Thursday, September 3, 2015

Today by Nick Feik

The treasurer needs to find some new solutions for our slowing economy

“There is no risk of recession in Australia,” Joe Hockey told Channel Nine yesterday, again demonstrating his penchant for making unnecessarily definitive economic statements that may come back to bite him.

He continued with a common refrain: “But, if we don’t continue down the path of delivering free trade agreements, getting rid of taxes, getting rid of regulation, and opening up more of the Australian economy to competition, then we will risk significant job losses and slower economic growth.”

Regardless of prevailing conditions, Hockey’s solutions are, it seems, always the same.

The national accounts released yesterday showed that the economy grew at a feeble 0.2% in the June quarter, with annual growth down to just 2%. As economist Andrew Charlton pointed out, the domestic economy slowed dramatically in 2013 and never recovered. This softness had been masked by the increase in net exports, but in the recent quarter net exports growth also subsided, mostly due to collapsing commodities prices.

“Worryingly, business investment – the engine of future growth – subtracted 1.3 percentage points from the domestic economy,” noted Charlton.

“For two years, we’ve been told that the Australian economy is ‘transitioning’ from the mining boom to alternative sources of growth … That smooth transition isn’t happening. [Instead,] Australia is set for a longer, tougher road back to growth.”

Ahead of this weekend’s meeting of G20 finance ministers in Turkey, the International Monetary Fund said that the recent turmoil in financial markets and the struggling Chinese economy would slow global growth this year, affecting commodities-reliant economies the most. The impact of these international factors is likely to be reflected in Australia’s national accounts from next quarter.

However, we know already from the treasurer that there’s no risk of recession, and the solutions to our economic stagnation will be “getting rid of taxes, getting rid of regulation …”

Stop me if I’m repeating myself.

Today’s links

Nick Feik

Nick Feik is the editor of The Monthly.



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