Depressionberg Unstimulus deals Labor back into next election

There won’t be many happy punters after the release of the Depressionberg Unstimulus yesterday but one that ought to be thrilled by it is the ALP and its Empty Chair.

Greg Jericho outlines the issue:

…the government is anticipating a pretty nice recovery in 2021-22 – GDP to grow by 4.75%, the best growth this century – better than occurred during the mining boom, better than occurred after the 1990s recession.

…the government is not anticipating it to last. The year after sees growth slow to 2.75% and then in 2023-24 a fairly average 3%.

The budget suggests that by the middle of 2024 our economy will be operating at near capacity, but that is the “new post-Covid” capacity.

…While that might sound good, what the budget also reveals is that by then our economy will be around 4.5% smaller than we would have hoped it would have been before the virus hit.

It also means hopes of wages growth of times past are gone for good:

To get the old average wages growth of 3% we would likely now need unemployment to fall to around 4.5% – something no one is anticipating anytime soon.

So, Treasury is now forecasting booming GDP and falling wages until the next election. This is too bullish so let’s leaven it a little with a more realistic scenario of decent catch-up growth over 2020/21 followed by weak growth in 2021/22.

Even so, that gives us a recovery of some kind with still falling real wages. This will be despite falling population growth as well so immigration will be one less thing to blame. That’s pretty toxic politically.

Why does the Government see such weak wages growth then? It says:

Wage growth is expected to remain below average over the forecast period, reflecting significant spare capacity in the labour market. However, a declining unemployment rate beyond the December quarter 2020 is expected to support a gradual pick-up in wages. Recent business liaison discussions support this outlook. The Wage Price Index is forecast to grow by 1¼ per cent through the year to the June quarter 2021 and by 1½ per cent through the year to the June quarter 2022.

Measures of average earnings, such as Average Weekly Earnings and Average Earnings on a National Accounts basis, rose sharply in the June quarter 2020 as lower paid jobs experienced the sharpest decline in employment. The unwinding of these compositional effects is expected to place downward pressure on these measures in the near term.

That’s all we get. We can still surmise the Government’s thinking from its stimulus mix. That is, there isn’t any for workers. The Depressionberg labour market unstimulus is, in fact, a vast fiscal cliff. Via UBS:

So, first up, the Government is going to flood the labour market with supply by ripping out income supports prematurely.

Phase two of the wages unstimulus is to NOT raise JobSeeker at all. In fact, it’s going to drop it back to the poverty level of $40 per day in January and leave there. This will further flood the labour market with desperate supply.

Phase three of the wages unstimulus is to subsidise part-time work over 20 hours per week, ensuring mass layoffs for those currently employed full time, to be re-employed as multiple part-timers, thus swinging the industrial relations pendulum even further from workers.

The final phase of the wages unstimulus is to pour an ungodly amount of tax incentives into encouraging business to invest in automation, so that it can shed still more labour. The same applies to the infinite number of efficiencies that business will have discovered while operations were reduced or idled, providing subsidies to invest into these processes as subsidised idled workers return to no job at all.

Don’t get me wrong. Some of this would normally be terrific, boosting productivity and income. But that would be if we were, say, mid-cycle and facing tightening labour markets with little output gap.

In the context of a vast output gap, the wages unstimulus is going to shred labour, which is why Treasury has quite rightly forecast very weak wages. In turn, that suggests that Treasury understands exactly what it is doing and begs the question: what has happened to the formerly rational Treasury Secretary Stephen Kennedy?

But I digress. The wages unstimulus will lift growth and jobs as a matter of course coming out of the virus, but will also continue to smash standards of living as wages miss out entirely on the rebound, even in the absence of mass immigration.

And that’s the political rub for 2022. All the Government needed to do to rule for the entire 2020s was keep China on the defensive and stick with centrist economic policymaking.  Instead, it’s gotten fruity with the radical Depressionberg Unstimulus that will contrast very poorly with traditional Keynesian versions pursued in other countries. As well as what Labor did during the GFC.

That’s an argument even an Empty Chair could prosecute.

David Llewellyn-Smith
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Comments

  1. did not read the article (will later) but headline says it all. Was thinking same yesterday.. Now it is for Albo to find a way to lose next elections.

    • He has one of two paths to choose:
      – Promise endless handouts for all locals
      – Promise endless handouts and legs up for hordes of migrants and their elderly parents

      Almost certain Mr Wet Lettuce – he who whines through his nose – will choose the latter.

