Coming up to the next federal election, Scott Morrison appears intent on creating a scare campaign of some sort. There have been a few major issues in Morrison’s crosshair but in this article, I would like to focus on the economy.
Scott Morrison has been claiming in recent weeks that the economy would be weaker under a Labor government. This claim is largely based upon the misrepresentation of Labor’s tax plan to increase tax revenues from new and existing sources by $200 billion over the next 10 years. The plan has been misrepresented as a sudden shock, rather than a longer-term plan. It has also been claimed, unfairly, that Labor’s policies will adversely affect pensioners, a claim that can be simply refuted by looking closer at the changes, rather than simply noting them as affecting superannuation. The tax policies Labor has included involve changes to negative gearing, family trusts, the capital gains tax and cancellation of cash refunds on dividend imputation (for certain people). They also aim to cancel the second and third stages of the Coalition income tax changes, which would form about $70 billion of the $200 billion.
This misconstruing of Labor’s tax plan led me to investigate some of the claims about Australian economic management that are commonly found in the media dialogue.
Labor as Poor Economic Managers
There is a tendency in Australia to view the Labor Party as secondary to the Coalition in economic management. This is plainly not true. Over its history the Australian Labor Party have instated massive changes to the economic system that have favoured the Australian people and grown the economy. I won’t go into a full history of the economic management of Australia, except to point out some of what I see to be the more significant developments in the past 40 or so years.
Gough Whitlam was a heavyweight in terms of the impact he held over Australia’s economic history. It is important to remember that Whitlam entered government during a globally turbulent period of stagflation (rising unemployment and inflation) and an oil crisis. Despite this, Whitlam was able to set about economic reforms that paved the way for the Hawke-Keating era internationalisation of the Australian economy. Whitlam was able to steer Australia away from recession during an international oil crisis that sent both the UK and USA into a recession. The Whitlam government was also responsible for opening relations with China, now Australia’s largest trading partner. Trade with China now benefits the average Australian household by approximately $16,985 annually. (The Whitlam government was also responsible for great strides forward in workplace relations, ending conscription and ending Australia’s involvement with the Vietnam War)
More recently we can turn to the legacy left by the Hawke and then Keating succession of governments. These leaders were responsible for the opening up of Australia’s protected economy. Prior to 1983 and the election of Hawke, Australia remained a largely agricultural/livestock based economy. Australia was opened up to international investment by floating the Australian Dollar, getting rid of import quotas, lowering trade tariffs, among other things. The benefits of that investment were realised by designing a more equitable tax code and distributed to the Australian people through programs like the re-instatement of Medicare and introduction of legislated superannuation. Under the economic reforms of Hawke-Keating, Australia has been able to avoid some of the extreme concentration of wealth that has been experienced in the USA and UK. While the deregulation of financial institutions could be argued as a particularly neoliberal and destructive policy (which may have ultimately led to the necessity of a royal commission into banking), their neoliberal policies were generally offset by taxation and social spending. (Under the Hawke-Keating era industrial relations accords were struck with the unions that also lowered unemployment, established a publicly funded wage and helped provide more funding to health and education)
Following Keating we entered an almost 12 year period of poor economic management under the Liberal government of John Howard. We then arrive at the most recent example of so-called ‘poor economic management’ by Labor. The Rudd-Gillard successions of governments, under the expert financial guidance of Wayne Swan, steered our nation through the Global Financial Crisis. Australia was the one of the only developed nations (along with Israel, South Korea and Poland) to escape the ravages of the Global Financial Crisis relatively unharmed, and actually managed to maintain a period of growth when much of the developed world saw a downturn. This was achieved by borrowing $52 billion to deliver a stimulus package that would ensure that bank debts were guaranteed (the details of the package are a little lengthy to go into in this article, though parts were invested into school structures and handed to pensioners).
The Coalition as ‘Strong’ Economic Managers
Many in the mainstream media cling to the idea that it was John Howard’s management that lifted Australia’s economy and set the nation up for the relatively unscathed ride through the GFC we ultimately had. Rather, according to an International Monetary Fund investigation, John Howard presided over the most reckless federal government spending in our nations history. The Howard Coalition government is credited most frequently for leaving Labor with a $20 billion dollar budget surplus, though that they managed to do this on the wave of a once-in-a-generation mineral boom is not a particularly astonishing feat. Howard also contributed to the housing affordability problems being seen at varying degrees around Australia by the capital gains tax concession and changes to the first home buyers grant. Howard offered tax deductions for private health insurance, eroding Medicare and dramatically increased private school funding, leaving public schools dry. (Howard willingly walked us into the falsely justified Iraq war, directly implicating us in a costly, inhumane, unjustified war. This is possibly the greatest foreign policy mistake in Australian history as the fall-out of the conflict has been credited by many analysts with spawning more terror than it has eradicated)
The cost of the economic stimulus that shielded our nation from the worst global recession since the Great Depression in the 1920’s was used by the Coalition as the basis for bashing Labor’s economic policy in the 2013 election. Their claim was that Labor’s reckless spending had left the country with the largest deficit in Australian history. The stimulus package was paid for by a $52 billion loan, which left a deficit in the federal budget. This deficit was at its peak in 2009-10 at 4.2% of national GDP. In 2012-13 (when Labor left power to the Coalition) the deficit was at 1.2% of national GDP. This is not the largest deficit in history, periods of heavy spending leading to larger deficits occurred during the Great Depression and each World War. The deficit, as a portion of GDP was actually shrinking in the years after 2009. The 2013 budget was projected to return to balance under a continued Labor government in 2015. Since taking power, the Liberals have handed out tax cuts and direct cash grants, doubling Australia’s net deficit.
The Coalition also campaigned in 2013 and 2016 on a basis of promoting “Jobs and Growth” for our economy. Recently we have heard Scott Morrison come forward again to triumphantly claim that the Coalition had created about a million jobs over the course of their government and that they would attempt to create a further 1.25 million in the next. This sounds like a large and even difficult achievement, however evaluations have indicated that Australia would always have grown by a million jobs over this time due to population growth and expansion in part-time work (not necessarily something to be proud of). This essentially means that had the Coalition enacted none of their economic changes, we still would have seen this level of job growth. And they are promising to deliver the same result, nothing, over their next 5 years in government.
Finally, Scott Morrison has been warning of dire economic consequences should Labor be elected, however measurements are pointing toward poor economic management by the Coalition. It has been announced recently that Australia has entered a per-capita recession. While this is not necessarily dire news for average Australians, it signals that overall economic growth is beginning to slow. Per-capita, GDP has fallen by 0.1% in the September quarter of 2018 and again by 0.2% in the December quarter. This reflects lower dwelling investment and declining household spending, which is likely caused by stagnating wage growth. This marker is more likely to be seen as a reflection of his own party’s economic mismanagement, rather than as a consequence of the last Labor government.
This is only a small, recent history of the Australian economy, but it appears from my investigation and from evaluations by leading bodies such as the World Bank and International Monetary Fund that the Labor Party are not reckless or irresponsible economic managers, quite the contrary. From recent history, it appears that many initiatives that have redistributed the benefits of big business to the people, along with our place in the international trade order, have come from the Labor Party. The Coalition on the other hand have demonstrated willingness to accommodate larger corporate profits at the expense of the Australian people. It appears a stark choice if one were to be going to the polls with only the economy (past, present and future) in mind.
By Nathan Booth