The deterioration in Australia’s economy has been deeper and more rapid than even the most pessimistic forecasters predicted before the last election. The worst outcomes have been in those areas where Coalition attacks were most vicious in Opposition. As observers await Joe Hockey’s second attempt at a federal budget, Alan Austin assesses the damage.
TWO HIGHLY DISTURBING OBSERVATIONS can be made regarding Australia’s abysmal economic decline over the last 18 months:
First, the most monumental failures have been in those policy areas where Prime Minister Tony Abbott and Treasurer Joe Hockey were most arrogant and most malicious before the last election.
Second, the mainstream media has failed utterly to report either the dire economic deterioration or the political hypocrisy.
A report in Crikey on Friday examined all 20 key indicators of economic health. Of these, seventeen have worsened since the last election.
Deficit and debt
Before the 2013 poll, both Abbott and Hockey took every opportunity to denigrate Australia’s relatively low budget deficits and modest borrowings as a “debt and deficit disaster”, or “debt ... spiralled out of control to a record level”, or Labor’s “six years of record deficits, record debt ...”
By April 2014 (according to ABC Fact Check) Abbott and Hockey doubled the deficits for the forward estimates period over the levels bequeathed by Labor. Since then, revenue losses and increased spending suggest the deficits may have deepened further — perhaps as high as three times Labor’s projected levels. We await confirmation of this in next week’s Budget.
Net debt in Australia left by Labor in 2013 was just $178.1 billion. At the end of March this year, less than 18 months later, it had blown out by 40.4% to $250.1 billion, with projections for more.
Debt is still nowhere near worrisome levels, but is moving swiftly in the opposite direction to that promised.
Abbott & Hockey doubled the deficit in just 9 months. Murdoch Liberal government of deceit. pic.twitter.com/utEazkBnKW
— Human writes (@ianw84) December 24, 2014
Infrastructure
Tony Abbott in Opposition repeatedly promised
“... to be an infrastructure prime minister who puts bulldozers on the ground and cranes into our skies.”
He denigrated “Labor’s mismanagement of infrastructure”, despite impressive achievements documented by Infrastructure Australia and other authorities at home and abroad.
So what has Abbott achieved so far?
According to Australian Bureau of Statistics (ABS) data (Table 3, 'Data' sheet, column K), public sector engineering construction fell a staggering 19.46% in 2014 from 2013 levels. This is the greatest year on year decline since the ABS series began in 1986.
Infrastructure development is down more than a quarter from 2012 levels, the year Labor’s Anthony Albanese was awarded Infrastructure Minister of the Year by the London-based publication Infrastructure Investor.
Now let’s assess Abbott’s arrogant assertions here [IA emphasis]:
“The Coalition’s plan to restore our economy means lower spending, lower taxes and higher productivity to produce higher economic growth.”
Lower spending?
Outlays have in fact blown out enormously compared with the prudent years of Labor under Hawke, Keating, Rudd and Gillard. A recent IA analysis of the recent 40% debt blow-out listed 40 wasteful spending decisions.
The Washington-based Heritage Foundation downgraded Australia’s economic freedom score in 2015. Economic freedom was remarkably high in Australia throughout the Labor years, ranking top in the OECD and third in the world behind Hong Kong and Singapore.
The 2015 ranking, however, saw Australia slip 0.6 of a point and lose third spot to New Zealand.
The foundation highlighted declines through 2014 [IA emphasis]
'... in investment freedom, freedom from corruption, and the control of government spending.'
Lower taxes?
Finance Department figures for March show the Government is on track to collect $362 billion in tax revenue this financial year. That is 6% above the actual collection of $341.6 billion in 2013-14. That, in turn, was 4.7% higher than the $326.4 billion in the last full year under Labor, 2012-13.
Wages, in contrast, rose only 1.3% in 2014 and 3.0% in 2013. This is clearly not a low tax regime.
Australia First to Introduce a Compulsory Tax on Money Itself http://t.co/Hef0VagqOY #CompulsoryTax #TonyAbbott
— Allan Henry John (@allanhenryjohn) May 9, 2015
Economic growth?
Abbott repeatedly promised to
'... significantly boost economic growth, which is the foundation of a better life for everyone.'
The rate of gross domestic product growth through 2014 was in fact just 2.5 per cent. This is below 2.7% in 2013 and well below 3.1 in 2012.
Significantly, Australia has now – for the first time since the onset of the global financial crisis – fallen behind many comparable countries, including Canada (2.63), Sweden (2.7), USA (3.0) Norway (3.2) and New Zealand (3.5). And well behind regional trading partners, Indonesia (4.71), Malaysia (5.8), Philippines (6.9) and China (7.0).
Interest rates
By Hockey’s own rhetoric, this is a major fail.
He said in 2013:
“If interest rates come down today, it is because the economy is struggling, not because it's doing well.”
That was when the rate was cut from 2.75 to 2.5 per cent — where it remained for 19 months. Within six months of Hockey taking charge it fell to 2.25 and was cut again to 2.0 this week.
Hockey cannot have it both ways. If a cut from 2.75 to 2.5 signals a “struggling” economy, then two cuts in quick succession – down to 2.25 and then 2.0 – must signal disaster.
Unemployment
Shortly before the last election, Abbott told a Sydney press conference that “unemployment was marching towards 800,000” and
“.... we will tell you how much better than them [the Labor Government] we will do."
So how much better are they doing?
According to this week’s ABS figures, the number of unemployed people seasonally adjusted in April was 769,500. That is 81,200 more people than were jobless in the election month. It is closer to 800,000 than at any time during the Rudd/Gillard years — even during the depths of the global financial crisis.
Australia's unemployment rate 6.2% in April from 6.1% in March - economy lost 2900 jobs, -21.9K full time pic.twitter.com/mFeGtUgBL2
— GotSanctuary (@GotSanctuary) May 7, 2015
Other economic indicators which have worsened woefully include real gross domestic income, job participation and economic freedom.
Those which have deteriorated disastrously include gross domestic product per capita, household savings, building activity, business confidence, terms of trade and value of the Australian dollar.
The only major variables to have maintained the trajectory of the Labor years are inflation, labour productivity and Australia’s credit ratings. The latter, however, have been maintained after stern warnings.
Can this hapless regime diminish even further the economy which until recently was the envy of the world? The answer, tragically, is almost certainly — yes.
Next week’s budget will offer further data on how, how severely and how quickly this may happen.
But it is highly unlikely any accurate reporting of this continual decline will appear in mainstream news media. They don’t want to believe it is happening. And they don’t want readers to believe it is happening either.
Such is Australia’s doom.
You can follow Alan Austin on Twitter @AlanTheAmazing.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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The public didn't buy #TonyAbbott's and Joe Hockey's Armageddon warnings last year ... http://t.co/11NYstfYXx #auspol pic.twitter.com/VpCaBtcbJI
— Mark Bishop (@itsmarkbishop) May 9, 2015
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