Just when we thought Australia’s economy could not get any worse, along comes the negative GDP quarter, bleak job numbers and the MYEFO. Econometrics writer Alan Austin reviews the year.
WELL, THAT didn’t take long. In mid October, IA was commending the Turnbull Government for its one success — the steady growth in gross domestic product (GDP).
Okay, it was one of only two areas out of 24 where the Coalition had not totally failed.
But it was something. Credit where credit is due.
Less than eight weeks later, Australia recorded negative GDP growth for the September quarter — the first without an obvious explainer since the Fraser years.
Gloomy global grading
Naturally, the Government and the craven mass media tried to play this down. But it should be seen for what it is — confirmation that Australia is one of very few poorly-run economies that have failed to adapt to the times.
We now have the September GDP growth figures for 57 countries. Australia ranks equal 54th with Norway — with negative 0.5% of GDP. Only Brazil and Singapore had a worse quarter.
The conclusions can no longer be avoided. The Coalition’s economic strategy is failing. It is not the treasurer or the PM. Things were bad with Joe Hockey and Tony Abbott, but are worse now with Scott Morrison and Malcolm Turnbull.
This is not based on just one negative quarter of GDP. Several other disturbing news items have arrived since IA’s October’s review.
The November jobs data shows hours worked per person per month at a miserable 84.68. Through the Labor years – including the Global Financial Crisis – this ranged between 85.77 and 90.46. This measure has been below 85.40 for the last nine months. The last time that happened was in 1994.
The total number of Australians out of work in November was 725,235 — higher than at any time during the Rudd/Gillard years.
Job participation fluctuated between 64.8 and 65.8 under Labor. It has been below 64.8 for more than half the Coalition period, falling as low as 64.4 for two months. It is now 64.6.
Trade in trouble
Australia’s balance of trade – which reflects how export income matches import payments – came in at yet another deep deficit in November. That extends the run of deficits worse than $1,200 million to a record 22 months — with no end in sight.
The Finance Department’s November report reveals net debt has blown out to $314.0 billion. That is up from $267.8 billion – or a 17.2% increase – in just one year. But it is up 76.3% from the modest net debt of $178.1 billion Labor left in September 2013.
Then came this week’s mid-year economic and fiscal outlook (MYEFO) with more depressing news.
In his 2014 budget speech, Joe Hockey forecast budget deficits totalling -$30.5 billion for the three financial years from 2015-16 to 2017-18. This was accompanied by smug assurances that the Coalition was not like Labor and would deliver what they promised.
The updated figures in this week’s MYEFO show actual and forecast outcomes for that period at $104.8 billion. That is a blow-out of 344% — in just two years.
Scott Morrison himself announced in his 2015 MYEFO last December that the cumulative deficits for the four years 2015-16 to 2018-19 would be $108.3 billion. This week he adjusted that to $124.5 billion, a blow-out of $16.2 billion – or 15% – in just one year. Those are all Coalition numbers.
The construction industry is in an unprecedented slump at a time when labour is plentiful, wages are at historic lows, taxes have been cut, interest rates are at an all-time low and infrastructure is sorely needed.
After Tony Abbott promised he would be “an infrastructure prime minister” who would put “bulldozers on the ground and cranes into our skies”, construction work done from September 2013 to September 2014 actually declined 1.44% over the previous year. That was the first negative year since 2001. His next year was worse, with activity declining a further 4.96%.
If this was one reason his party dumped Abbott as PM – along with his treasurer and industry minister – they have had no joy with the replacements. Total construction fell a further 6.92% in the year to September 2016.
Three consecutive years of contracting activity has not happened since the recession of 1991-92.
Top end tax take tanking
The other documents to land with a thud on the treasurer’s desk recently show precisely why the economy is in such disastrous shape.
- The Australian Tax Office’s (ATO) annual report shows strong tax receipts in all areas except from corporations. Company tax collected was down 6.4% on last year, despite substantially higher profits.
- The National Audit Office in September found serious problems with the ATO’s approach to compliance — getting the dodgers to pay their share. This may not be the ATO’s fault, as compliance funding has been slashed from $868 billion in 2012-13 to $654 million last year.
- The ATO’s corporate tax transparency report for 2014-15 shows that an extra 45 big companies were added to the 2014–15 corporate transparency population. This brings to 1,904 the corporate entities whose tax payments are published. Despite more companies on the list and the current steady global recovery, company tax fell by $59 million from last year’s level. Companies with income above $5 billion numbered 55. Of these, 21 arranged their affairs so tax paid was below 2.0% of their gross earnings, and 13 paid no tax at all.
- Finally, an Australia Institute report released last week examining Australia’s tanking economy concluded that ‘the main cause of the current budget outcome is the fall in revenue.’
The case is now compelling that the current malaise is due to the dramatic collapse in taxes collected from corporations and high income individuals.
This has blown out the deficits and debt, reduced revenue available for much-needed stimulatory infrastructure projects and stymied spending by low income people — those who sustain the volatile retail economy and its flow-ons.
Remember we noted, above, that the only four economies now in negative GDP growth are Australia, Norway, Brazil and Singapore. They are all allowing corporations and the wealthy to evade tax. Coincidence?
With further tax cuts for the rich proposed in Australia, the year ends with no good news whatsoever. Happy holidays!
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