Treasurer Wayne Swan gave a big ticket speech for G’day USA on Friday evening that says a lot about our Treasurer’s failure to build a persuasive economic narrative for Australian households. Here is an excerpt:
Let’s start with the global economy. I want to say upfront that I think 2013 could be a better year for the global recovery, but only if policymakers around the world do the right thing for growth and jobs. I think there’s a lot of evidence that China’s economy is stabilising. I’ve always been an optimist about China – and I think the data we’ve seen should give us confidence that they’ve still got the policy capacity to manage their economy and they’ve been getting it pretty right. We also need to keep China’s recent growth performance in perspective. China is now 40 per cent larger than it was in 2008. So its growth rate can be 20 per cent lower – say 8 per cent now versus 10 per cent back then – for China to make the same contribution to global growth. Yes there are risks – China will have to keep addressing its big structural challenges like the huge amount of unregulated lending in its financial system and its transition to more consumption-led growth.
But so far, China seems to have managed its transition pretty well. So it turns out the facts are in stark contrast to much of the commentary we saw late last year which had essentially written China off. It just goes to show that you can’t have a mature debate about long-term economic performance based on monthly data. There’s also an important distinction between caution and pessimism. There are good reasons to be cautious about the global outlook, and I’ll spend a bit of time on these now, but I’m cautiously optimistic. While risks remain, I think leaders, governments and commentators around the world have a responsibility to ensure that sensible realism doesn’t morph into undue pessimism which itself hurts confidence. Endless pessimism is in itself a risk to the global recovery, just as it weighs on business and consumer sentiment in Australia’s economy. I am determined to have a positive debate in Australia in 2013 about how we lock in the gains we’ve made in the last 5 years, and set our economy and our community up for the next 5 years. The future of our region is remarkably bright. Yes, there are challenges and our future is not assured, but I’m confident that we will keep getting the big economic calls right to support growth and jobs and make the most of the Asian Century.
Throughout last year I noted that Wayne Swan has been running on empty vis-a-vis the government’s economic narrative. Despite Australian household’s return to historically normal savings rates and ongoing disleveraging, a structural shift that will define this era and should be encouraged, Wayne Swan spent much of last year spruiking an endless mining boom as well as lambasting commentators for being doomsayers. Late in the year, Labor added its “Asian Century” rhetoric which is not much more than a brand.
The problem Wayne Swan faces is that he is not addressing the right people. Those who punch holes in Australia’s current economic performance are doing so with the recent experience of the vast majority of the community on their side.
Check out the following two charts. The first is GDP since 1990, which shows that even though the recent period has been reasonable, the post 2008 period is clearly below historical trend:
But have a look at the next chart, of nominal GDP (that is, activity unadjusted for inflation):
I would describe that as shocking. The post GFC period is so far below the long-term experience of Australians that it is surely obvious to most in their day-to-day business lives. As a country, we are getting lower (though decent) levels of real growth from much lower levels of growth in actual activity (some call this a “deflationary boom”). It’s no mystery why the economy’s recent performance feels so crappy to most.
That is not to say that the mining boom has not been a boon. Of course it has, perhaps more so than most people know. But much of the benefit has been in avoiding the counter-factual case. Had there been no mining boom, Australia would have been in and out recession since the GFC as global markets forced discipline upon our spending to curb the current account deficit. Wayne Swan has tried to express this by constantly drawing comparisons with other struggling Western nations.
But to my mind, this is a political non-starter as a national economic narrative. Constantly being told how fortunate you are when your own recent experience is that you are getting less so is not going to resonate. In fact, it will make most people angry because they are being ignored. This is one reason why the negativity of Tony Abbott has resonated with the community, most particularly around the carbon tax, despite the nation broadly acknowledging the need to act on climate change.
This points to Wayne Swan’s great failure as a Treasurer; he has proved to be a lousy communicator, stuck like some broken recording of an American new age evangelist, exhorting all to “be positive”, he has made no connection with the community. It may, in fact, be his greatest failing given poor communication in part gave rise to the mining tax debacle that is certainly his most obvious policy blunder.
The Treasurer and government might have time to remedy this off-base rhetoric in the lead up to the election. A start was made in this direction with the abandoning of the surplus late last year. And in his Friday speech, Swan also linked his shift away from a budget surplus to the lessons learned by the IMF in Europe about negative fiscal multipliers. Why this sensible line of argument is available only to US audiences is beyond me.
As the end of the mining boom approaches mid-year, Swan will have to shift towards a more resonant centrist narrative of public and private prudence, of entrepreneurial endeavour, of productivity boosts to compete in global markets and of rebuilding broad-based export successes post the mining boom. This is the same narrative that the community needs to hear in policy terms. Within twelve months (and probably by the election) we’ll be living the reality as exports for bulk commodities struggle, LNG exports are yet to ramp up, and our lack of competitiveness sheds more jobs. It is the kind of message that in the mean time could frame fiscal initiatives targeting the dollar, like a Tobin tax, which would help mitigate the fallout which is already well underway.
