News this month that unemployment has risen, wages growth has slowed and consumer confidence has collapsed is a reminder that too many new pieces of economic data are telling the same disappointing story.
Gross domestic product growth has tumbled to 1.4 per cent, well below forecasts, the slowest annual growth in 10 years and about half its 30-year average. Consumption growth has fallen; productivity has declined; business investment hasn’t been this weak since the early 1990s. Household debt is at record highs; living standards have gone backwards; almost two million Australians are looking for work or more work.
The domestic private sector went backwards last year and for four quarters in a row for the first time since the 1990s recession. Labour productivity in the market sector went backwards last financial year for the first time.
The economy is growing slower than the population.
These trends can’t be fully explained by the drought or by volatility overseas, as concerning as they things are.
Ours are homegrown and longstanding challenges. Under the Coalition our economy is falling down the global ladder. On its watch, Australia has recorded the fifth lowest GDP per capita growth out of 35 OECD countries.
Under Labor we recorded the sixth highest GDP per capita growth of these countries. Under Labor, Australia’s GDP per capita rose from the 13th highest to the ninth highest in the OECD economies, even adjusting for exchange rate movements.
Under the Liberals, we have slipped to 11th.
The message is clear: the Australian economy is running on fumes. Growth is too weak, too uncertain and too narrow. It isn’t trickling down to the people or out to the suburbs.
Just this week two damning speeches from the Reserve Bank further exposed the government’s economic mismanagement. One suggested feeble wages growth was now the “new normal” and another contemplated unconventional monetary policy. Unfortunately for Australia, Josh Frydenberg has no idea what’s going on and the Morrison government has no plan to turn things around. The Liberals and Nationals are crippled by a complacency that says if you can’t think of a solution just pretend there isn’t a problem.
This complacency flies in the face of the growing consensus — from economists, experts and the business community — that something must be done.
The Business Council of Australia, Australian Industry Group, Master Builders and others have joined with the Reserve Bank and Labor to call on the government to intervene, in one way or another, to promote stronger growth.
None of these organisations is equating this period of weak growth with the global financial crisis and neither are we. It’s different this time and nobody is calling for kitchen sinks to be thrown at the problem.
We all agree the Australian economy needs responsible, proportionate and measured stimulus to get it going again and that this can be done without abandoning the surplus.
The Liberals’ strategy is to buy time, point the finger, recycle old policies and pretend to be doing something while pinning their hopes on an expected improvement in growth in the September quarter national accounts.
With the economy already growing at its slowest pace in 10 years, few economists expect it to get significantly worse and it would be alarming if it did.
But for growth to improve on paper all that’s required is a quarterly outcome above 0.3 per cent, when last September’s contribution to annual growth is replaced by this one.
All that will show is the Liberals lowered the bar last year and tripped over it this year.
We know the tax cuts and rate cuts are helping, but not enough. Retail trade volumes still went backwards this quarter, recording their first annual decline since the 90s recession. Wages growth slowed in the September quarter and we’ve just seen the biggest monthly fall in employment in three years. Consumer confidence just fell to its lowest level in more than four years.
Whatever the September national accounts tell us next month, there is no sign that our major and longstanding economic challenges are improving. Some are cyclic, some are structural, but all are unattended. Challenges such as weak demand, exacerbated by years of persistently and abnormally low wages growth. Challenges such as declining living standards and declining productivity, caused in part by capital shallowing, with business investment 20 per cent lower under the Coalition. These longstanding problems are the inevitable consequences of a government with a political strategy but not an economic policy.
Australia needs a growth strategy. Not growth for growth’s sake, but the right kind of growth — strong, inclusive and sustainable. A strategy that creates good, well-paid jobs and gets us on the path to full employment and lifts living standards. A strategy that takes immediate action to boost demand; tackles the major drags on Australia’s productivity; anticipates the big forces bearing down on our economy and approaches reform with a mindset of genuine partnership and co-operation.
So much of what Labor seeks to achieve for Australia, from creating good, well-paid jobs in the regions to the extending of new opportunities to our suburbs, comes back to that.
The world’s best economists have come around to Labor’s long-held view that growth is stronger when it is fair — when more people have a stake in it. We need growth and redistribution, not growth or redistribution. We need middle Australia to get ahead, not just get by. We want to help communities thrive, not just survive. And we believe Australians deserve a broader set of opportunities and a better standard of living.
Australians need a plan for growth but instead the Treasurer and Scott Morrison have dithered and denied while the economy has deteriorated further since their re-election.
This opinion piece was first published in The Australian on Friday, 29 November 2019.