Wednesday, 4 December 2019
Matters of Public Importance
Today's national account figures confirm what many Australian families have been feeling for some time, and that is the economy is simply not working for them. Growth is at 1.7 per cent for the year, and a measly 0.4 per cent for this quarter. Remember, this is the quarter where the government estimated that the benefits of the first stage of the tax cuts would begin to show. They haven't. Perhaps most worrying is that household consumption—that is, what people are spending—has effectively flatlined, recording just 0.1 per cent.
Today, the Treasurer said that, yes, he would like consumption to be a little higher but that this is a significant issue, particularly as we are now going into what is traditionally a strong period for the retail sector. We won't have those figures until early next year, but if the retail sector has a very poor Christmas period then that is a significant issue for the Australian economy.
The household consumption figure is the lowest it has been since the negative days of 2008, in the global financial crisis. We were in the midst of that then and the Labor government addressed it effectively. In fact, talking of Labor governments, Senator Brockman mentioned 29 years—I think that's what he said, but he's a little ahead of himself. We've had 28 years of continuous economic growth in this country. That was a consequence of the economic reforms that the Hawke-Keating government made. We have them to thank for the fact that our economy has remained so strong.
These dire figures from today's national accounts come on top of recent ABS labour force data showing that 19,000 jobs have been shed from the Australian economy in a month—the biggest fall since May 2016. And this figure doesn't factor in those who are underemployed and who would like to work more hours, which remains at a worrying 8.5 per cent. Together, this represents as many as two million Australians still looking for work or looking for more work.
I want to look at the Reserve Bank Act. This was passed in 1959, 60 years ago. We can see that, unusually for a central bank, it does not have just one single objective; it has three parts to its charter. Yes, it has what is normal for a central bank—that is, effecting and ensuring the stability of currency—but it also expands on this single role of controlling the supply of money in the economy to include a function that is more unusual for a central bank: the board of the Reserve Bank has a duty to consider the maintenance of full employment of the Australian people.
The legacy of the pursuit of full employment in Australia can be traced back to the vision of Joseph Benedict Chifley. Prior to becoming Australia's 16th Prime Minister in 1945, Ben Chifley served as Treasurer in John Curtin's wartime government. It was here, through the Commonwealth Bank, that Chifley extended functions to continue wartime controls on private banks, a precursor that became the model for the Reserve Bank of Australia 15 years later.
Hugh Armitage, who served as the Governor of the Reserve Bank, worked closely with Chifley on the formation of the Commonwealth Bank Act 1945, and this legislation formed the genesis of the Reserve Bank's current charter. Chifley's postwar vision was to use the instruments available to him to pursue a policy of full employment. He believed that this was of vital importance to the nation's interests. More than 70 years later, the Reserve Bank's current governor, Dr Philip Lowe, reiterated his belief in this charter goal in a speech he gave in June. He noted:
Low and stable inflation is a precondition to the attainment of full employment …
He went on to say:
The RBA is seeking to achieve the lowest rate of unemployment that can be sustained without inflation becoming an issue.
Labor believes this; it is in our DNA—indeed, it is in our very name.
Today, the government continues to run with an oft-repeated mantra that they are 'good economic managers', but the facts just don't stack up. For six years now they have been relying on outside influences to keep the economy ticking over, unwilling to intervene to protect the livelihoods of working Australians, lest this put at risk their surplus. We are now in a per-capita recession. If it weren't for immigration, the economy would be going backwards. We have record household debt, declining living standards and declining productivity—and I'm going to come back to productivity. In fact, this government is asleep at the wheel on getting Australia to be more productive. They are still on a sugar high from an unexpected election win and they are delivering nothing.
On productivity, we often think of productivity in a simple way: whether people are working sufficient hours and whether that has contributed to the economy. But I want to go to Harvard University's Kennedy School of Government, which has developed The Atlas of Economic Complexity. This maps the economic progress and opportunities of various countries. The data in the index shows that Australia ranks 93rd out of 133 economies—93rd! We are behind Morocco, Senegal and Uganda. We have many success stories in technology and education services, but we also have the same export profile as Angola.
Ensuring Australians are better educated, better trained for work and re-skilled has never been more important, because if we do not do these things our economy will go backwards. But this sitting fortnight has shown us that all this government has by way of response are plans to punish registered organisations, to punish the very organisations that represent working people. They've had a go at cutting the unions off at the knees, which was clearly the first step in a long play to re-introduce a WorkChoices-type piece of legislation.
Many wage earners haven't had a pay rise in real terms for the last decade. The last time business investment was this weak was almost 30 years ago and we were in the middle of a recession. To top this off, the Treasurer has been out talking on the importance of paying down the national debt. This avoids the inconvenient fact that it was the government who voted with the Greens political party to scrap Labor's debt ceiling—that was in 2013. National debt has never been higher. It has now reached a record $400 billion, all on this government's watch.
At every turn, the government refuses to use the levers available to it to pump stimulus into this moribund economy and give it the kickstart it so desperately needs. As today's account figures show, the first tranche of tax cuts hasn't had the desired flowthrough effect it was meant to have. In an indication that the public know trouble is on the way, they have decided to bank the money instead. In a recent speech, Dr Lowe, the Reserve Bank governor, said that, looking towards full employment, 'monetary policy is not the only option, and there are limitations to what can be achieved'. Not for the first time in recent months, he went on to say that fiscal policy, through infrastructure spending, should be considered.
This all lends itself to the increasingly apparent truth that this government never expected to win the 2019 election and therefore never put in place a vision or a plan for guiding the economy through these challenging times. Perhaps they should reflect on the third part of the Reserve Bank Act, which states:
… the economic prosperity and welfare of the people of Australia.
I don't often recommend that people read the objectives of the Reserve Bank Act, but it is unusual in a central bank and I think it's well worth having regard to. All policies at the moment need to be framed around job creation and productivity gains, not in propping up a milestone surplus, which seems to be getting narrower and narrower by the day.