Damage done to Australia’s resilient economy by the current inept prime minister and treasurer is now being exposed by corporations and the professions. Alan Austin reports.
BUSINESS AND THE PROFESSIONS remained mute through the first 18 months of incompetence and indecision by Tony Abbott’s Coalition regime. They are now openly expressing dismay and despair.
The latest shock to Australia’s once-lauded economy arrived in Thursday’s disastrous figures on capital expenditure – abbreviated to "capex" – from the Australian Bureau of Statistics (ABS). Industry economists are now talking recession — unthinkable just a year ago.
UBS issued an urgent report to clients headed: ‘Capex outlook worsens from bleak to recessionary’.
‘The “capex cliff” arrived early with implied nominal growth in 14/15 slashed to -8% y/y, & 15/16 cut to -14% y/y, both much weaker than our forecast -4%.’
That is jargon for vital investment in job-generating building projects plummeting 8% this financial year. And projected – based on ABS surveys of potential investors – to tumble another 14% next year.
The last time this key indicator fell badly was in 2009 during the global financial crisis. The time before was the 1991 worldwide recession. (ABS Cat no 5265, table 5B, column AB)
The normally upbeat ANZ Bank economists attributed this slump to pessimism among business decision makers about the future of the economy:
'An improvement had been expected due to a more stable political environment during this survey period, but the ongoing weakness is indicative of a lack of business confidence.’
JP Morgan’s Tom Kennedy believes the budget estimates of GDP growth – released just two weeks ago – won’t be met:
"It looks like capex is going to be a bit more of a drag on GDP than we had pencilled in. We had 0.5 per cent and we are in the process of adjusting it."
He means downwards.
China accounts for 30% of Australian exports. AUS may not have had a recession in 24 yrs but this leaves it exposed http://t.co/U6CTb1Gvhh— Alexandru Mihalache (@alexmihalache) May 24, 2015
Tim Toohey at Goldman Sachs agrees:
"Given the scale of the declines in this survey we reiterate our warnings that economic growth estimates remain skewed to the downside ..."
According to AMP Capital Investors' Shane Oliver, worse is to come:
"The shock number wasn’t so much the quarterly figure, it was the year ahead estimates for 2015/16 … it’s a pretty hefty downgrade."
Treasurer Joe Hockey cannot claim this is beyond his control. In Opposition, he attacked Labor when the capex declined slightly from historic highs. He blamed this on specific Labor failures, including regulation, "capricious and unpredictable tax grabs" and "wilful disregard for Australia’s interests" in trade.
If Labor was responsible for capital expenditure in 2012/13 – in retrospect, the all-time high – then the Abbott Government must cop the blame for the collapse in 2014/15.
This corporate bashing of Joe Hockey’s mismanagement came hard on public condemnation of Tony Abbott by BHP Billiton chief Andrew Mackenzie for his mooted inquisition into iron ore prices:
"This is a ridiculous waste of taxpayers' money on providing a basic economics course on supply and demand ... It's red tape, pure and simple."
That was not all. Earlier this month the Australian Medical Association condemned Abbott for backing a proposed new medical school which the profession considers superfluous.
A truly appalling idea RT @lurupana: Tony Abbott branded 'Captain Chaos' over medical school plan http://t.co/RYNXfQRfQr— Norman Swan (@normanswan) May 17, 2015
AMA President Brian Owler was scathing:
"It's a calamitous captain's call by Captain Chaos. That's the only way to describe it because it's going to cause chaos with the medical training of students."
Australian Medical Students' Association President James Lawler supported Owler, claiming Health Minister Sussan Ley had previously rejected Abbott’s proposal:
"She told us that she didn't believe we needed a new medical school and there wouldn't be funding for that in the budget. But all of a sudden Tony Abbott's flying to WA to announce it."
This follows open warfare between the Government and the AMA last year over the spectacularly failed attempt in Hockey’s first budget to impose a $7 GP co-payment.
The pharmaceutical industry has also been at war with the Government over its budget proposal to change drug pricing.
Medicines Australia chief executive Tim James rejected this as penalising sick people:
"We see these changes as arbitrary, hasty and unplanned and ... not in the best interests of patients."
A deal was struck on Wednesday, with retail chemists winning and the drug manufacturers – and consumers – losing.
This month’s most savage attack on Abbott’s incompetence came from fund manager Christopher Joye, who once worked for the Howard Government and was recruited by Malcolm Turnbull to be a director of a Liberal Party think-tank, the Menzies Research Centre.
“Rating agencies are smoking dope if they think Australia is a better "credit" today than it was in 1980s & 1990s.” http://t.co/Yh8HMfRWKq— eleanor bloom (@eleanorbloom) May 14, 2015
‘The country is suffering from a toxic combination of unprecedented public and private debt’, Joye wrote in the Financial Review.
‘This budget deficit is worse than even the most sophisticated investors realise. Indeed, Australia faces its biggest fiscal challenge in 60 years and does not deserve an AAA credit rating.’
Joye sees little hope for the economy under the present regime:
‘With fiscal and monetary policy all but completely spent, we have scant policy ammunition left to combat a real downturn.’
Business confidence has collapsed from a healthy 12 points on the NAB’s monthly index in September 2013 down to three, zero, three and three this year. Causal factors are not hard to identify.
- failure to frame a fair budget which ensures the rich pay their share;
- continual backflips and broken promises, now documented at 85 and rapidly approaching the ton;
- the ingrained practice of sheer blatant lies destroying trust in government ministers;
- failure to address negative gearing and other contributors to uncompetitive land prices;
- failure to progress superannuation reforms to relieve future budget stresses;
- failure to maintain infrastructure investment;
- wasteful spending; and
- frequent foreign affairs blunders, failures of diplomacy and ministerial ineptitude widely reported internationally.
Tony Abbott better but maybe not yet good, say business leaders: Business leaders think that while Prime Minis... http://t.co/kk2fHYjQaM— TheAge Breaking News (@theagebreaking) May 19, 2015
To date, the mainstream media have downplayed or denied the unravelling of Australia’s economy.
That is fine for the Abbott Government and for the rich tax avoiders who are its principal beneficiaries. But disastrous for citizens – workers, consumers, families, retirees, welfare recipients, investors – and the majority of businesses.
If things deteriorate further – if, for example, there is a dramatic drop in next Wednesday’s GDP growth figures – that may well change.
The original artwork by John Graham reproduced as the feature image in this piece may be purchased from the IA store. You can follow Alan Austin on Twitter @AlanTheAmazing.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
Outlook slips "from bleak to recessionary": http://t.co/CgbzNENyB7 #ausecon #budget #auspol @smh @theage pic.twitter.com/ryUHNkiIhh— Peter Martin (@1petermartin) May 28, 2015
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