Today Scott Morrison will celebrate 500 days as Treasurer. He has two achievements to his credit. He has staved off a credit agency downgrade. And with the help of the craven media, he has largely concealed the economy’s disastrous decline.
The Australian economy deteriorated under Joe Hockey from what was the world’s best-performing economy in 2013, but it remained in the top 10. Since Hockey took his promotion in September 2015, it has been downhill all the way.
The last 500 days have almost certainly meant the worst fiscal deterioration relative to the rest of the world in Australia’s history. While most economies are steadily advancing, Australia is the only country in the world with the queasy quadrella of negative quarterly “growth” in gross domestic product (GDP), jobless above 5.5%, gross debt above 33.3% of GDP and debt increases every year since 2012.
Annual GDP growth is now 1.8%, down from 2.4% when Morrison took over from the hapless Hockey. This is the lowest rate since the depths of the global financial crisis (GFC) in 2009. Quarterly growth is now negative 0.5%, down from positive 0.8%. This is the first negative quarter without an obvious reason since the Fraser years.
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Burgeoning budget deficits
This year’s budget deficit has expanded from the -$10.6 billion Joe Hockey forecast in 2014 to -$36.5 billion in last month’s MYEFO. That’s a blow-out of 334% in two years.
Gross debt is up from $383.9 billion to $474.4 billion in the last 500 days. That’s a monthly increase of $5.33 billion. Even Joe Hockey added only $4.44 billion each month. Wayne Swan, who had to contend with the worst global recession in 80 years, added $2.97 billion monthly.
There is no sign of improvement. This financial year, $7.71 billion has been added each month.
- The official jobless rate is now 5.8%, just a smidgeon below the GFC peak of 5.9% in 2009;
- Under Morrison the ratio of full-time jobs to total jobs has fallen to an all-time low. It dipped below 68% for the first time in September, after he had been spruiking “jobs and growth” for a year. It is now 68.2. Labor’s lowest level was 69.7%;
- Hours worked per person per month — the best indicator of real paid work — are now 84.9. Hours worked have been below 85.7 for 12 of Morrison’s 15 months, the worst outcome since 1994;
- Job participation in October was 64.7%, the lowest in a decade; and
- The rate of jobless 15- to 19-year-olds clicked above 30% in December. That happened three times under Hockey, never during the Rudd/Gillard years and only twice during the Howard period.
Construction work from September 2013 to September 2014, in the Coalition’s first year, declined 1.44% compared to the previous year. That was the first negative year since 2001. The next year was worse, with activity declining a further 4.96%. It fell a further 6.92% in Morrison’s first year, to September 2016. Three consecutive years of contracting activity has not happened since the 1991-92 recession.
Declines across the board
Other key indicators show:
- Wages growth is the lowest since records have been kept;
- Interest rates were cut twice last year, each time to a new record low;
- Australia’s economic freedom ranking, according to Heritage Foundation, fell to fourth in 2014, after rises in the Labor years. In 2016, ranking slipped to fifth;
- Real net disposable income has fallen by more than two thirds from Labor’s levels to a miserable 0.87% annual growth; and
- Net interest on government debt will be $16,644 million this year. Labor paid $8,285 million in its last financial year, 2012-13.
What did Morrison need to do?
After global setbacks through the GFC and the rapid fiscal deterioration under Joe Hockey, four reforms were required.
Most urgent was a bipartisan minerals resource tax to collect at least some of the tens of billions of mega profits shunted offshore in the current mining export boom. The iron ore price has surged from US$41.25 a year ago to above US$80 now. Production and export volumes are now at record highs. Yet the Australian budget — and people — gain little, if any, net benefit. Yes, mine employees pay part of their salary in PAYE taxes, but some of the biggest miners record losses — real or fake — and claim tax credits from the government. Just one miner in 2016 claimed a tax credit above $1 billion.
Second was fixing tax evasion, which escalated in 2014, as revealed by the Australian Tax Office’s transparency reports. The 2016 budget papers, the PEFO and MYEFO, suggest this has worsened on Morrison’s watch.
Cutting wasteful spending — the third priority — has been a monumental Morrison failure, as the recent focus on MPs’ rorts has highlighted. The MYEFO confirms Coalition spending every year, including this year, will be higher than in any Rudd/Gillard year as a percentage of GDP.
The fourth priority, not necessarily in order of urgency, is to shift the narrative away from the nonsensical Coalition mantras of the Abbott period. These mantras claim (1) the Coalition is the party of sound economic management, (2) Australia’s economy is facing global headwinds, and (3) company tax cuts are needed for jobs and growth. None of this is true.
They serve two fateful ends. They tacitly encourage the top end to ramp up tax avoidance and evasion. And they shift the focus away from the policy settings actually needed to boost activity — which include increasing taxes on many corporations.
The appropriate narrative for recovery is for all sectors to contribute fairly and justly, so Australia can join the current global recovery. The jobs and growth now evident in almost all other developed countries will then follow. But not with Morrison as Treasurer, it seems.