Why Australia’s stimulus is not working and won’t

The latest data from Australia and the world confirms Coalition policies are failing to have the desired impact. Alan Austin reports.

AUSTRALIA’S PRIME MINISTER shocked the world 12 years ago with the greatest ever Keynesian intervention into a free enterprise economy. In October 2008, Kevin Rudd – in office just 11 months – announced vast stimulus spending to start immediately.

No other administration had yet acted to reverse the disastrous early impact of the Global Financial Crisis (GFC) — despite 15 advanced economies already in recession.
The rest is history. Australia acted swiftly and was the only member of the Organisation for Economic Cooperation and Development (OECD) to escape recession and devastating job losses.

By the end of 2009, Australia had the stand-out best-performed economy in the world. By 2013, it was the best economy the world had ever seen.

Critics of the Rudd Government were scathing. But smart countries rapidly followed suit — to their great benefit. These included Israel, South Korea, Poland and Slovakia.

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Not this time, unfortunately

Fast forward 12 years and the party which vehemently condemned Labor – and continues to do so – is now testing its mettle. It is failing spectacularly.

Australia’s economy is in deep recession. The June quarter collapse in gross domestic product (GDP) was a staggering 7.0%, the worst since the Great Depression.

Australia’s employment in 2009 was among the world leaders. The highest that the jobless rate reached that year was a modest 5.86% in June. That ranked ninth in the OECD.

Ranking improved later to seventh and then sixth, as other nations weakened.

In June this year, Australia’s jobless rate hit a 22-year high of 7.45%, ranking 23rd in the OECD, the lowest ever. The rate slumped further in July to 7.49%. We will see if the ranking has tumbled again when we get July figures for the other countries.

The underemployment ratio is now 12.1%, the fourth month above 12% — the worst outcomes by far since records began in 1978. The highest this reached during the GFC under Labor was 8.1% in May 2009.

Virtually all other indicators of the health of the economy have worsened badly also. Overall, the deterioration is worse than in any other OECD economy.

Five reasons the economic stimulus will not work:

1. Response far too slow

Even the ABC, which is loathed to criticise the Coalition, quoted Professor Raja Junankar in April — who was dismayed at the delay:

“The most important factor in the Rudd [stimulus] was that it was immediate. They paid out $900 to everyone straight away. Why are we waiting? This should have happened a month ago.”

2. No vision for nation-building

In France, the Macron Government has hundreds of thousands of workers fixing insulation, heating, windows and doors nationwide. The cost to a homeowner is one euro. The benefits for the environment – and savings for citizens – will continue for a hundred years.

Where did they get that idea, I wonder?

During the last global recession, Labor built social housing, roads, rail, ports, insulation and school and community buildings across the nation. This time, very little.

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3. No plan to elevate incomes of the majority

Vital to the recovery last time was ensuring poor and middle-income citizens maintained adequate spending power permanently. Critical to this were the cash handouts, wage levels, penalty rates, welfare payments and tax levels. Unfortunately, the Coalition has reversed many of these critical settings.

4. Shifting Australia’s wealth and income to the rich

The latest data show Australia’s export sector is still enjoying near-record demand, prices and volumes. Profits are soaring. But without a minerals tax and with widespread tax evasion, vast swathes of wealth are lost offshore.

Finance Minister Mathias Cormann stated in a recent interview that:

“We are also looking very carefully at what we can do to provide further incentives through the tax system to businesses to invest in their future growth and success.”

Of course they are. Herein lies the major problem. The Coalition serves foreign businesses before Australia’s people.

5. Telling people the truth

That interview with Mathias Cormann contained several assertions which do not accord with the facts. It was conducted by a News Corporation outlet so, of course, the false claims weren’t challenged.

For instance:

“We are working on the longer-term plan to maximise the strength of the economy.”

Not true. Australia’s economy has never been weaker, relative to other developed economies. See above, and see here, here and here.

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He also said:

“Our plan is to restore as many jobs as possible, as soon as possible, to create new jobs.”

This is not happening. See charts above.

Cormann went on to say:

“We went into this crisis in a stronger fiscal and economic position than many other countries around the world.”

This is technically true in the sense that Australia is not the worst-performed economy in the world. Venezuela, Chile, and the USA are now managed even worse than Australia. But the implication that Australia’s economy has been strengthened by this government is false.

Finally, he said:

“We repaired our Budget over six years. We got the Budget back into balance in 2018-19.”

The Budget was not returned to balance. Not even close. This is a shameless lie which should be challenged.

The closest the Coalition got to break even was the deficit of $9,669 million in the monthly financial statement for August 2019. The latest statement, for May this year, has the deficit blown out to $64,914 million — by far the worst in Australia’s history and close to the worst in the world.

Hope for a turnaround

If Australians want a sound economy again – out of recession, with steadily increasing standards of living for all – there are two ways forward.

Either get the current administration to reverse the decisions it has made since 2013 and reset the levers where Labor left them. Or simply replace this regime – currently with the record as worst economic managers in the OECD – with one with the record of having been the best.

Alan Austin’s defamation matter is nearly over. You can read an update HERE and help out by contributing to the crowd-funding campaign HERE. Alan Austin is an Independent Australia columnist and freelance journalist. You can follow him on Twitter @AlanAustin001.