THE AUSTRALIAN ECONOMY – “NO WORRIES!!”
CAPTION. Good governance can lessen the burden. Fiscal Deficit. Trade Deficit, Debt.
Obscuring the Truth.
Australian Treasurers appear to have developed the charade of constantly obscuring the economic problems from the nation. A recent statement by Treasurer Frydenberg reinforces this reporting situation. Evidence for this style of reporting on the national economy is illustrated by the following quotes:
- A pleasing set of numbers. Hockey, September, 2014.
- A terrific set of numbers. Hockey, June, 2015.
- The best growth rates since 2012. Morrison, September, 2016.
- Deficit reduction due to good economic management. Morrison, January, 2018.
- Excellent GDP rate of 3.4%. Frydenberg, September, 2018.
The Devil in the Detail.
Each of these statements have glossed over a serious weakness in the economy or have omitted to include important facts which have a bearing on the numbers. The Devil lurks behind the rosy announcements:
- In September 2014, Treasurer Hockey announced the National Accounts to be a ”pleasing set of numbers”. At the same time, the Reserve Bank warned of a dangerous housing bubble. Mr Hockey enthused that the GDP had risen to 0.5% for the June quarter but omitted to mention real GDP had fallen to 0.3% due to unfavourable Terms of Trade.
- In June 2015, the annual growth rate had risen to 2.3%. Treasurer Hockey enthused “this was a terrific set of numbers” and further stated the Australian economy was among the fastest growing in the world. The Treasurer omitted to mention that this period had seen the fifth quarterly drop in the Terms of Trade and that disposable income was now less than that after the GFC in 2008. Australian living standards were falling and national productivity had declined as growth was driven from low labour mining to intensive labour in tourism and hospitality.
- In September 2016, Treasurer Morrison enthused over the National Accounts informing Australians there was no sign of a downturn in the economy. The Treasurer noted that exports had increased slightly and imports had decreased. However, the Treasurer omitted to mention that Australians now had less disposable income so, ipso facto, lower imports were to be expected.
- In January 2018, Treasurer Morrison enthused over the success of Government economic policy in reducing the deficit. However, the Treasurer omitted to mention that there had been a spike in export commodity prices and that ATO income had increased due to the fact that company tax losses had now been fully absorbed following the GFC. The reduced deficit was due to good luck not good management.
- In August 2018, Treasurer Frydenberg enthused on the annual growth rate of 3.4% for the six months ending June 2018 and that this is on a par or better than Australia’s trading partners. Much more muted was a warning from the Reserve Bank that this result is partly driven by shoppers drawing down on their savings. This profligacy cannot continue.
A Plea for Informative Economic Reporting.
Treasurer Frydenberg generated enthusiastic reporting of GDP with accompanying economic sweeteners. This is useless information on which to judge the health of an economy. GDP can be generated in several ways:
- By immigration and small business development – unfortunately the money supply will churn, quantitative easing will be necessary and the currency will slowly devalue.
- By encouraging a domestic building boom – imports will increase putting pressure on the deficit (Terms of Trade), money supply will churn unless there is strong offshore buying.
- By irresponsibly permitting a savings funded retail spending spree. This is economic madness – the retail sector will benefit but the deficit will increase due to the import of foreign goods. Savings are finite!
- By generating infrastructure projects – overseas funding will be required which will increase the National Debt but, unless this infrastructure produces export income. the resultant economic activity will produce less useful domestic GDP.
- By encouraging strong export income. This is the Holy Grail. Unless the Government can encourage an increasing export, income wages will continue to flatline and increasing pressure will be placed on living standards.
Improving the Treasurer’s Statement.
The Government trumpets its record on job creation We know wages are depressed and under-employment is increasing, but what we do not know is the breakdown of employment into jobs in the domestic economy and jobs in the export industries. With this information, there will be a better informed sense as to how the economy is travelling. The term Jobs and Growth is oxymoronic- the mantra must become “Jobs and Exports”.
JOHN HUGH HILL Current Affairs Flash Points towardsthefinalhour.com firstname.lastname@example.org