Report: Abbott/Turnbull worst post-war economic managers

By Leith van Onselen

The Australia Institute (TAI) has released a new report, entitled “Jobs and Growth… And a Few Hard Numbers: A Scorecard on Economic Policy  and Economic Performance”, which attempts to benchmark the economic performance of Australia’s post-war prime ministers, namely:

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The report assesses performance based on a dozen common statistical indicators:

  • Average unemployment rate (not working as share of official labour force).
  • Average employment rate (full-time equivalent jobs as share of working age population).
  • Average annual real GDP growth (per capita).
  • Average annual growth, real private business capital investment.
  • Average public sector capital investment (as a share of GDP).
  • Average annual growth, real business intellectual property investment.
  • Average annual change, exports (value, measured as a share of GDP).
  • Average annual growth, real weekly wages.
  • Average annual growth, real personal incomes (per capita).
  • Average annual change, personal debt (as a share of GDP).
  • Average current account balance (as a share of GDP).
  • Average annual change, Commonwealth government debt (as a share of GDP).

The results for each measure are summarised below:

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According to the above indicators, the TAI ranks the current Coalition Government as the weakest in the post-war era:

Across all twelve of the indicators, Australia’s economic performance under the current government has ranked well within the bottom half of the eleven postwar Prime Ministerships considered in the analysis. In four cases, the current government ranked last of the eleven governments, and in three more cases it ranked or tied for second-last. Considering all the indicators, the tenure of this government qualifies as the weakest of any government in Australia’s entire postwar economic history.

The report then concludes with the following statement:

During election campaigns, competing politicians tend to exaggerate the potential impact their policies (and their opponents’) are likely to have on the national economy. In reality, Australia’s economy is dependent more on the decisions of private actors (including businesses, consumers, and foreign customers) than on government. It would be folly to ascribe full credit for good economic times to the government that happened to be in power during those years – and by the same token, to blame a government for negative economic events which were clearly beyond its control. (The economic fallout in Australia from the GFC is an obvious example of that latter form of misattribution.)

Politicians on all sides, therefore, should approach economic performance indicators with caution and humility. Government policies clearly have the capacity to influence the broader economic trajectory, for better or worse. But those effects take time, and are muted or even overwhelmed by other developments.

In the context of the current election, the present government’s claims to superior “economic management,” rooted in the alignment of its policies with the preferences of the business community and high-income households, must be considered with particular skepticism. By most of the twelve indicators presented here, national economic performance has clearly deteriorated during its tenure. Again, this deterioration cannot be attributed solely to the actions of the government itself. But it is still far-fetched for the present government to claim “credit” for an economic record that, by concrete statistical measures, is quite poor.

Looking past the election, there are numerous indicators that Australia’s economic performance is likely to get worse, not better, in the absence of strong countervailing measures. Significant risk factors in the economic outlook include:

• A dramatic and continuing contraction in business capital spending, usually the most important driver of economic growth. Recent ABS data indicate that private business investment will decline another 15 percent in 2016.10

• A continuing decline in the value of exports relative to GDP. GDP statistics for the March 2016 quarter reported a decline in the aggregate value of exports (down at an annualized rate of 3 percent), despite an increase in the physical quantity of exports. Exports consequently fell to their lowest share of GDP (18.77 percent) since the GFC.

• Swelling current account deficits reached over 5 percent of GDP (one of the highest levels in postwar history) in the second half of 2015.12 These deficits reflect the falling value of Australian exports, and a widening trade deficit — and translate into an inexorable increase in foreign debt. Financial analysts have expressed concern about the stability of Australia’s foreign debt (especially in the event of a housing market downturn, sharp drop in the value of  the Australian dollar, or other shocks).

• Steady increases in consumer debt (now equal to 130 percent of GDP) are being fueled by soaring real estate prices. At the same time, concerns are growing over the quality and stability of Australian mortgage debt, including the growing preponderance of interest-only mortgages.

• Unprecedented stagnation in wages and prices across the broader economy. In fact, both consumer prices and overall output prices declined in the March quarter of 2016. Nominal wage increases are near zero. If deflation becomes entrenched, the impacts on business and consumer expectations, spending, and debt stability could be severe.

Taken together, these negative indicators suggest that Australia’s economy is headed into very challenging times. Invoking vague concepts like “confidence” and “leadership” is hardly a convincing response to those challenges…

Fair enough. In defence of the Coalition, whoever was in Government over the past three years would have struggled given the collapse in commodity prices and mining investment, which has weighed heavily on many of the measures presented above.

