Inflation is the latest measure to show the Coalition’s current economic management is failing the nation. Alan Austin reports.
“I used to be an ardent remainer... I believed staying in the European Union was the best thing for us. Then something monumental happened and I completely changed my feeling.”
Naturally delighted to hear from an articulate fresh convert, Farage asked: “What was that monumental thing, Mark?”
“I got kicked in the head by a horse!” — which ended the call abruptly. And hilariously.
What made that sledge effective was Farage inviting it so eagerly. And thus it is with Australia’s Morrison Government and the appalling economic outcomes now piling up about them. They have urged voters to convert to supporting the Coalition with specific, identifiable commitments.
This column’s task is to reveal the actual outcomes – in contrast to those promised – and direct readers to reliable data. The second is vital because Coalition ministers and mainstream media economics writers lie routinely about the economy.
Ever-rising costs for most Australians
The latest area of economic failure is the surge in the cost of living. The Australian Bureau of Statistics revealed last Wednesday that over the last year, costs rose overall by 3.85%, the highest since September 2008. The price of fruit increased 6.0%, beef 13.5%, medical services 6.7%, footwear 4.9%, furniture 5.9% and car fuel 6.5%. Fortunately, alcoholic beverages increased only 1.5%.
Recent inflation history
In early 2009, Kevin Rudd and Wayne Swan implemented the world’s fastest and most successful stimulus strategy in response to the Global Financial Crisis (GFC). From that point until Labor lost office, Australia’s inflation rate stayed between 1.20% and 3.60%.
Then in June 2016, with Morrison as Treasurer, inflation fell to 1.02%, well outside the Reserve Bank’s target range of 2% to 3%. It fell again to negative 0.35% in June last year and has now climbed to 3.85%.
Australia was the only OECD member to keep inflation in the optimum range between 1.20% and 3.60% through the GFC. It rose above 6% in Hungary, the Czech Republic and Mexico, above 10% in Estonia, Latvia and Turkey and above 16% in Iceland and Costa Rica.
Controlling living costs was one of several vital areas where Australia led the developed world through the GFC. Others were economic growth, jobs, wealth per adult, infrastructure development, low debt and optimum interest rates.
Today, in contrast, Australia ranks a miserable 32nd in the group of 38 developed OECD member countries. Only Iceland, Poland, Hungary, United States, Mexico and Turkey had higher inflation rates in the year to June. See chart, below.
There is no excuse for Australia to have tumbled from the top of the world to among today’s conspicuous losers. These are good economic times globally, despite the pandemic. No OECD country is in deflation — a relatively rare event. And no fewer than 24 have inflation in the sweet spot between 1.2% and 3.6%.
Impact on real people
This surge in inflation seriously disadvantages welfare beneficiaries and low-income wage earners. They must get by with less food, clothing and other items for the same money spent.
This would not be too problematic if both profits and wages were increasing satisfactorily. This is not the case.
Wages versus profits
Recent ABS data shows starkly the different priorities of Labor and the Greens on the one hand and the Liberals and Nationals on the other. The graphs below show trajectories in profits and wages since the last major global crisis hit in 2008.
Through the devastating GFC, profits in Australia actually remained relatively high. This is despite the worst recession since the 1930s. Wages kept rising steadily. This was a major reason Australia – alone in the developed world – averted recession and widespread job losses.
Fast forward to the current global downturn and we see profits have surged mightily while wages have crept up only marginally. Wages have actually fallen, after inflation, in recent years. This is one reason Australia copped its worst recession on record.
By 2013-14 – the last year to reflect Labor’s policies – profits had grown by 19.1% over 2008. Not bad given the global downturn. But wages had increased 31.7%.
By 2019, profits were up 69.3%, far outstripping wages which had lifted only 51.1%. By March this year – the latest numbers – wages were up just 59.3% on 2008, but profits had surged 91.9%.
Thus, it seems clear there is only one explanation for any working Australian still supporting the Coalition. A kick in the head by a horse.
Alan Austin’s defamation matter is nearly over. You can read the latest update here and contribute to the crowd-funding HERE. Alan Austin is an Independent Australia columnist and freelance journalist. You can follow him on Twitter @alanaustin001.
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