Malcolm Turnbull will go down as one of Australia’s more economically and fiscally successful prime ministers and Tony Abbott’s superior in virtually every way — except for the nagging problem of wage stagnation.
Turnbull’s biggest achievement was on employment, with a remarkable 772,000 net jobs created while he was prime minister, including in the boom year of 2017, during which 400,000 jobs were created in trend terms. While a large proportion of these jobs were in health and education, rather than private sector industries, that had the side effect of lifting female employment significantly — over 400,000 of the 772,000 jobs went to women, lifting the female participation rate a full percentage point and lifting the overall participation rate half a per cent — a remarkable achievement at a time as the Australian population ages.
Turnbull also oversaw a lift in economic growth out of the doldrums it was in after 2013, while inflation picked up from a disturbingly low level under Abbott to just within the RBA’s target band, although whether it can stay there isn’t clear yet. Part of this was driven by a substantial rise in infrastructure spending, which despite Tony Abbott’s pretensions to being the “infrastructure prime minister”, had fallen off a cliff under him.
Turnbull could thank the states for the rise, rather than his own investment — especially the NSW government’s big-ticket spending in Sydney — but it helped that Turnbull ended Abbott’s war on renewables, which had almost killed off renewable energy infrastructure investment. Sadly, however, the NBN continued to be plagued by the disasters inflicted on it by Turnbull himself when communications minister.
Turnbull and his Treasurer Scott Morrison also dramatically improved Australia’s fiscal situation, slashing the deficit and putting Australia on track to surplus in 2019-20. That’s in dire contrast to the situation under Abbott, when the deficit blew out from $19 billion in Labor’s last full year to nearly $40 billion. A rise in commodity prices helped the fiscal situation, of course, pouring extra tax revenue into government coffers, but they also brought spending back under control.
According to Morrison, when Abbott was ousted spending was running at 26.2% of GDP; now it’s back at around one quarter. To Turnbull’s credit, he followed Labor in closing superannuation tax concessions, at substantial political cost, and while the long-term consequences of his government’s suite of multinational tax measures can’t be judged for several years, there may well be fiscal benefits from those as well.
On wages, however, Turnbull fared poorly — though not as poorly as private sector workers who have endured real wage cuts. This was a problem under Abbott as well – after 2013, wages growth began falling from the 3-4% level seen under Labor, seemingly ratcheting down every quarter. But it reached its nadir last year when wages growth fell below 2%, on Turnbull’s watch.
Turnbull and Morrison don’t wear all the blame for this: in virtually every major western economy, wages have stagnated in recent years even when unemployment reached record low levels, leading policymakers in treasuries and central banks to rack their brains about why their economic models weren’t working as they should.
But what Turnbull does bear the blame for is refusing to take wage stagnation seriously as both a political and a policy issue, treating it with a combination of Pollyannaish “round the corner” optimism and claims (more accurately, lies) that company tax cuts would push wage growth up, maintained even when wages growth was falling in the US in the wake of Trump’s tax cuts. More particularly given even the International Monetary Fund now acknowledges that industrial relations deregulation has played a part in undermining wages growth, it’s clear Turnbull and the Liberals didn’t want to know the real way to fix the problem.
Overall, Turnbull had good luck and was a fair manager. With signs jobs growth has slowed to a more normal pace and with building and investment coming off the boil too, Turnbull’s successor might not have as much luck.