The Australian economy is at a critical juncture. Last week, the Reserve Bank cut interest rates despite them already being at record lows, despite a highly stimulatory fiscal policy from the federal government and despite the Aussie dollar being dramatically weaker against the US dollar than three years ago. It has also revised down its growth forecasts, and the bank believes unemployment will rise further and stay higher for longer.
There are good external reasons for this weakness: commodity prices have fallen significantly, growth in China has slowed, the mining investment boom had to end at some point. But domestic economic growth has been severely affected by the government’s policy decisions, inability to explain them and its disastrous 2014-15 budget.
While the media and politicians focus on the leadership of the Liberal Party, the real story is how our continuing economic weakness is affecting workers, families, business and investors across an economy that is performing well below trend and seems unlikely to do otherwise for the foreseeable future. And from that point of view, the outcome of the leadership spill motion in Canberra today is the worst possible result. It’s a vote for the status quo — for more uncertainty, for more ineptitude, for more miscommunication and lack of confidence — at a time when the government needs to be providing reassurance to both consumers and business that it has a clear plan both to improve economic growth and provide a path back to a budget surplus.
While Labor ripped itself apart between Julia Gillard and Kevin Rudd, it kept delivering economic growth. As the Liberals go to pieces over Tony Abbott’s prime ministership, it’s the lack of growth that should be the focus of everyone’s attention.