By any comparative measure, the Australian economy has performed remarkably well over the last two decades.
We’ve had strong gains in the labor force throughout the 1990s, rapid population growth and a surge in the value of key commodity exports through the 2000s.
Resilient wage inflation duly capitalised into rising property prices, by way of a dramatic and accelerated run up of household debt in the lead up to the GFC. All of which was buffered and prevented from any significant deleveraging, by the Rudd administration in 2008, when he threw sizeable cash handouts to families along with infrastructure investment to avoid plunging Australia into a technical ‘recession’.
From this alone, our economic platform deserves the title “The world’s star performer”.
However, whilst we may stand out in the wealth stakes, we’re not a happier nation for it.
Last week Q&A featured a question from a young Australian and recent school leaver which touched on the sensitive subject of depression asking: “What can the government do to “fix it?”
Like every other Western nation, Australia has experienced a sharp rise in the number of people suffering depressive illness over the last decade, with the average onset of the disease moving downwards in terms of age since the 1990s.
Organisations such as Beyond Blue report that more than one in five Australian’s experienced depression, anxiety, or both, over last past year, and as the gentleman stressed, he was no exception.
The comments that followed were sensitive in nature – focusing primarily on individual treatment and prevention within the health system. And whilst the cause of depression is both complex and varied, the first acknowledgement on what the government could do ‘collectively,’ came from Clive Palmer:
“We need to have some sort of vision,” said Mr. Palmer “Create an environment that makes people realise the world is not as bad as we think it is… if you cut things, if you cut budgets, if you take things from people, you make them more worried about the future, and more uncertain.”
This was reiterated by Ged Kearny, President of the Australian Council of Trade Unions:
“I get very concerned when I hear about cuts to public health… they're just another barrier to person, particularly a young person, getting help.”
They are appropriate observations considering our rising population, skewed toward an aging demographic, which by its very nature will necessitate additional funding over the next decade into both health and education.
So, it was somewhat unfortunate, at the same time panellists were discussing cuts, Prime Minister Tony Abbot was giving a speech to the Australian-Canada Economic Leadership Forum in Melbourne, hinting at just this – as summarised bluntly by Christopher Pyne, Minister for Education:
"[The Prime Minister] said that the current growth in education and health expenditure was unsustainable, and that is true.”
What’s Tony Abbot’s vision for economic growth?
“You can’t spend money until you’ve earned it! – Or until you have the means to pay it back!”
Was the cautionary opening statement Mr Abbot posed.
It’s a somewhat startling assertion considering it comes from the ‘issuers’ of our monetary supply, offset through taxing those who do have to earn dollars before they can spend it - whilst our government ‘earns’ nothing. Rather it is elected, and charged, to balance the budget in the best interests of its working population to promote economic growth – for which education and health are vital pillars.
Abbot goes onto say - the best way to build a stronger economy is for Australia to once again to: “Enjoy a surplus.”
Which may lead you (like me) to wonder how exactly the average private household will enjoy this surplus, considering we have the highest unemployment rate since 2003, along with an increase in those registering as “long-term” unemployed, up 13.5% since January 2013, and more part time jobs being created than full time?
In Victoria, where manufacturing industries are concentrated, unemployment is at its worst level since 2002, whilst youth unemployment, which represents the demographic driving the future of our economy, has reached a ‘crisis’ point.
Just over 12% of young people between the ages of 15 and 24 are currently out of work.
Regional localities reflect the worst - 20% in Cairns and Tasmania, 18% to 19% in north Adelaide, 17% in Western Sydney, the Illawarra, parts of Melbourne and regional Victoria – with the trade off being the increased cost of metropolitan accommodation for those “job seeking” in capital cities.
Additionally, the latest “ABS labour price index” records wage growth at its lowest level on record – climbing just below the rate of inflation for the last calendar year - whilst the cost for ‘essentials’ such as health, childcare, utility services, and petrol, in some areas, has reached record highs.
Considering our household debt to disposable income has barely deleveraged since property prices hit their peak in 2010 – the very talk of reaching a surplus within three years, particularly by way of cuts to essential services, or even the increased number relying on job seekers allowance - is foolhardy,
When the government tightens its belt, the private sector picks up the slack. Therefore, “repairing the [government] budget” with the claim that it’s putting Australia “back on the right track”, is not putting the fate of Australians on the right track.
Austerity, at a time of rising unemployment, does not lead to productive economic growth. And from depression and unemployment statistics alone, it seems Australian’s are not enjoying a return to surplus.
They’re are working longer, retiring later and in the face of rising unemployment, the only ‘vision’ the working population seemingly have to hold to is more of the same.
So what are we left with?
After 30 years of demise, the manufacturing industry is in the depths of recession.
Retail is losing the battle to the World Wide Web and residential construction is still struggling to pick up the cyclical slack created by the mining sector.
Abbot’s “infrastructure promise" to speed up the flow of money from Canberra into the states, to upgrade road and rail projects, is positive news and sorely needed, however, remember where those gains will be most acutely felt.
Without effective land value taxation, the investment creates the ‘future speculative hotspots,’ where the improvements will be capitalised into rising land values, rather than fed back into servicing, maintaining, and further extending essential community facilities.
Land is an absolute necessity to all commercial and personal needs, therefore as land values rise; it will affect a continued strain on business and productivity, and once again, we’re stimulating the cost of irreplaceable fixed assets, rather than the employment sectors needed to underpin a longer trajectory of economic growth.
But this is what Australia is remarkably good at – creating a booming land market. We’re right up there with the world’s best performers.
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