Progressive political parties improve prosperity

Economic outcomes show reformist governments are managing current global conditions far better than conservatives, as Alan Austin reports.

THE NUMBER OF New Zealanders looking for paid work has surged from 96,000 in late 2022 to 156,000 in this year’s March quarter.

This and multiple other recent adverse economic outcomes are the opposite experience of Australians, just across the Tasman. So why these figures?

One possible explanation is that the government changed in 2023 from the progressive Labour Administration led for five years by Jacinda Ardern and then for nearly a year by Chris Hipkins to a conservative National Party Government led by Christopher Luxon.

We can test this hypothesis by examining several comparable economies. Like petri dishes in a sterile Swiss laboratory, these five countries allow us to observe the transformation of their domestic economic culture over time.

New Zealand from left to right in 2023

Since the last federal election, New Zealand’s jobless rate has jumped from 3.6% in mid-2023 to 5.1% in the latest report. See chart below.

New Zealand’s NX50 stock market index closed at 12,853 on Friday, well shy of last year’s levels above 13,000. Retail sales year-on-year have declined for eight of the last ten quarters. Consumer spending for the last two quarters of 2024 was below that in the first quarter of 2022. See chart below.

New Zealand’s turning point for most indicators was actually before the 2023 change of government. Its unemployment rate began to sneak up in 2022, although it remained well below historic averages throughout Labour’s term.

So we cannot claim with certainty that the changed policies by the Nationals were the only cause of all these downturns. We can assert, however, that the new regime has not arrested the deterioration.

World’s best economy flourishing

We saw here earlier this month that Denmark now has the world’s best-performed economy on the Independent Australia Ranking on Economic Management (IAREM).

Since the 2019 Election swapped the conservative Venstre Administration for a progressive Social Democrat Government led by Mette Frederiksen, Denmark’s economy has boomed in virtually all areas.

In 2018, Denmark ranked 38th in the world with negative growth in gross domestic product (GDP) and low wealth per person, but it has advanced since. From 11th in 2020, Denmark reached eighth in 2022, fifth in 2023, second last year and top spot this year. That’s almost certainly the most spectacular rise in the IAREM’s 11-year history.

After a dip during COVID, exports surged under the policies of the reformist Frederiksen Administration. See chart below.

Other outcomes which improved markedly include employment, wages, budget surpluses, government debt to GDP and consumer spending. See chart below.

Finland from centrist to progressive to conservative

Finland’s economy struggled through the four years of Juha Sipilä’s Centre Party administration, then improved significantly under the reformist policies of the centre-left coalition led by Sanna Marin.

Strong outcomes from 2019 to 2023 under Prime Minister Marin were recorded in jobs, wages, budget deficits and consumer spending, despite the COVID recession of 2020. See chart below.

In a surprise result to many, given the apparent success of Marin’s progressive coalition, Finns opted for a right-wing coalition under Petteri Orpo in June 2023.

Many have regretted this since, with worsened outcomes on GDP growth, unemployment, government debt and consumer spending. See chart below.

Italy’s uncertain future

Georgia Meloni has now led Italy’s right-wing coalition government for two years and nine months. If she manages to survive for three full years, she will become the second-longest-serving Italian Prime Minister of the last 18.

Her administration appears to have enjoyed a continuation of the gradual economic recovery from the Global Financial Crisis set in train by her more reformist predecessors, with exports rising, consumer spending steady and unemployment gradually declining. See chart below.

(Data source: Italian National Institute of Statistics)

The last six months, however, have seen the total jobless rate sneak up, youth unemployment jump back above 20% and GDP growth remain close to zero.

If these negative trends accelerate, Italy will confirm the observation that right-wing policies deliver worse outcomes than leftist policies. But only if. We shall soon see.

Australia from strength to strength

Of all the economies transformed by progressive policies, Australia’s is Exhibit A.

Almost every variable tumbled through the nine years of the conservative Coalition from 2013 to 2022. Since then, the advances have been impressive.

Australia’s inflation rate has been below 3.0% and its jobless rate below 4.5% for a record ten months straight. Wages have risen faster than prices for 18 months. See chart below.

Fresh records continue to be notched up in exports, corporate profits, housing starts, construction output, taxes collected, wealth per person, poverty alleviation, debt reduction and consumer spending.

Retail sales reached an all-time high both in dollars and as a percentage of GDP in this year’s March quarter. See chart below.

Economies teetering elsewhere

Recent changes of government in the USA, the UK, Germany and elsewhere are likely to yield equally intriguing economic shifts in due course. For now, it is too soon to tell.

Suffice it to say that in Donald Trump’s first six months, the U.S. economy has seen a collapse in the value of the U.S. dollar, a surge in bankruptcies, steep increases in monthly budget deficits and the federal debt blown out by more than half a trillion dollars to US$36.7 trillion (AU$55.9 trillion) last Friday.

There is a real possibility that the title for the worst four-year period of economic mismanagement in the developed world in modern history may shift from Australia’s Scott Morrison to Donald Trump.