But Swan has been beaten to the punch by the shadow Treasurer, Joe Hockey. For the past two years, Hockey has built a message for the times. His growing narrative of bank reform, of public and private prudence, of moving beyond entitlement, of renewed entrepreneurial vigour, will resonate with a community now firmly set on financial conservatism. Here’s how Hockey put it last week in the AFR:
Productivity reform and a banking inquiry are at the top of his to-do list in what promises to be another brutal year of federal politics. But the shadow treasurer has also added “respect for taxpayers”, and says he won’t walk away from controversial comments about a culture of “entitlement” among some Australians.
…“Yes, it will be a theme for me and it sits very comfortably within the Coalition’s theme. That is the commitment to live within our means. Australians can no longer afford a lifestyle that is fuelled by debt,” he said.
“Everyday Australians know it and that’s why they’re increasing their household savings.”
As I’ve written several times in the past eighteen months, this is how the disappointment that currently pervades the Australian community can be turned to a positive catharsis (sadly Hockey’s policies imply the opposite outcome but hey!). As the year wears on, the Hockey narrative (excepting surplus rhetoric) will make more and more economic sense. It may even have the credibility to carry some renewed industrial relations reform.
The Coalition’s problem is that its leader has not yet embraced this message. Abbott does have a vision but like Labor, it is based upon the assumption that Australia will continue forever to enjoy out-sized benefits from China’s rise. Abbott too is stuck in a scratch on the record: negative, carbon tax obsessed, closed on trade and investment, bashing away at dated surplus politics, instead of fashioning a positive vision of post-mining boom change such as that offered by Hockey. The recent attack on the butchered mining tax is welcome and works well within his lower taxes framework since it’s not collecting any revenue. But should he become Prime Minister, Abbott is going to be scratching around for new revenues from, and ideas for, struggling growth as much as anyone else.
More to the point, as Swan indicated on Friday, as the mining boom draws to a close, the surplus narrative is going to become much more politically charged. Abbott is busy talking up what will be contested tactics while Joe Hockey is delivering the grand narrative. The Coalition has it backwards.
Neither Julia Gillard nor Wayne Swan nor Tony Abbott have the economic narrative to win the election, Joe Hockey does.
I’d like to see a nominal GDP chart of the non-mining economy. That is most Australians reality.
Yes, but it would still have been worse…
So you keep saying, but the mining boom has made it much, much worse for non-mining exporters, and for that we will pay a terrible price in the long term.
That’s a generalisation that is not generally true.
Ok then … in general terms, please tell me how non-mining exporters have benefited from the mining boom, or at least, not been harmed.
Lorax’s point is right in isolation. The fact is, however, that many of those same businesses would have been harder hit by collapsing domestic demand.
Perhaps, but for true exporters — those selling a globally competitive product into a global market — Australia will only ever represent 5% of their market. I would argue that these businesses are the most valuable businesses in Australia, and they have been punished more than anyone else.
That is a tragedy.
Lorax sorry…my reply with appropriate apology below!
I agree that ideally we have a broad range of exporters and perhaps if we put in place measures to encourage export focussed businesses this may come to be.
Unless we home-grow an Apple or a Google or a Samsung, we are unlikely to ever match the export revenues generated in recent times. And these too are exports of globally competitive product – which I guess is in effect what exports are!
How does big Joe’s espousing of public and private prudence translate to house prices? “Australians can no longer afford a lifestyle that is fuelled by debt.”
He must be bearish on houses.
As I say, his policy matrix does not match his rhetoric.
This post is about his narrative…
Bingo! And so, what I would like to have seen in this otherwise superb analysis, is a clear, bold, simple statement at the end -
“CONCLUSION: Hockey’s policy matrix does not match his rhetoric”.
In other words, he’s full of $h!t and not to be trusted. A polietician, lawyer, and international bankster’s husband, indeed.
nar·ra·tive
noun
1. a story or account of events, experiences, or the like, whether true or fictitious.
Ahhhh, no.
As evidenced by his July 2011 tweet in response to the release of building approvals data, JHockey is just another dangerously clueless fool who will … naturally … do whatever it takes to keep the bubble propped up for his bankster mates (and wife) -
@JoeHockey Joe Hockey
Building approvals down for 7th month in a row. NSW and Vict. hardest hit.I can’t believe house prices won’t rise soon on back of shortages.
4 Jul via web Unfavorite Retweet Reply
Well put, and unfortunately, true IMO.
