Election 2019: Australia Drinks the Poisoned Chalice – Economy

In the 2019 federal election, the Australian people chose to drink from the poisoned chalice. Over the coming articles I will be explaining why this is so, starting with the economy.

It is the aftermath of the election and Australia is rightfully reeling from the results. The resultant debate (from what little attention I give to the mainstream media) appears to be about as narrow as the pre-election debate. What did the polls say? And how did they get things so wrong?

While election polls might be interesting on a superficial level. They might help parties target electorates with policy decisions and the like. But in terms of political discourse, it is incredibly shallow to talk about only the polls as though a federal election is a popularity contest.

I would like to briefly discuss what I think was the main reason that the Labor Party was not able to come away with an electoral victory, before moving on to the environmental and economic consequences.

The Media. While it requires a little explanation, it can pretty much be said that the media is primarily culpable for the election outcome. Australian print media is almost 70% controlled by Rupert Murdoch, which essentially gives him a monopoly over the political dialogue. He uses this monopoly in favour of the Coalition in many elections, this one no exception. Murdoch’s papers are frequently called out for being propaganda with one academic calling them a “political propaganda machine he runs in the guise of a news organisation”.

Then there is the matter of the $55 billion that Clive Palmer spent on directing preference votes to the Coalition and “polarising the electorate” in order to ensure that Labor’s closures of tax loopholes and tax avoidance schemes wouldn’t be passed.

While Clive Palmer didn’t get exactly the result he wanted (securing seats), he did manage to stop Labor from forming government and thereby saved himself from heavier tax measures.

All of this amounted to one of the largest scare campaigns run in recent history, their claim being that the economy would slow under Labor (which would cost jobs), and that their new tax schemes would (mainly) punish retirees and everyday property investing families. These were all deviations from the truth. But it was enough to push Morrison over the line.

Not only would the economy not have been doomed to suffer under a Labor government, but historically Labor has proven to be more capable at economic management than the Coalition. I have even written on this subject previously.

But we have another 3 years of Coalition government to look forward to, so it makes sense to talk about what we might see over the next term. Because of the complexities, I will be approaching the most important topics in individual articles.

Economy

In the lead up to the election the Coalition has been touting various statistics in trying to blind the electorate into believing that the last six years of government has been positive. The most positive statistic has been job growth, which has yielded positive changes in both youth and persons over 25 employment. While this is undeniably good, it isn’t as good as the Coalition claims, with most of the growth being the result of part-time employment and population growth.

When focussing on the raw number of 1 million jobs over 5 years, this sounds like a great deal. However when processed into a more relative raw statistic of a percentage change in adult population employment, there has only been a 0.9% increase. And more worryingly, there has been a percentage decrease in the amount of adults employed full-time.

Josh Frydenberg, along with Scott Morrsion, has also been making the frequent claim that the budget is back in surplus. This is also a misrepresentation of the truth. We are currently predicted to be in surplus, under optimistic projections from the Coalition at the end of the 2019-20 financial year. This means that we are currently not in a surplus, and as economic conditions slow in Australia and its major trading partners continue their trade war that surplus becomes less likely. Pressing forward with tax cuts, particularly those that favour the top end of town will press this further.

In other measures, the Coalition has not been performing strongly either, with labour productivity producing its weakest growth rate since the last Fraser government. In earnings the story is abysmal, with real male full-time weekly earnings stagnating over almost the entirety of the last 6 years of government. Real household disposable income has dropped by an average of 0.17% over the last 6 years.

In addition to the indications of a weakening domestic economy and a definitely weakening economy in two of Australia’s trading partners, there is also the matter of the budget that was deliberately poisoned by the Liberals prior to the election.

Over the past 2 years and particularly in the last 12 months up to the election, there was a massive increase in government expenditure. And much of that expenditure was in defence. While defence expenditure is necessary, the kinds of contracts that the Coalition has locked Australia into are not wise investments. Procurement (buying new military equipment) expenditure has been raised to 55%. In addition to this, the Coalition has committed Australia to $200 billion in expenditure over the next 10 years on procurement.

Australia Ramps up its spending: Source

This wouldn’t necessarily be an issue, provided that we were reaping some sort of security benefit from the investment. But we aren’t, really, which is a problem. Some of the money is being spent on arguably needed upgrades to naval vessels while a large portion is being spent on an outdated F-35 stealth bomber program, arranged with Lockheed Martin.

The F-35 is a distinctly 20th century fighter, that has been outdated by more modern drone technology. What’s more is that drone technology only costs about 1/10th of the price to purchase and a small fraction to run. It is likely that this kind of purchase was undertaken by the Coalition as a gesture to the USA government (who has a partial stake in Lockheed Martin) to ensure that the security burden of Australia is not entirely falling on the USA taxpayer.

But it seems that massive expenditures on already obsolete hardware is a rather stupid way of preserving the USA-Australia security relationship. Especially when that money could be invested in naval technology that could assist in security patrols of the pacific region.

Conclusion

The incumbent Coalition government has some stiff hurdles to overcome. Not only has it poisoned it’s own budget by raising spending to alarming levels and committing large amounts of funds to untendered contracts, the government is facing both internal and external problems.

Productivity and wages are stagnating domestically. The real estate market looks as though it could be ready to topple over in Melbourne and Sydney, which would send those states and potentially the nation into a recession, as WA is currently recovering from its own.

China has dipped below the 7% growth rate for the first time in recent history and the ongoing trade war with the USA is likely to further restrict that growth (likely at cost to itself). The USA economy is tipped to be entering recession in the near future, as soon as the end of 2019 or first half of 2020. These kinds of conditions amongst our largest trading partners will also tighten the squeeze on the Liberals to deliver a strong economy.

I’m not saying that continued growth and better living conditions aren’t possible under a Coalition government, only that the markers measuring their current performance aren’t good and that the global situation is deteriorating.

By Nathan Booth

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