Extract from The Guardian
The Economist’s rosy profile of Australia is in some ways an oddly
timed piece given the insecurities many in this country are feeling
This week The Economist magazine featured Australia on its front page, stating “Aussie Rules: What the world can learn from Australia”.
In some ways it is an oddly timed piece given the insecurities many in
this country are feeling – coming as it did in a week when about 150,000
people rallied in Melbourne for better wages, and in which the stock
market slid five days in a row.
Is it a case that Australians have become the grumpy ones who can’t see
how good we have it, or is it time to end stories about the “Australian
economic miracle”?
It’s not all that surprising really to have a magazine based in London as it experiences the absurd hit on its economy from the Brexit idiocy look wistfully to Australia. And given this week Tony Abbott advised the Brits to just give the EU a take it or leave it offer, many in Britain could well be forgiven for wondering just how did Australia manage to not be in an economic mire given the competency bar for leadership in this country appears to be so low.
If we look over the past decade, Australia’s GDP per capita (not that I would suggest GDP tells all there is to be said about an economy) has grown by 10.2% compared to the UK’s meagre 3.9%. Whereas Australia over the past 10 years comes in 7th among OECD nations for per capita real growth, the UK comes 20th.
And yet digging deeper (something which our economy certainly is
reliant upon doing) the picture of Australia as this wonderfully
performing economy looks like it was written about five years ago rather
than in 2018.It’s not all that surprising really to have a magazine based in London as it experiences the absurd hit on its economy from the Brexit idiocy look wistfully to Australia. And given this week Tony Abbott advised the Brits to just give the EU a take it or leave it offer, many in Britain could well be forgiven for wondering just how did Australia manage to not be in an economic mire given the competency bar for leadership in this country appears to be so low.
If we look over the past decade, Australia’s GDP per capita (not that I would suggest GDP tells all there is to be said about an economy) has grown by 10.2% compared to the UK’s meagre 3.9%. Whereas Australia over the past 10 years comes in 7th among OECD nations for per capita real growth, the UK comes 20th.
Most of the reason for our good relative performance over the past decade is due to how well we did during the GFC. In the three years from the last quarter of 2007 to December 2010 Australia was one of only six nations in the OECD not to see their GDP per capita go backwards. While our per capita economy grew 1.6%, the UK’s fell 5.8%.
But here is the dirty secret – since the end of the GFC, Australia has been far from an economic powerhouse.
Since 2010 our economy on a per capita basis has actually grown in line with that of the UK, and behind the USA. The IMF also recently predicted that over the next five years both the USA and UK would outperform us – and that is in spite of Brexit and Trump’s tax cuts inevitably leading to a massive cut in government spending.
Yet there is little sense of this in The Economist’s article. Instead all appears rosy, but very oddly so.
Consider that the author of the piece, Edward McBride, suggests that “whereas many other rich countries have seen wages stagnate for decades, Australia’s have grown strongly”, although he does at least acknowledge that “albeit less steadily in recent years”.
He thus argues that “in other words, a problem that has agitated policymakers – and voters – around the world, and has been blamed for all manner of political upheaval, from European populism to the election of Donald Trump, scarcely exists in Australia.”
Really? Scarcely exists?
From the start of 2011 till the middle of 2017, private sector wages growth fell and real household incomes have been flat now for over six years. The Reserve Bank and the Treasury are both worried and somewhat perplexed why wages aren’t growing, given our low levels of unemployment, and it has reached such a state that 150,000 people protested in Melbourne this week on the issue.
The union movement might be good at propaganda, but you don’t get 150,000 people turning up to a rally during their lunchtime unless there is a real problem.
Similarly the article has a rather rosy-coloured look at places that are actually struggling.
Townsville is highlighted as being this wonderful place that has boomed from mining but thrived in spite of the end of the investment boom because of tourism and defence. McBride writes that “when commodity prices began to slide a few years ago, Townsville’s economy was dragged down, too ... unemployment rose from 5% in 2013 to 9% in 2016. Property prices sank”.
Except unemployment in Townsville didn’t peak in 2016 – it kept going up, reaching an annual average of 11.6% in 2017. It is now back at 9.1%, but consider that in 2013 the unemployment rate in Townsville was 1.4 percentage points lower than the national rate and now it is more than 4 percentage points above it. Not really an example of a place that “stumbled rather than swooned”.
The article also reveals rather unintentionally the issue at the heart of our economy. Yes mining has kept our GDP growing, but the jobs are not flowing as they did previously.
In attempting to explain how efficient our mining sector is, McBride notes Rio Tinto’s use of self-driving trucks and that they “are 15% cheaper to run than the human operated sort... There are no idle spells between shifts or during breaks, and there is no need to fly burly men in hard hats up from Perth.” Quite – an efficient economy all without the need for people.
The Economist article does at least acknowledge Australia’s utter lack of a climate change policy under the Liberal party, and also that the “appalling circumstances of many Aboriginals are a national embarrassment”.
It also notes that “the right-wing press likes to dwell misleadingly on stories about immigrants and crime. It has stirred up a panic about African gangs in Melbourne, despite scant evidence that any such gangs exist”. McBride actually paints a more realistic picture of Australia’s thriving multicultural society.
But there is no mention of the concerns about house prices, housing affordability and our large levels of household debt – something that the Reserve Bank has highlighted as a concern should the world economy slow.
Yes, Australia’s economy has done well over the past 25 years, but it seems an odd time to point to the lessons we can show the rest of the world. During the GFC we were indeed the poster boy of how to manage an economy, but ours now, as much as others, is suffering through the new normal of lower growth and flat incomes.
Our economy is also more dependent upon fossil fuels than almost any major economy, and yet we continue to do almost the least to reduce our emissions. Of this major economic challenge facing the world and very much this nation, our own Treasury department this week told the Senate estimates committee it wasn’t even doing any modelling on the impact.
If anything we can teach the world that short-termism of looking at GDP growth now and ignoring problems bubbling under the surface and looming large on the horizon is the way to go. But I am not sure that is a lesson anyone should wish to learn.
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