Joe Hockey has never impressed me, he loves his own image on the telly too much but when it comes to crisis situations he gets tounge-tied and flustered. I recall the HIH collapse in 2000 when he was the minster responsible and he basically flew into a rage and tried to blame APRA (and everyone else) – it was obvious that they were really worried and they didn’t have any answers. Lucky for them the ‘bushfire’ of HIH didn’t contaminate the rest of the insurance industry.
“This points to Wayne Swan’s great failure as a Treasurer; he has proved to be a lousy communicator, stuck like some broken recording of an American new age evangelist, exhorting all to “be positive”, he has made no connection with the community. It may, in fact, be his greatest failing given poor communication in part gave rise to the mining tax debacle that is certainly his most obvious policy blunder.”
Not to defend Swan, but the AFR (pre-Stutchbury) stated after the ‘Night of the Long Knives’ that the mining tax was conceived by Rudd in a vacuum-and ‘sprung’ on Swan at the last minute.
But, you hit the bulls-eye: what a policy blunder, both in design….and execution.
Kevin Rudd made so many unilateral decisions that his own party got jack of him (before the public got wind of it themselves). The coup was a perfectly legitimate response to his dreadful management style.
The fact that he (apparently) keeps touting himself as a realistic alternative for PM goes to show how much he lives in la la land.
Labor’s own internal polling continues to show Rudd a clear winner in the electorate when compared with Gillard…talk in some places that a couple of old Nambour High dudes (Rudd and Swan) have had a little contact of late…
Slightly off topic, another reader here at MB recently posted Rudd’s 2009 Monthly article on the GFC – if he wrote it (not a collegiate effort) and whether you agree with the content nor not, quite impressive. I can guarantee you Gillard would not have been capable of penning the first line. Apparently even the misogyny speech was not her own.
2d,
Care to provide any evidence about the speech?
You’re like a dog with a bone, you just can’t let go of it. Rudd is gone for good reason.
By the way, you still haven’t answered my question on climate, that, as usual, you replied without answering.
as usual, you replied without answering.
That’s standard operating procedure for a spinmeister.
There’s no doubt that Kevin is a very clever man but if he can’t work as part of a team then there’s no way he can ever be leader again. Even Johnny Howard took advice and occasionally changed course as a result of what his own party was saying to him – not Kevin. Not ever.
Recall in January 2010 the parlimentary defeat of the carbon scheme; everyone fully expected him to show some leadership and call an election following the defeat. The Labor party would have been in a great position to win – it was all riding on what Kevin wanted to do.
So what did he do? He launched a children’s book. He might be really intelligent but he doesn’t take advice; therein lies the core reason why we’ll never have Kevin as our PM ever again.
“Labor’s own internal polling continues to show Rudd a clear winner in the electorate when compared with Gillard…talk in some places that a couple of old Nambour High dudes (Rudd and Swan) have had a little contact of late…”
I’ve heard a few whispers as well 3d1k, from people who are in the know.
My old man has sworn black and blue from almost the moment the Gillard got the big comfy chair that this election would see Rudd and Turnbull go head to head as leaders. He might turn out half right. If there is a Rudd renaisance – would Abbot be able to defeat him?
I think Rudd could win.
Again, I come at this from a WA perspective. JG is loathed. Labor knows this (local State Labor leader absents himself when JG is in town). Mums and dads voters at BBQs (so to speak) will freely say they’re not voting for Labor…but if Rudd was there…
Of course over in latte land JG may be well loved!
There will be no leadership change on either side unless polls break decisively for one of the current candidates.
That’s not likely in my view.
Ironically, though, both current candidates best chance of fighting the election is the tight race.
If Labor installed Rudd, the polls would swing to them in my view, toppling Abbott and bringing on Turnbull.
If Libs installed Turnbull, the polls would swing to them in my view, toppling Abbott and bringing on Rudd.
It’s two for the price of one.
“It’s two for the price of one.”
Yes please!
Gillard is far more popular compared to Rudd than Abbott is compared to Turnbull.
http://www.news.com.au/national/opposition-leader-tony-abbotts-support-plummets-with-malcolm-turnbull-preferred-as-coalition-head/story-fncynjr2-1226510202909
“A Galaxy poll published this morning shows Mr Turnbull is preferred as opposition leader by 60 per cent of voters, compared with 29 per cent support for Mr Abbott.”
“Mr Abbott also said Prime Minister Julia Gillard – who trails Kevin Rudd as preferred Labor leader by 34 per cent to 49 per cent in the Galaxy poll – needed to answer questions about her past as an industrial lawyer at Slater & Gordon,”
Nice analysis and pretty spot on. Hockey signalled mid 2012 a narrative of interest (if not intent?) with his Entitlement speech – a speech that was quickly ridiculed by assorted watchers but one that on reflection held kernels of truth that are not easily digested.
Hockey may be or may want to present as a big picture guy, someone with a vision, or rather narrative, to tell(sell).
His public floundering on a number of questions economic in nature is matched by nearly all the current crop of pollies – I’ll cut them a little slack – even the economists don’t seem to agree when it comes to economics.
