ALAN AUSTIN. Which party runs the economy better and how do we know? Part two.

There are two ways to demonstrate that Australia’s Labor governments have managed the national economy better than the Coalition has. First, by comparing outcomes over time in Australia. Second, by comparing how Australia has ranked in the world under different administrations. The second accounts for global conditions which, as we saw in part one, are critical. Let’s start with some simple charts comparing outcomes before and after the 2013 change of government.

Increase in income per adult

The Australian Bureau of Statistics (ABS) records the rate of increase in the household incomes. Naturally, the higher the better. The green chart, below, shows a healthy rate of increase from 1995 through until 2012, the period of the Howard and then Rudd/Gillard governments. Then it collapsed in 2013, and is yet to recover.

Household savings and debt

Net savings across the community are also measured by the ABS. These remained pretty constant from 2009 to 2015, even through the global financial crisis (GFC), but have slipped each year since.

The Reserve Bank records the debts households carry. Those due to credit cards, payday loans and similar have risen during recent Coalition periods and declined under Labor:

 

Wages growth

Also recorded by the ABS, wages increased at a steady rate throughout the Howard years, and continued to rise under Labor, despite the ravages of the GFC. Under the Coalition, wage rises have fallen away.

The blue chart, just above, shows the shift over time in Australia. But this doesn’t reflect what is happening in the rest of the world. So we now consider some global comparisons.

Staying with wage rises, the green chart just below shows Australia ranked fourth in the developed world in 2013, after six years of Labor:

Six years later, after the global recovery has clearly boosted wage rises worldwide, Australia’s ranking has tumbled to 18th:

Jobless rates

The Organisation for Economic Cooperation and Development (OECD) comprises 36 wealthy mixed capitalist member countries. Valid comparisons on economic progress can be made within this group.

For most of the Hawke-Keating years, Australia ranked 18th or 19th in the OECD on jobless rates (World Bank databank figures). Australia then rose through the rankings as Keating’s profound economic reforms took effect. 

By 2000, Australia had lifted to 17th, then in 2004 to 13th. By the end of the Howard Government, the jobless rate had tumbled to 4.33%, which ranked a creditable 12th out of the 36 OECD economies.

During the Rudd Government’s first year, the jobless rate fell even further, down to 3.98% in February 2008, the lowest since records began in the 1970s. For all of calendar 2008, the jobless rate averaged just 4.24%, which ranked 11th in the OECD.

Then came the devastation of the global financial crisis (GFC) which whacked every developed economy, sending growth plummeting and unemployment soaring. Except in Australia. The jobless rate did not go above 6.0% through the GFC, although it exceeded 10.0% in twelve OECD countries and topped 20% in two.

So although Australia’s jobless rate rose slightly, the global ranking improved markedly, settling at eighth for the four years 2009 to 2012. This is where Australia should still sit today.

By the end of 2014, after the first failed Coalition budget, Australia’s jobless rate had risen to 6.10% and OECD ranking had slipped back to 11th. By December 2015, with the global recovery well underway, the ranking had tumbled to 13th. At the end of 2018, ranking was down to 18th. 

Now, on this month’s ABS figures, the jobless rate is 5.32%, which ranks 21st in the OECD. That is the lowest ranking since the World Bank and tradingeconomics.com began providing data in the 1980s.

Economic growth

At the time of Whitlam’s election in 1972, the World Bank databank provided figures on the annual growth of gross domestic product (GDP) for 28 members of the OECD. The others were added to the file later. At the end of 1972, Australia’s modest GDP growth of 3.91% ranked 23rd out of the 28, ahead of only Chile, Italy, the Netherlands, Sweden and Switzerland. Australia was one of five laggards.

Two years later, in 1974, after frenetic economic reprioritising and lifting the fortunes of the disadvantaged, growth was up to 4.1%, which ranked 13th out of those 28 economies. So relative to the rest of the world, Australians fared well under Whitlam.

After seven years of the Fraser Coalition Government, the 1983 rate was a dismal -2.22%, ranking 26th out of the 28 economies. Only Chile and Mexico, which were both in deep recession, fared worse. Australia was close to the bottom again.

