The latest report to Parliament on the state of the economy by Coalition ministers is riddled with contradictions, hypocrisies and falsehoods, writes Alan Austin.
THERE IS A disturbing incongruity at the heart of the Government’s end-of-year economic assessment released last Thursday. It proclaims that its economic management is magnificent and Australia’s economy is set to boom.
Yet, the current run of the deepest budget deficits on record will continue until 2025. Gross debt will more than quadruple Labor’s level and reach $1.2 trillion.
How is this possible? How can the budget still be in deficit with booming growth, high productivity, bounteous jobs, rising wages and companies raking in record profits, which surely must mean record tax receipts and government revenue overflowing?
Glowing government forecasts
The mid-year economic and fiscal outlook 2021-22 (MYEFO) from Treasurer Josh Frydenberg and Finance Minister Simon Birmingham asserts that:
Having performed more strongly than any major advanced economy throughout the pandemic, the Australian economy is poised for a strong expansion that is forecast to see the unemployment rate fall to 4.25%by the June quarter of 2023. This would represent the first time since before the Global Financial Crisis that Australia has sustained an unemployment rate of below 5%and only the second time since the early 1970s.
Resolving the contradictions
The answer to the question above, of course, is that the words in this document are not credible. The economy is currently being managed in an inept manner.
We can demonstrate this by examining the actual data presented in the body of the MYEFO and in the historic tables in appendix E, which show outcomes from 1970 to 2021 and projections until 2025. These prove Australia’s worst period of economic management has arguably occurred since 2014.
The fallacy of economic growth
It is blatantly false to assert Australia’s growth has been stronger 'than any major advanced economy throughout the pandemic'.
All countries except New Zealand have positive annual growth, averaging a solid 5.4%. The United Kingdom, Hungary, Iceland, and Estonia are above 6%. Ireland, Greece, Chile and Colombia are above 11%. Australia’s lowly 3.85% growth ranks a miserable 30th out of the 38 developed countries, close to the lowest ranking on record.
If we compare this with the same period during the recovery from the global financial crisis under Labor, we see where Australia should rank: first or second.
Australia's ever-increasing debt
The MYEFO confirms that the Coalition has no pathway towards reducing the debt it will leave to future generations.
The Abbott Government increased gross debt from Labor’s very modest 16.8% of GDP to 22.7%, despite having solemnly promised to fix “Labor’s debt disaster”.
The Turnbull Government deepened the debt to 28.4% of GDP, even with booming exports and record company profits.
The Coalition with Morrison as Prime Minister and Frydenberg as Treasurer then increased it to 34.5% in 2019-20, before the pandemic impacted the economy. It then deepened to 39.5% by the end of the last financial year.
It gets worse. The MYEFO forecasts gross debt blowing out to 45.6% of GDP by 2023 and a staggering 48.6% by 2025. In dollars, that is $1,189,000,000,000. Yes, almost 1.2 trillion dollars.