Tag: economics

Who really invested in jobs and growth? An economic comparison of Australian Prime Ministers.

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If you’re looking to make an informed vote based on economic strength this Saturday, here are some numbers worth looking at. The Australia Institute has released a paper analysing the economic performance of Australian governments from Menzies onward.

 
Independent and non-partisan research organisation The Australia Institute released a new research paper, ‘Jobs and growth… and a few hard numbers‘, illustrating the economic performance of Australian prime ministers across a broad range of economic indicators.
The Coalition’s constant reminder of Labor’s ability to take a government budget in clear surplus and turn it into deficit and debt (as Rudd did following Howard*) seems to have resonated with the Australian public. Polls show the Coalition leads public trust in economic matters, but how much of that is influenced by political spin, and who do the numbers support for ‘best economic management’?

Here are some highlights of the report.

* Note that while the Howard government passed a surplus to Rudd (that he famously destroyed and put the government into debt), the debt was accumulated in the roll out of Rudd’s stimulus packages during the global financial crisis.  And what is a budget surplus if not unallocated funds to cushion a country in unexpected economic crisis? That is precisely what Rudd did, and may have been the best economic management the country has seen—ever.
On innovation investment growth:
The investment of the Abbott/Turnbull governments for innovation is less than that of the Rudd and Gillard governments. The Coalition’s claim that they are the masterminds behind a more innovative Australia is branding at best. By dollars invested, the ALP was leading this as far back as Rudd.
 
On business investment growth:
Once again, the LNP under Abbott/Turnbull fails to put its money where its mouth is. For a party that claims to support ‘jobs and growth’ by investing in business, it’s a little worrying to see the lowest business investment numbers since the Whitlam government. Interestingly, the Gillard government comes out on top here, followed by Howard and his lauded surplus.

On GDP per capita growth:
Only the Rudd government performed worse than the Abbott/Turnbull duo in this category. Remembering that both governments have been victims of difficult economic times, you might be ready to shrug it off. The Gillard government’s result matches Abbott/Turnbull at 1.1% a year each—so where exactly does this idea that the ALP under Gillard was worse at economic management come from?

It’s nothing more than warping the interpretation of statistics to claim that Rudd ‘failed in economic management’ because the numbers reflect the initial hit of the GFC, and his spend-more response.

On jobs and wages growth:
Of particular interest to those of you who like to eat, and who need the money to invest in food to indulge in the luxury of eating: wages growth has suffered under the Abbott/Turnbull government.

Falling from 1.2% per year under Gillard to -0.6 per year under the Coalition. Personal income growth fell from 0.7% to 0.3% per year. This doesn’t look much like ‘jobs and growth’. This looks more like ‘underpaid and starving’.

Remember that in this time, while wages are falling, living expenses are still inflating. The average postage stamp costs $1 and public transport fares increase every January 1st. Wages should be growing to support those costs, not shrinking.

On household debt growth:
This is where it gets scary. This is where we see the sort of ‘growth’ Abbott/Turnbull have really shared with the Australian public.

The Gillard government saw the fall of household debt growth from 1.5% pts per year to 0.9% pts per year. Rudd had already drastically reduced that number from Howard’s 4.3% pts per year. In the short time of the Coalition’s rule, Gillard’s 0.9% has become 5.5% pts per year.
The Coalition, though allegedly committed to reducing government debts, seems to be doing so at the cost of households.
Record low wages and income growth coupled with record increase in household debt. Not really something you’d want to boast about. 

On allegedly reducing government debt:
So there’s some numerical support here. Some. Under Rudd, government debt growth hit a record 3.3% pts per year. As noted at the top of the article, a large chunk of that growth was in response to the global financial crisis, and a government that was determined to out-spend economic disaster.
It was Gillard who saw this come down to 2.3% pts per year, and Abbott/Turnbull have so far only succeeded in reducing this to 2.2% pts per year. Achievement, or the result of a trend started before they took power? Either way, to claim that the Coalition is better at managing finances than the ALP is like trying to claim that five twenty cent coins is better than a dollar coin.

On the GDP and economic growth:
If you look at the numbers as they’re typically presented (by average GDP growth per year), you’d be fooled into thinking that Rudd was a terrible economic manager. Abbott/Turnbull are too willing to boast their 2.60% growth against Rudd’s 2.17%, though they notably forget that Gillard tops the three recent governments with a growth of 2.75%. Essentially, GDP growth has stalled since the Coalition came into power, and that is not what they would have us believe.

To look at the numbers a different way, and the way they perhaps should be measured, is to compare those growth rates against the rest of the world–against the Organisation for Economic Co-operation and Development or OECD. This gives a picture of how each government performed against other countries during the same economic period.

That is, Rudd’s performance against other governments faced with the GFC, Howard’s performance in relatively stable times, etc. To compare governments directly with each other is somewhat unfair, as they each faced different situations in global economics.

This data, displayed by the percentage above the average GDP percentage growth across the OECD tells a vastly different story than a comparison of Australian governments to each other ever will.

Abbott/Turnbull sits just 0.62% above the average OECD GDP, behind Howard (honoured alleged economic mastermind) and his 0.85% above. Gillard shows in at 1.04% above (yes, performing better globally in her time in office than Abbott/Turnbull has in theirs), but is eclipsed by Rudd who saw 2.89% above the falling OECD GDP. Australia grew stronger economically while the world struggled not to grind to a halt.

Part of that? The Labor government under Rudd utilising the budget surplus (and then some) to keep the economy moving. The big ‘economic mis-management’ that Abbott/Turnbull love to trot out under the terms ‘government over-spending’ and ‘increased debt’. Did Rudd spend too much? Possibly. We will never really know what the minimum spend would have been to keep Australia rolling during the crisis.

What we do know, is that we saw growth in that period. The measures saw results.

Tl;dr:

Turnbull would have you believe that Australia is headed toward a stronger economy with more ‘jobs and growth’.
However, the numbers on prior performance indicate that the only ‘jobs’ we will see are going to be underpaid, and ‘growth’ is likely to be in household debt.
To claim that Turnbull and the Coalition are more equipped to handle Australia’s economy than the ALP is laughable at best, and certainly not supported by the data in this report.