  2. GunnamattaMEMBER

    I loathe the Torynuffs. I would love to see an active reformist ALP. I think the best economic reform governments of my lifetime have been ALP and I would love to see it again. I often look for some sign of it………..

    Alas what i see is only ever feeble.

    ‘A couple of days after the serving of Liberal nothingness came a reminder of why they have had seven years with their hands in the till…….an ALP which is not just leaving an imprint on the electorate akin to a ‘Here’s Lucy’ episode seen for the 90th time but which seems to have deliberation processes revolving around providing ‘Here’s Lucy’ vintage responses to the biggest economic jolt the country has had in generations. Albanese flags an eight-point economic plan as key to COVID-19 recovery https://www.smh.com.au/politics/federal/albanese-flags-an-eight-point-economic-plan-as-key-to-covid-19-recovery-20200915-p55vyf.html

    For anyone who missed the ALPs serving of anodyne gruel this was the offering………….

    Labor’s eight-point plan
    1. Reverse cuts to JobKeeper and JobSeeker and expand JobKeeper to include casual workers
    2. Support small business through improving cash flow
    3. Invest in aged care and the care economy workforce, including child care and disability care
    4. Provide temporary financial support for community groups and charities providing essential services to vulnerable communities
    5. Improve labour market programs to support vulnerable job seekers
    6. Encourage local governments to bring forward plans for local infrastructure
    7. Improve compliance with the code of conduct for commercial tenancies
    8. Reverse decision to “freeze” the pension

    No need for revisiting the entire economic box and dice, no need to think about debt, the sorts of jobs we have been creating for a generation, or house prices. No vision looking at how we fund our services, and what the actual economic effect of endless tax cuts for people on 150k when the median income is circa 60 actually is. Of course that is after a glimpse at Albos photograph brings to mind the question of whether he is trying to look like someone from the 1940s and should wear a trilby to further the effect.’ (From a recent rant)

    The impression i get from the ALP time and again is that they simply are not interested……..and i have ceased to be interested in whatever it is they seem now to be interested in.

    • happy valleyMEMBER

      Gunna – I share your sentiments in the first para of your post. Next election, it’s looks like I will be voiding the ballot papers.

      • Dont do that, if you void the ballot paper its not part of the count, effectively giving your vote to the rest of the people voting for the 2 majors.

        You have to go into the ballot anyway so instead of wasting your time and effort send a message that will actually have an impact, event if only tiny. Pick the least vile independent and work backwards, picking the next least vile….. You may not end up putting the ALP and LNP last as there is bound to be an Absolutely Loonie candidate but you can sure put them a long way down the list.

    • Gunna, not DLS, on this one. Surely Labor would at least have to pretend to care. Albanese is a spavined nag that couldn’t win at Pakenham, not a group one Makybe Diva that can storm home in the shadows of the election post.

  3. happy valleyMEMBER

    The Treasury mugs were out by 50% in their estimate of the cost of JK so why would you trust anything they came up with. It’s a race to the bottom with the useless RBA as to which can produce the most ridiculous forecasts, based of course, on the historic results numberwang of the already totally useless ABS. APRA and ASIC long ago totally useless. I guess the ACCC, Productivity Commission and Parliamentary Budget Office might retain some loose threads of usefulness?

  4. You’re missing the point – ALP are unelectable – LNP know this. If it gets close, then LNP just pivots to attacking ALP’s Chyna connections. Until ALP address this, its smooth sailing for LNP.

    Right now, LNP are banking on a recovery next year. If there is no recovery, they will implement emergency budget measures – the budget is not rigid – they have the political capital to pivot – the coronavirus grants them this (i.e. extraordinary times, 1/100 year event etc.).

  5. I have heard alot of stories of people refusing to work as they are on jobkeeper/jobseeker and it is not worth their while to work, when instead you can stay at home and watch the money come into you bank account.
    Unfortunately this is they way Australians think. Its part of our culture. Australians are most efficient in finding ways to rip of the government.
    The Libs know this which is why they are taking the punch bowl away.
    Low wages, means low inflation, which means low interest rates, which means house prices will boom – and that is all that matters!
    When the vaccine comes, Australia’s economy is going to BOOM!

    • ErmingtonPlumbingMEMBER

      “I have heard alot of stories of people refusing to work “

      Ha ha,… you have been completely Beguiled and indoctrinated by our Pro plutocracy media and corporate PR industry and don’t even know it.

