The Australian economy

May 24th, 2013 at 1:00 pm by David Farrar

Greg Ansley at NZ Herald reports:

Unemployment rate of 5.5 per cent set to rise with more job losses in manufacturing sector Ford’s decision to shut down its production lines in at the cost of thousands of jobs across the automotive industry has dealt another heavy blow to Prime Minister Julia Gillard’s ailing minority Government.

Although Ford’s exit has long been expected after 20 years of declining fortunes for the industry, the disappearance of its iconic Falcon is not only a heavy blow to the national psyche but will also further undermine voter perceptions of Labor’s economic credentials.

Ford’s announcement comes a week after a federal budget marked by major spending cuts and expectations of continued deficits, driving down consumer confidence and placing employment squarely in the spotlight for the September 14 election.

wrote at Stuff how Australia is not living within its means:

A regular question in and Australia is whether our respective nations succeed because of, or in spite of, our politicians.

As both nations’ Budgets were read this week, it was a story of two countries that have faced a vastly different set of circumstances over the past five years, and the choices both have made in light of that.

In 2008, Australia had a mining boom, rising wages and no debt. Its government had delivered consistent surpluses, tax cuts and targeted cash payments to targeted voter groups. Growth was assumed and household wealth doubled during the Howard years. It even avoided recession.

In contrast, New Zealand was lurching into debt, had a collapsed non- bank finance sector, a tradeables sector that had been squeezed for several years, a real recession in advance of the global recession, and a structural deficit

So when Finance Minister Bill English announced last Thursday that New Zealand is on track to record a budget surplus (albeit tiny) in 2014-15, it stood in stark contrast to Australian Treasurer Wayne Swan announcing his sixth budget deficit.

Unfortunately for Mr Swan, he had been promising a surplus for 2013 since 2009, and last year he announced “four years of surpluses” to begin this year. So his staggering A$19.4 billion deficit, with years of deficits ahead, was quite incomprehensible.

And recall how certain parties attacked every single act of spending restraint done by the Government over the last four and a half years.

Since Mr Swan has taken over as treasurer, tax revenue has increased by roughly the equivalent of New Zealand’s entire budget. Unfortunately, he and prime ministers Kevin Rudd and Julia Gillard spent all of the increase plus some, and are miffed because revenue did not increase at an even higher rate.

Yep. While NZ Labour’s plan are to bring in some new taxes, and hike spending.

Budgets are ultimately about choices. The Australian Government chose to run it close to the wind, increasing spending by as much as the most optimistic revenue forecasts would allow.

New Zealand made a very different and far more difficult set of choices. In 2008 the issues were obvious: productivity growth was poor, taxes too high – particularly at a relatively modest level of income – and the tax system had little internal integrity.

Government was chomping its way through far too much of the national pie, crowding out private sector activity.

One important thing the New Zealand Government has done is tamp down expectations of spending increases, concentrating on core activities and not using government as a vehicle to give handouts to partisan coalitions of voter groups.

In fact much of the extra spending by National has gone in areas where there are not high pressure lobby groups demanding more money for themselves, but in areas that will promote economic growth such as tourism and science.

But there are still worrying signs. Both New Zealand and Australia have superannuation burdens set to grow immensely, and health and welfare spending continues to outstrip the ability of society to pay in the long term.

Yep. They will be the big challenges for the future.

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19 Responses to “The Australian economy”

  1. YesWeDid (1,044 comments) says:

    So Australia’s unemployment rate is 5.5% verse 6.2% in NZ and debt as a % of GDP is 18% in Australia and 38% in NZ and yet our government has done a better job of managing the economy than in Australia?

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  2. Manolo (13,517 comments) says:

    Did Malpass manage to whip the very delicate Sleep the other night? No pun intended.

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  3. Harriet (4,626 comments) says:

    Australian superannuation is worth well over a trillion dollars. They’ll just tax the shortful to cover the burdon of the aged pension.

    And it is only a problem untill the ‘peak’ of the babyboomers die – and that is within 25yrs!

    More and better drugs are the prevention to the problem of ‘spiraling’ health care costs – as it doesn’t take a massive beurocracy to administrate the administration of them! :cool:

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  4. Mike Readman (362 comments) says:

    Does the media usually try to predict what the unemployment will be in October 2016?

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  5. Harriet (4,626 comments) says:

    “……Did Malpass manage to whip the very delicate Sleep the other night? No pun intended….”

    Agreed Manolo.

    DPF – could you please tell us the result of that debate that Malpess was in? – or anyone else if they can. Thanks.

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  6. toms (301 comments) says:

    “…Luke Malpass is a research fellow at the New Zealand Initiative http://www.nzinitiative.org.nz...”

    Which is what the Business Round Table rebranded itself as when it became so toxic even they couldn’t cope with the stench.

    Nice try Luke, but no cigar. We are still onto you and the vested neo-liberal interests you represent.

