“403,000 jobs in a row”
The PM should be careful grandstanding on the economy
However it shakes out, the share market turmoil of the last 48 hours is a timely reminder that the Turnbull government is skating on fairly thin ice, economically.
Most political commentary is predicated on a continuation of Australia’s long, slow recovery from the financial crisis and transition from the mining construction boom. This is in line with official forecasts: December’s MYEFO, for example, while cutting forecast growth by 0.25 per cent to 2.5 per cent in 2017–18, and lowering expected wage growth to 2.25 per cent, maintained forecasts for the subsequent years to grow 3 per cent per annum.
Turnbull has sought to shift the battleground back onto the economy, crowing about the record 403,000 new jobs created last year. But what if “delivering jobs and growth” becomes “delivering a market correction and economic slowdown”? Then the Coalition’s electoral prospects turn very grim indeed.
Economic news cuts both ways: if he wants to take credit for last year’s job creation, Turnbull must be prepared to wear the blame should forecast jobs growth not eventuate this year.
It’s like Turnbull’s line in 2015 – “we’ve lost 30 Newspolls in a row”; it was useful in rolling Tony Abbott, but has since come back to haunt him.
And voters care a hell of a lot more about the economy than they do about Newspolls.
There is no point in Turnbull (or Scott Morrison for that matter) trying to convince us that his policies should deliver wages growth in theory: the laws of supply and demand may still be in operation, but nobody buys the trickle-down rhetoric anymore. Voters are sceptical to say the least. If anything, what we’ve seen over the last 30 years, as World Vision’s Tim Costello said on RN Breakfast this week, is wealth “trickling up”.
Similarly, there is no point in measures that will deliver wage growth in the long run. Workers need to see, and the government needs to deliver, wage growth this year. As Ross Gittins wrote last week, the economics are arguable, but time is running out for those who have argued that below-inflation wage growth is a temporary, rather than lasting phenomenon: “rest assured, if it keeps up for another year, light will dawn”.
A vast construction boom stimulated by emergency-low interest rates has propped up the Australian economy since the end of the mining boom in 2012. The waters are still choppy. Without getting too bearish, or speculating about a house price collapse that never comes, or waves of panic selling, it is quite plausible to imagine that a combination of stagnant or easing house prices plus rising interest rates this year – the market is pricing in 1.5 per cent – will dent consumer confidence, crimp spending and therefore economic growth. The recent recovery in commodity prices – iron ore, coal, oil – may not be sustained. A lower Australian dollar makes us all poorer, ultimately. Yesterday’s RBA decision to keep rates low underlines that our economic recovery remains fragile.
In 1995, the then Opposition leader, John Howard, used rising interest rates to devastating effect against the prime minister, Paul Keating, lamenting the “five minutes of economic sunshine” Labor had delivered since the early-’90s recession.
Whether an election is held this year or next, it is easy to imagine Labor wielding a similar line to similar effect.
since this morning
Markets are rebounding worldwide today, but billionaire Carl Icahn has warned the market volatility is a harbinger of things to come.
The estranged wife of Deputy Prime Minister Barnaby Joyce has told media [$] she is “devastated” by his affair with a former staffer, while Caroline Overington asks [$] why it took so long for the story to come out.
in case you missed it
A Human Rights Watch investigation of 14 prisons in Western Australia and Queensland has found prisoners with disabilities have been locked in solitary confinement for prolonged periods, raped by carers and taunted by officers.
BuzzFeed’s Josh Taylor has revealed that an investigation is underway in the Victorian Department of Premier and Cabinet to find out who is editing the Wikipedia page of Labor senator Penny Wong. The page has been edited several times to alter and remove references to Senator Wong’s children.
The government has attacked Labor’s decision to oppose the revised Murray-Darling Basin Plan.
Paddy Manning is a contributing editor (politics) at The Monthly. He is a writer and journalist who has worked for the ABC, Fairfax, Crikey and the Australian. He is also the author of three books, including Boganaire: The rise and fall of Nathan Tinkler.
In-depth analysis of the moments that define the day from Paddy Manning.
Free to your inbox every afternoon.