A bigger issue in my view is that the Coalition has no plan for the future other than ongoing support of the bubble and Australia’s rent-seeker economy.

Full report here.

Comments

  1. This is why I am certain the LNP is throwing the election,
    Abbott, all he was good for was managing a concrete batch plant. He could never have been expected to run a series of business relationships which comprise and economy.
    Now Turnbull, he has money in the bank, says he was lucky, maybe lucky to be in Golden Sacks, when the opportunities literally knocked on your door, and was able to squirrel enough away to cultivate an image of prosperity. But running an economy, needs hard nosed business skills and the ability to manage strong personalities of those who are tasked with carrying out the executive roles.
    Turnbull has neither, he is simply the front man of power brokers in Melbourne, who simply wish for the status quo to continue at least till they execute their property investment plans.
    Turnbull is the suicide bomber, even if he wins the election in the upcoming infighting he will blow himself up. My call is the men behind the Chinese walls know that. How did this nation get this way.

    • “Politicians on all sides, therefore, should approach economic performance indicators with caution and humility”. Politicians? Humility? Like, Australian ones?

      • ResearchtimeMEMBER

        Highly political, lowly factual, for instance, have a look at the number Howard’s deficit. One budget deficit out of heaps of surplus (and a couple of small deficits, turned out to be surpluses), heaps… Keating comes out worst, but he was doing a heap of structural changes (under Hawke) that Frasier was too gutless to do!

        This is political diatribe. Not worth printing – its simply confirmation bias. Rudd was the worst economic manager by far! And gut feel tells me that if Shorten gets in, he will be the David Cameron of spenders!!!

        That Australia institute must be a Labour Party pawn…

      • Oh yes Researchtime, and these surpluses were made of what? Commonwealth Bank? Telstra? What other boomer gifts, I forget now…

      • ResearchtimeMEMBER

        Wow – my posts are not recording…

        We have a population of 20m odd, our neighbour, 200m odd…

        Australia will be populated one way or another.

      • the hagiography of those two vandals has been unpacked time and time again….structural budget deficit baked through their pork and an infrastructure deficit that is boggling…wtf does a temporary fiscal surplus count for against those crimes??? but nah fk reality, lets give ’em a fkn sainthood… articles of blind faith really shit me.

      • RT loves Howard and the structural deficits that he and Costello introduced. The structural deficit means you then get to rachet down spending in a downturn (thus exacerbating it). Then in the next upturn you worsen the structural deficit by cutting taxes further and selling off more assets.

        The guys and girls at the Minerals Council love it!

  2. Conservative governments typically claim to be the best economic managers. Typically they are not.

  3. Conservative governments are typically viewed as being those who withdraw support from worthwhile causes.

    They do.

  4. “”A bigger issue in my view is that the Coalition has no plan for the future other than ongoing support of the bubble and Australia’s rent-seeker economy””
    You forgot about innovation

    • Rent seeking innovation. Just wait for the private health insurance premiums if they get in and go ahead with their medicare changes…

  5. Figure 8 is interesting.

    Thanks for smashing our chances of getting a job by flooding AUS with cheap 3rd world labour!

  6. haroldusMEMBER

    So clownshoes was it a malignant hatred of Australian workers, or just general incompetence? Or a mix of the 2?

    C Pyne for PM, Asbestos Julie for deputy again (as is their custom).

    • “If the new world is to be a world of men, we must be not pallid and bloodless ghosts, but a community of people whose motto shall be, “To strive, to seek, to find, and not to yield”. Individual enterprise must drive us forward. That does not mean that we are to return to the old and selfish notions of laissez-faire. The functions of the State will be much more than merely keeping the ring within which the competitors will fight. Our social and industrial obligations will be increased. There will be more law, not less; more control, not less.

      But what really happens to us will depend on how many people we have who are of the great and sober and dynamic middle-class – the strivers, the planners, the ambitious ones. We shall destroy them at our peril.

      22 May, 1942″

      Robert Menzies, ‘The Forgotten People’
      http://menziesvirtualmuseum.org.au/transcripts/the-forgotten-people/59-chapter-1-the-forgotten-people

      • Yes, unfortunately the current mob of neoliberal dullards read that last line as “We shall destroy them at our leisure”

    • I heard a youngish Liberal supporter say that there wasn’t a difference between John Hewson and Bob Brown. He was exaggerating his view to make his point, but it wasn’t much of an exaggeration.

  7. Charts produced by TAI, who would’ve thought? I’m guessing the IPA could do these charts in reverse. LOL. Its getting a bit dull. Some of the stuff by these “independent think tanks” is getting so predictable.
    Press the snooze button….