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  7. Manolo (13,517 comments) says:

    Nice try Luke, but no cigar. We are still onto you and the vested neo-liberal interests you represent.

    I gather the delicate Sleep represents the virile Rainbow Branch of the Labour Party.

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  8. NK (1,138 comments) says:

    Tom Semmens approves of Australia’s budget position to our one.

    No surprises there.

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  9. nasska (10,917 comments) says:

    The downturn in Australia will send quite a few of our expats back home….those who gave us the the fingers a few years ago & called us mugs for staying.

    It will put pressure on our welfare budget & housing sector.

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  10. wreck1080 (3,821 comments) says:

    Australia is still doing much better than us. Incomes are still far higher, unemployment is still lower.

    Get some perspective.

    The aussies conservatives will win the next election and things will turn around for them.

    The current aussie government reminds me of helen clarks — drunk on money so they are spending it all. I bet tons of graft is going on over there and some people will have done wonderfully. The worm has turned though.

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  11. KiwiGreg (3,226 comments) says:

    Ford going is a major boon to Australian taxpayers and consumers.

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  12. RF (1,349 comments) says:

    Aussie was in a healthy state in 2008 and then Labor came in and gave the country the kiss of death. NZ was in the crap in 2008 and National came in and gave the country the kiss of life.

    Who in the hell would want to vote for Labor / labour.

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  13. wreck1080 (3,821 comments) says:

    Australia need to reform their unions and labour practices.

    They seem stuck in the old days. The mining boom has made aussies complacent and lazy.

    They also need to embrace globalisation and remove tariffs and industry protections.

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  14. tvb (4,263 comments) says:

    How can a Government control spending when it’s PM Julia Gillard regards spending public money as a moral crusade. You cannot blame it on economic conditions as the Australian Government started with a surplus and with negligible public debt. And revenues have increased significantly though their new taxes did not bring in much money. But they spent it anyway. Now we have another policy failure that despite huge subsidies Ford have closed their industry. What a waste all those subsidies were.

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  15. calendar girl (1,203 comments) says:

    “But there are still worrying signs. Both New Zealand and Australia have superannuation burdens set to grow immensely, and health and welfare spending continues to outstrip the ability of society to pay in the long term.”

    “Yep. They will be the big challenges for the future.”

    No, DPF, I disagree with regard to the superannuation challenge (in particular). It is there to be dealt with now, not when the problem becomes intractable.

    The present Government has been advised to signal a future, very modest, rise in the age of NZ Superannuation entitlement – one that is fully justified in the light of increased life (and retirement) expectancy. Yet the Government has put its head in the sand on the issue. John Key has even refused to contemplate the change while he is PM, thereby impliedly threatening his colleagues not to push him too hard on the issue.

    That is an extraordinary position to take on a straight-forward, prudent proposition that is now well overdue for implementation. The Key Government could adopt it now as a firm policy for future implementation, with minimal impact (if any) on its political capital, and the change in the medium-term future would have little practical effect on those presently under 50 years of age.

    A “big challenge for the future” it need not be.

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  16. KapitiCoast (114 comments) says:

    I agree Calander Girl, Key has boxed himself in on this issue. When labour talk of raising retirement age it doesn’t kick in till 2030 or there abouts, so anyone now 50 or above needn’t worry, with medical and science breakthroughs happening yearly the average life expectancy in 2030 will be 80+ or so (approx 72-75 now?)….we need to tackle this looming train wreck of Govt. outlay now!…Aussies have over a trillion in their super fund and that will grow and grow, NZ has about $41.50 equivalent, Key needs to backtrack or step down after next election as PM and hand reigns over to someone who will make that call….cross party agreement will have the numbers to pass easily.

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  17. Viking2 (11,286 comments) says:

    Oh super funds eh?

    Well the Greens are bitching like stuck pigs over super funds buying MRP shares. apparently that’s the rich guys.
    Fucking wankers.

    But then Super funds have a habit of wasting lots of OPM( Other peoples money for those that don’ t know).

    Lots of Aussie funds gone as in NZ leaving people without any fund otr with almost nothing in them

    Wouldn’t touch them with yours.

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  18. bchapman (649 comments) says:

    Australia 22% of GDP in government spending and going down. Not sure they have a spending problem.

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  19. willtruth (245 comments) says:

    All this crowing by the right about how Australia has been cowardly and not implemented the right reforms like nz and now they will pay. It reminds me of similar crowing back in the late 80s. Australia didn’t have the guts to go through the pain of rogernomics and so now NZ will outperform Oz from the 90s onward. Except of course that didn’t happen did it? The Oz economy and wages continued to pull away from ours. But they didn’t follow the recipe? How was this possible? Oh yes the mining boom. So, no amount of evidence that Oz’s less extreme economic management is producing better results will ever convince you guys because you will always point to the mining boom. Seriously though. What would have to happen in the next 20 years for you to admit that Australian policies are working better?

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