      • Less Woke More BlokeMEMBER

        I’ve heard lots of stories of people wanting a secure well paying job in preferencing to lording it up on $40 a day

        Which is more likely, do we think

  6. Per above, the ALP policy platform is hardly inspiring and one only had to watch the first round of budget responses to realise the ALP is caught flat footed here, Jim and Also just don’t cut through! The only soundbites that seems to be getting any traction is ‘tax cuts for the rich’ and ‘pink recession’

    The old, “you’re rich if you earn 100k” narrative did them no favours last election and the pink recession dribble is just more of same same identity politics, much like Trump, your base will love it but it’s now a turn-off for anyone else.

    LNP budget aint great, will clearly line the pockets of business owners, ASX corporates and the Church of Latter Day Developers but that is hardly a surprise to the electorate, the fact that most of the MSM has been largely supportive of the budget speaks led and clear, hell, even Waleed gave a bit of stick to Chalmers on the project as to why they would dare oppose some of the measures.

    The ALP may have been dealt back in, but they have neither the chips nor the gumption to seriously contest the pot.

    • Totes BeWokeMEMBER

      “your base will love it but it’s now a turn-off for anyone else”

      Labor are incapable of learning.

  7. Totes BeWokeMEMBER

    I don’t understand enough about economics to debate Keynesian, but Labor’s incompetent (in terms of the delivery and outcomes) response to the GFC is much of what’s brought the party down, leaving them unelectable in the view of the electorate.

    We shouldn’t forget, Plibersek, Bourke, Albanese, Shorten, Marles, Wong, Chalmers etc are all still at the head of the Labor party.

    Labor’s not going to be an alternative for decades if ever. Meaning LNP can do near whatever they want.

    • The response was not that bad, but the Media’s perpetual repetition of the LNP talking points on how bad the ALP response was sure caught the imagination of the population. Going to be interesting to see the response the voters have when the impact of this lot of responses starts to really hit home.

        • We have had this discussion already and despite your repeating the “it was bad ” mantra you have not justified your position.

          1) School halls programs was designed to get construction building something other than houses. Lots of schools needed new halls etc. Just because some people claim it was all rorted because schools that didnt need it got one does not mean thats true and does not mean it was bad economic policy. The issue I have with it was the fact they outsourced the management of the implementation to a number of consulting firms who effectively skimmed off the top, Could have been better handled in that regard. BUT thousands of schools got halls built that would not have gotten them. Some of those that didnt need a new hall got a new hall and now use the one they had for other purposes. I know of one school that converted the new hall into classrooms. Billions spent, thousands of tradies kept working.

          2) Pink Batts, responsibility for workplace safety lies with the states, while tradies were killed, the actual injury/death rates went down. i.e. less people died or were injured per installation during the program than before… but somehow this was turned around and the ALP were blamed for every death…. could t have been run better, sure…. but so could all programs.

          There are more examples, but your so caught up with the LNP bad, ALP even more bad mentality that clouds everything you say.

          I agree, we need a stand up replacement to combat the LNP, and no I dont want it to be an ALP, or an ALP lite. We need a true centrist party, reasonable on immigration, interested in social well being not woke posturing, focused on a diverse economy of industry and commerce, not just houses and holes.

          My issue is that we will never get one while ever we have a media that rants LNP talking points and people like yourself buy them uncritically. You blame the ALP for not presenting a viable alternative, but how can you when the media has so much sway in influencing opinion and talk in favour of the LNP and against the ALP. They have to try and appear to be LNP lite or they get ridiculed..

          The ALP GFC response while it had issues was really not that bad and resulted in us not suffering like everywhere else but almost everyone are convinced due to the media that it was extremely bad. Compare it on debt levels to the current response, same people who were spruiking how irresponsible the ALP were for the debt spend have spent how many years spending like drunken sailors, and now have come out with a policy designed to appear to do something with no actual value except double down on the housing ponzi.

