Taiwan at 1.3%, Canada at 1.9%, United States at 2.2% and New Zealand at 2.2%.
While most developed countries are either negative or barely breaking even on where they were pre GFC, Australia's economy is streaking ahead 16% larger than it was in late 2008.
It is also important to note that tax as a percentage of GDP is lower than it was under the Howard government, currently 21% or so compared to 24% or so under Howard and the Coalition.Combine this with an investment pipeline of $500B and you start to get the idea that Australia is well placed in the Asian century.
Many of these facts may be new to you but when you look at them it is hard to see why we shouldn't be proud of them.
These facts are reasons why Australian comparisons to Spain and Greece should be laughed off for the jokes they are.
Prudent actions the Australian government took protected our economy and our jobs through the hardest of times.
We should all be very grateful. Time to start spreading the word and letting facts finally enter the discussion.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License