Enter Hawke and Keating, and within four years, the ranking was up to 18th. In 1996, when Labor lost to John Howard, growth was 3.88%, which ranked 14th out of the full 36 OECD member countries whose data was then on file. 

GDP growth numbers and OECD rankings fluctuated through the Howard years, ending in election year 2007 at 3.84%, ranked 17th. 

Then came the devastating 2008 global financial crisis to which Australia responded with a vast stimulus program implemented with blinding speed. In 2008, just one year after Labor took charge, annual GDP growth registered 3.66%, which was the OECD’s third highest, just behind Poland Slovakia. The following year, 2009, Australia climbed past the Slovaks to second rank. 

The ranking then fluctuated through the Rudd/Gillard years, finishing at 5th in 2012 and 8th in the transition year, 2013.

The Abbott Government was swept to power on the promise of “jobs and growth”. And despite the actual outcomes, the Coalition continued to bask in the plaudits of the mainstream media for its successes in these two areas.

The actual outcomes, however, which the mainstream media steadfastly refuse to report, have been the worst deteriorations in the world. From 5th ranking in Labor’s last year, GDP growth slipped to 13th in 2016, then to 21st in 2017 and is now placed 25th with annual growth at a miserable 1.4%.

Government debt

Australia’s gross government debt in 2013, after six years of Labor was just $257.4 billion, or 16.8% of GDP. That was the third lowest in the OECD, with only Chile and tiny Estonia lower.

Fast forward six years and gross debt has more than doubled to $557.3 billion, which is 28.7% of GDP. The increase over the last six years is the second greatest in the OECD, after only Chile.

We can do the same with all other variables. The message they convey is clear: since the early 1970s, overall economic outcomes have been much better under Labor than the Coalition. 

Yet many citizens firmly believe the opposite. Such is Australia’s doom.

Alan Austin is an Australian freelance journalist now living near Nîmes in the South of France. His special interests are the news media, religious affairs and economic and social issues which impact the disadvantaged.

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3 Responses to ALAN AUSTIN. Which party runs the economy better and how do we know? Part two.

  1. John Doyle says:

    There can be little doubt the LNP lies about it’s performance. There’s a lot of data here to quote. But both sides have little to boast about because they both embraced neoliberal policies. starting under Hawke and Keating. It was not called neo-liberal then, just Restructuring [I think]. No wonder Howard thought Keating made a good LNP operative.

    Howard and Costello used the boom at the time to have budget surpluses that we now know were the cause of the rapid rise in house prices and its accompanying debt.

    We are fortunate that the system of governance here has not allowed the descent into predatory Capitalism that is scarring the USA, but we are some way along, what with privatisation of government services etc proceeding unrestricted and a tendency to blame the poor for their misfortune [Hokey’s [sic] lifters and leaners] an excuse to cut services.

    This is where getting Economics wrong can have massive ill effects. For example the Currency is NOT in short supply. It doesn’t follow that giving tax breaks to the wealthy requires belt tightening and loss of pensions and entitlements for the poor. This isa much more important metric the the LNP is a poor performer. worse than than Labor. Even though Labor is a dud too., it’s just not as venal as the LNP.

  2. Alan Luchetti says:

    Could the author explain why he has charted federal debt but not private debt and in particular household debt?

    Surely what is owed by actors in the economy more affects its health than what is”owed” by a currency issuing government.

    • Alan Austin says:

      Household debt is slightly complicated as it comprises both desirable debt – house mortgages and business overdrafts – and undesirable debt – such as payday loans and maxed credit cards.

      It is possible to analyse these separately for Australia, as was shown in an article on private debt at Michael West on 31 October.

      But it is not possible to compare these separately with the rest of the world.

      Both government debt and private debt affect the health of the economy. Government debt is generally highlighted because this is the province of elected officials and impacts voters directly. Private debt in a free enterprise economy is mostly the outcome of negotiations between lender and borrower with little, if any, impact on other citizens.

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