The great Morrison Stagnation besetting the Australian economy has now been recognised internationally, with the International Monetary Fund (IMF) overnight cutting its 2019 GDP growth forecast for Australia to 1.7% (down from 2.8% just a year ago) and revising its unemployment predictions for this year and next. Scott Morrison is now declaring he “won’t be spooked” into taking any action to help the economy, in the same way a man standing on a rail line refuses to be spooked by the oncoming train. If stagnation turns into a downturn or worse, this do-nothing, agenda-less leader will own it 100%.
No one else can be blamed. Not the Reserve Bank (RBA), which has cut its key cash rate five times since 2016 to successive record lows and repeatedly called for fiscal stimulus and structural reform; not workers, who have had to endure flat or declining incomes for more than half a decade; not the states, which have been doing the heavy lifting on infrastructure spending and want to do more; not even business, which has been calling for more infrastructure spending and the skills and training programs to back it up, as well as increase in Newstart.
No, it’s been Morrison’s determination to return to surplus, on the back of — as the RBA has also repeatedly pointed out — a burgeoning tax take by the Australian Tax Office. With his surging tax collections eating into household demand, Morrison embodies exactly the stereotype of a tax-hungry government crimping economic activity that the Liberal Party pretends to rail against.
Commentators and the press gallery were distracted by the government’s tax offset (remember when the press gallery lavished acres of newsprint on Labor’s position on the issue?) but it seems the package has done nothing to bolster demand. According to the RBA’s October monetary policy meeting minutes, “members noted that there had not yet been evidence of a pick-up in household spending following the recent reductions in the cash rate and receipt of the tax offset payments…”
Retailers agree. Baby Bunting says its stores have not seen any lift in sales from refunds being spent. Sydney-based furniture retailer Nick Scali yesterday issued a one-third profit downgrade, noting “monthly store traffic has been down 10-15% in this period and has had a significant impact on like-for-like store sales, which are currently down 8% year-to-date compared with the previous year”. That saw the price of listed retailers slide — Harvey Norman shares fell nearly 6%.
By hurting retail, the Morrison Stagnation is flowing through into other areas, like the media sector. Southern Cross Austereo — a major metro and regional radio and TV operator and Nine’s regional affiliate — told the ASX yesterday that revenue in its radio and TV businesses had seen an 8.5% slump in the first two months of 2019-20 and that it was looking at a 24% slide in first half profits to between $60 million and $68 million. And it’s not just Southern Cross: according to Commercial Radio Australia yesterday, September quarter ad spending across the sector fell 10.2%. Every capital city recorded a fall in advertising spend, with Perth and Sydney hit the most, down 15.9% and 11.4% respectively. Melbourne declined 8.7%, Brisbane was down 6.7% and Adelaide fell 9.4%.
The Southern Cross update triggered a sell-off not just in its shares (down 18.6% to 94 cents at the close) but Nine Entertainment (down 6.4% at $1.745), beleaguered Seven West Media (down 3.8% at 37.5 cents) and NTE (owner of Australian Radio Network, down 6.5%). Watch for profit updates in the next few weeks from those and other media companies. The irony is, much of the media sector were happy to cheer Morrison on to victory back in May. They’ll pay the price if the economy slides into the mire on his watch.