Lorax
Yes you are right for exporters. I didn’t pay enough attention. However again the high dollar is not a mining production problem. It’s a speculative currency problem backstopped by our willingness to sell off our amazing array of natural assets
Grrrr my reply to Lorax ended up in the wrong place!
3d1 I think it would be best if the Libs lost the next election. Maybe then they’d drop this weak lily livered john Howard populist tripe that now passes for policy.
I guess it’s hard to win on rational grounds in these days of the 30 sec sound bite and an electorate who’s rather be watching master chef or some such combined with a continuous emotional anti common sense feed from the ABC et al.
I always thought it would take a leader to win. Maybe now a good leader cannot win.
For me it has come to the point where I almost do not care who wins – as long as it is not ‘xxxxxxx’ and the AG is replaced. I suspect if they go so will some of Labor’s more ridiculous/expensive policies.
The most interesting thing to watch over coming months/years will the the economy and frankly, if the above transpires, I think it comes back to Tweedledum and Tweedledee. A pyrrhic victory whichever way?
We’d first need to find good leadership material in the ranks in order to test that theory. Alas, there is none. All self-serving sociopaths, some of whom even appear to believe their own BS.
Given the shyte that is travelling down the tracks straight at Australia, I’m convinced we cannot afford to keep a party that is so anti-Business in power as we transition into the coming period.
The fork in the road is almost here and the 2 directions are clear. 1 heads for much higher Debt, anti Business policy and yet more Govt intervention in the economy , the other much less of those conditions but with a PRO Business outlook and bent. Clear choices.
These are not perfect choices for everyone. But, they do have the advantage of being quite clear. My concern is that too many still don’t comprehend the changes in our economy about to become evident. And that is what Swan wants to continue, with his narratives etc. If he can pull the wool over Australians’ eyes long enough…..
What, exactly, defines something as “anti-business policy” ?
I’m not so sure what anti-business is but as far as I can tell, pro-business is about pushing down the workers wages which ends up destroying customer base of the business and as a result drives the business into bankruptcy.
My fellow bogans love Joe. He’s a perfect counterpoint to Tony Abbott. As much as they like Tony because of his total lack of anger-management and wish to punch anyone who disagrees with him, he still has the stench of workchoices about him.
But Joe is harmless, the loveable buffoon. He’s the most likely of any of the big guns to make a gaffe so large that you’ll be dumbstruck but Man, if you could harness that stupidity you could power an entire vllage of idiots.
And then he just gives that million dollar smile. Onya Joe.
http://www.youtube.com/watch?v=bK-Dqj4fHmM
Joe ‘Flounder’ Hockey. It has a ring to it. You nerds love a challenge. See if you can get it in the MSM by the end of the week.
You have about summed it right for me.
Btw, what do you do on-site?
The government might well lose the election, but I doubt that Hockey will win it.
Small target no detailed policy carping opposition seems to be the strategy of the Liberals. It may well work, but I don’t see Hockey as having a vision, and I don’t see him as particulalry effective as a Treasurer, but he is seen as a likeable person because he smiles a lot.
What are the proposed Liberal policies detailed by Hockey that you like?
None. I’m simply pointing out he is closest a narrative that will resonate with the peeps.
I’ve only listened to him speak in person once, but he is a very good public speaker. He had zero chance of winning over the audience of course – the debate was the merits of workchoices given before a gathering of around 99% unionists – but he knows how to talk the talk, and in the face of intense hostility as well.
Who are these peeps though? In separate speeches he’s taken aim at entitlements and welfare for both the poor and middle class. I tend to agree with him but I can’t imagine that’s an election-winning strategy.
And if he’s to do anything about middle-class welfare then he’s going to have convince his boss that families on $150k don’t actually need government handouts.
Oh wait, Joe actually agrees with Tony (or once did).
http://www.abc.net.au/news/2011-05-12/government-hits-back-over-middle-class-welfare/2709214?section=justin
“I despise the way Labor turns Australians on Australians and the way they’re trying to turn Australians on others who may have a household income of $75,000 a year or $100,000 a year or $150,000 a year,” Mr Hockey said.
A career politicians taking about “entitlement’ is a hypocrite. To be anything else they need to firstly get rid of their tax payer funded defined pension schemes.
A great example of this “entitlement” is Anna Bligh. After 15 years in the Queensland parliament she has a lifetime indexed pension of $150k in 2012 terms plus other perks. Work out how much money a self-funded retiree needs to withdraw that amount at current term deposit rates.
“the Hockey narrative will make more and more sense”.
It certainly needs to- rapidly- and not only for the poor and those with disabilities.
He might also try numeracy too and learn to count.
“He might also try numeracy too and learn to count”
Ironic that his wife is head of fixed interest for Deutsche Bank!