      • ErmingtonPlumbingMEMBER

        “the Media’s perpetual repetition of the LNP talking points”

        LNP talking points are the Pro Plutocracy talking points supported by all Corporate media organisations.
        The owners of these media companies and other rent extracting corporate behemoths are the Oligarchs and true rulers of western society.
        Even the supposed “Left wingers” within the ABC are have completely submitted to, and never challenge, the primacy of our corporate plutocratic rule.
        Any who genuinely question the economic status quo have no career within the dominant mainstream media (Including the ABC) a #FakeLeft circus centred around identity politics is served up as some kind of Left/Right dichotomy and yet no debate is ever had advocating for the radical economic and political empowerment of working and middle class people (the plebs), the vast Majority, who through their numbers should rule in any kind of real “Democracy”.
        The fundamental basis of a “Left” is supposed to be the the democratic dominance of decision making by the majority,…by us plebs.
        There is no real organised “Left’ in our countries any more you morons!,…what most of you are wailing on about when going on about the “Left” is just a progressivism v social conservatism dichotomy/battle being waged and guided by 2 different apparchik factions of our overarching Plutocratic oligarchy.
        It is the money and power that this plutocratic oligarchy wields that guarantees the ALP (or any other other supposedly Left leaning Party) will be completely “No Platformed” by all establishment media if they were to truly start challenging the economic status quo.
        Id actually like to see the ALP do this by aggressively advocating for working class people and challenging the status quo but unfortunately the party isn’t run by and for its rank and file anymore and the very few who do run the show all value their careers to much to rock the plutocratic boat.
        It might be fair to say that we are in the dying days of the social experiment that was Democracy and that what masquerades as it is nothing more than a propaganda narrative used to subjugate the expendable 21st century techno peasantry.
        Domination of all, by the very few, has been the default setting for civilisation for almost its entire history.

        It is my view that if we dont reverse Media ownership concentration with fierce antitrust laws designed to maximise media ownership diversity and independence then democracy is over.
        https://youtu.be/EuwmWnphqII

        • Totes BeWokeMEMBER

          “There is no real organised “Left’ in our countries any more you morons!,”….

          Other than calling me a moron, that’s an outstanding comment ermo.

          I completely agree. Don’t get hung up on a word. I’ll replace “left” with “woke”. Seems to fit what I oppose more.

          Anyway, IMO, you should abandon the Labor party and join me in seeking a replacement. They’re too far gone; you’ve observed that yourself i think.

          We have about a decade to save Australia is my gut feel, and Labor cannot be reformed in that time. Step away and help destroy them.

        • The Greens are about 99% aligned to what you want, Ermo – and far more so that New Labor – but since your real whinge is about people who think social justice issues are important at all, we both know that doesn’t matter.

          • Totes BeWokeMEMBER

            Greens are the worst thing to ever happen to Australia. They have probably been the biggest driver of changing the Labor party into an unelectable joke.

          • Totes BeWokeMEMBER

            Social justice. lol.

            You live in the best country in the world. We all live like kings and queens. What more could you possibly want?

            What you are actually achieving is to lose the whole lot.

            You are in fact a spoiled rotten individual who doesn’t know what having nothing means. Maybe travel when you get a chance because you think like a child.

            Grow up.

          • ErmingtonPlumbingMEMBER

            The racist white Privilege privilege narrative embraced by the Greens make them useful idiots to the very few individuals who could be called the true enemies of the people (of all colour) ,… the plutocratic oligarchs.
            Many Greens and inner city ALP types speak of White people In exactly the same way 1930s Germans spoke about the Jews, scapegoating THEM and Holding THEM all responsible for all ills that befell post WW1 Germany.
            Where is the Working class Solidarity in demanding that “White” working class kids Be silent, bear shame and apologise for acts that were directed and committed by European aristocracies that hated and often killed the Working class ancestors of me and my kids.
            Until the Greens drop this dangerous White male hatred they can get fked. They have made themselves the enemy of all white working class people in this predominantly “white” country.
            Fken idiots!

          • The racist white Privilege privilege narrative embraced by the Greens […]

            Is created by the same “corporate media organisations” you complain about above, and you have bought into it hook, line and sinker.

            There is no loss of “working class solidarity” in recognising that other forms of discrimination exist.

            You, and people like you, are the ones creating and sowing division by attacking anyone who thinks it does.

  8. Australian punters have very low expectations. People’s minds are so distorted around here that I can’t even be sure that Andrews will lose the next Victorian election. I don’t believe Aussies know or care about what sort of Keynesian plans are happening overseas. They’ve been fine with Liberal austerity and it was sweetened by JobKeeper. They won’t go to Labor on this issue.

  9. Display NameMEMBER

    These f$ckers need to stop talking about unemployment and start talking about under employment or slack in the labour market. With all the “official” stats pretty much useless we need to reset the debate. GDP growth is a waste of time unless it is real GDP per capita growth.