13 July 2015
by Alan Austin
Australian economy tanking at the halfway mark
Australia economy tumbles down the economic tables
Simply comparing numbers now with numbers at the 2013 election shows Australia’s economy has deteriorated. But when we examine rankings across the world – which is now recovering steadily – the position is truly alarming.
We can now track most variables over the first 18 months since September 2013 for the entire Organisation for Economic Cooperation and Development (OECD). That is the group of 34 western democracies with comparable mixed free enterprise economies.
So how is Australia travelling? Badly. How can we tell? Ten variables can readily be compared across nations. On each of these prime minister Tony Abbott and treasurer Joe Hockey promised improvement when in Opposition. On each there has been demonstrable decay – if not in the raw figures then certainly in relative performance.
Economic growth: 9th down to 19th
Joe Hockey said in 2013:
“It will be my number one imperative to safeguard the economy against a significant downturn and to turbo charge economic growth and jobs.”
The annual growth rate of Australia’s gross domestic product (GDP) in September 2013 was 2.3%, ranking equal ninth in the OECD with the USA. It rose through 2014 but fell back to 2.3% in March this year. During that period, the rest of the world advanced. Australia is now in the bottom half of the table, ranking 19th behind Spain, the Czech Republic, Hungary, the USA and 14 other countries. (Figures are found at tradingeconomics.com, except where indicated.)
Unemployment: 8th down to 13th
Australia’s jobless rate in September 2013 was 5.7%, ranked a creditable eighth in the OECD, equal with Denmark. Only Chile, Germany, Japan, South Korea, Mexico, Norway and Switzerland were lower. By March this year, the rate had increased marginally to 6.1%. But the rest of the world had progressed, leaving Australia in 13th place, overtaken by Iceland, Israel, New Zealand, the UK and the USA.
Youth unemployment: 6th down to 12th
This is one area where OECD countries appear to have focused attention with success. The average rate of 21.61% in September 2013 was reduced by March this year to just 19.38%. Still too high, but declining. Australia’s rate was 12.65% in September 2013, ranking a creditable sixth. In defiance of the global trend, it had expanded by March this year to 13.6%, now ranking 12th.
Deficits: 10th down to 22nd
Australia’s budget deficit in 2013 was 1.2% of Australia’s GDP, ranking equal tenth in the OECD. That was the same as Turkey and lower than 23 other countries. The average deficit for the 34 economies then was 2.78% of GDP.
In 2014, the OECD average dropped to 2.1% as the global recovery gained pace. Defying the trend, Australia’s deficit blew out to 3.1%, falling from tenth-ranked to 22nd. Italy, Ireland, New Zealand, Turkey, the USA and 16 other OECD countries had lower 2014 deficits than Australia.
Debt: 4th down to 9th
Australia’s gross debt in 2013 was 28.6% of GDP, ranking equal fourth lowest with Mexico. Only Chile, Estonia and Luxembourg had lower gross debt to income. Now, Australia ranks ninth with debt at 34.5%, having fallen behind Mexico and also South Korea, Norway, Switzerland and Turkey. (Some 2014 debt figures are from the CIA factbook.)
This is not to imply Australia has a debt problem. It doesn’t now, and certainly didn’t in 2013. Just noting that rapid debt expansion is the opposite of what the Coalition and the mainstream media promised.
Terms of trade: disastrously down
This measure – which reflects the relative price of exports in terms of imports – has retreated alarmingly in the first 18 months of the Abbott Government, falling from 98.3 index points at the last election to a lowly 85.7 in the 2015 March quarter.
Meanwhile, global trade has advanced. The OECD average (for the 26 countries that record this indicator) rose over that period from 98.81 to 101.67. Australia has thus gone from about average to well below. Only six of those 26 countries experienced a significant decline over the period. Australia’s was by far the worst.
Only Australia and Poland maintained interest rates within the optimum band 2.75% to 4.75% through the entire global financial crisis from 2009 to 2012. In August 2013, however, Australia’s rate fell to 2.5%, prompting then shadow treasurer Joe Hockey to warn:
“If interest rates come down today, it is because the economy is struggling, not because it's doing well.”
His clear message was that a rate lower than 2.75% offers little reward for savers and is a government fail. The 2.5% rate remained for 19 months. Hockey could not restore the higher level. It then fell to 2.25% in February this year and was cut again to 2.0% in May.
In March this year, three OECD countries had interest rates back within the optimum band, with others not far off. Australia was not one of them.
The World Economic Forum’s Global Competitiveness Report ranks 144 countries. Australia’s ranking fell, in 2014-15, to 22nd place, from 21st in 2013-14 and 20th in 2012-13.
Areas of regression highlighted included infrastructure, innovation, technological readiness and the macroeconomic environment.
Measured by the Washington-based Heritage Foundation, economic freedom was high in Australia throughout the Labor years, ranking first in the OECD and third in the world behind Hong Kong and Singapore.
The 2015 ranking, however, saw Australia slip 0.6 of a point and lose third spot to New Zealand. The foundation noted:
'... declines in investment freedom, freedom from corruption, and the control of government spending.'
Heritage’s downgrade was confirmed in the Corruption Perceptions Index reported by Transparency International, which showed Australia’s global ranking falling from ninth in 2013 to 11th in 2014.
It seems that on every indicator for which global comparisons can be made, Australia has fallen in the rankings since the last election and is continuing to slide. This is not what voters were promised.
In his February 2013 state of the nation address, Tony Abbott assured the Committee for Economic Development:
"Should there be a change of government later in the year, there will be an instantaneous adrenaline charge in our economy.”
The opposite has occurred.