MUNGO MACCALLUM. Australia plummets below Greece

At last Scott Morrison’s torpid government realises that it is in danger of being mugged by reality.

Not yet, of course – there are still a few peaceful weeks in which ignorance will remain bliss, in which wishful thinking may be preserved in the hope of another ScoMo miracle. But after last week’s report from the International Monetary Fund, it is no longer feasible to pretend that the Australian economy is in safe hands and can continue to muddle through without at least a modicum of intervention.

The IMF is, as always, tactful and cautious – the problem is a global one, many of the issues are beyond the control of individual governments, the international slowdown will not be countered unless the international situation can be remedied. But even within the scenario of doom and gloom, the Australian malaise stands out. Growth will be slashed over the coming year, and the little Aussie battler, the survivor of 28 years of uninterrupted positive progress, is in real trouble with no obvious relief in sight.

Australia’s growth is now expected to be feebler than that of Greece, long derided as a failed economy, the basket case of Europe. The apologists point insist that the comparison is absurd – Greece actually went into recession, and is now recovering from a very low base. But that is precisely the point: Greece is on the way up, while Australia is on the way down.

And it is not a gentle decline, a managed correction: it is a plummet. The new figures forecast indicate a drop of more than a full percentage point in just over 12 months, a plunge of nearly a third on the earlier prediction. This is not just a minor glitch – it is a dive into the unknown. But it isn’t entirely unexpected; serious economists, notably those from the Reserve Bank, have been warning that the wheels have been falling off for many months, and that the government’s response – or rather the lack of it – has been utterly inadequate to reverse the trend. Morrison and his troops, especially his determinedly optimistic treasurer Josh Frydenberg have simply denied the bad news, and last week they continued to hold their leaky lines: this was not a time for panic, what was needed was the calm, stable and measured approach that could only be delivered from the coalition.

The trouble is that the approach has been less calm, stable and measured than catatonic; in keeping faith with his quiet Australians, Morrison has been hitting the valium, sedating his denialism with assurances that even if there were a few headwinds, things could have been much worse – and would have been if the reckless, destructive, wrecking-ball policies of the Labor had been in play.

Well, that is at least debatable – but in any case it is utterly irrelevant. Labor, as Morrison keeps telling us whenever he gets the chance, in fact lost the last election, and its former policies no longer apply — nor is it likely that they will be rehashed in 2022, not that anyone – let alone Morrison – is looking that far ahead.

His hypothetical fairy story exists entirely within his own delusional bubble. Screaming about $387 billion worth of new taxes (they weren’t, in fact, but why spoil a good lie) has nothing to do with anything. And bragging about all the new jobs he has created, which have only kept pace with the rate of immigration, is almost equally meaningless at a time when real per capita living standards are dropping.

Morrison and Frydenberg tried to make a big deal over the September unemployment figure – it fell marginally, but only because the participation rate also dropped, indicating not that things were improving, but that some discouraged punters had now given up trying to find work. And the bad news is that the IMF reckons that not only will unemployment be stuck in doldrums for the next two years, but it might even get worse – as might just about everything else.

The RBA’s ambition for a 4.5 per cent number, which it says is necessary to start wages moving again, look further away than ever. Not much to cheer about, and given the prestige of the international body, even Morrison is reluctant to shoot the messenger. So instead, he is preparing to try and find a few more helpful envoys of his own.

But first, as always, procrastinate: wait for next month’s figures, because improbably, but just possibly, the long-awaited trickle of the interest rate reductions and the tax cuts will finally dribble through to a cash splash from consumers and investors alike. Then the economy will rebound like an ibex on steroids, glory, hallelujah. And if – when – that does not happen, just wait a bit longer, until the silly season, when, with any luck, there will be plenty of distractions before this year’s MYEFO is revealed.

Morrison’s spin doctors are presumably already massaging the unavoidable Mid-Year Economic and Fiscal Outlook, because this time there will be no place to hide: but this does not mean they will not obfuscate and dissemble, because that is what they do. But even Frydenberg is preparing the ground for some kind of tentative back down – let’s face it, he would look pretty silly if he finally delivered his cherished surplus in the depths of a recession. So, there are just visible signs of movement – come December, the situation could be reviewed. Obviously, the surplus must remain sacrosanct, but it could, perhaps, be shaved, tweaked a little to provide a touch of the stimulus which just everyone else has been pleading for months. Even Morrison is wavering – he has suddenly discovered that surplus is not just an end in itself, but an economic tool – perhaps like himself. A surplus is predominantly, insurance against economic stagnation.

And the first step is for Morrison and Frydenberg to admit the clear evidence that the stagnation exists. They may not accept the verdict of the IMF, a bunch of unelected foreigners, but if it is confirmed by MYEFO, this will be the king hit – reality will strike back. And then, merry Christmas.

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9 Responses to MUNGO MACCALLUM. Australia plummets below Greece

  1. Charles Lowe says:

    “Even Morrison is wavering – he has suddenly discovered that surplus is not just an end in itself, but an economic tool – perhaps like himself.”

    Chapter and verse please, Mungo.

  2. Simon Warriner says:

    Wishing for Labor to find something resembling competence is as futile as waiting for Scomo to stop being an advertising executive.

    It is very simple, we are close to, if we have not already exhausted the likelyhood that anyone competent and intelligent will put themselves forward as a party candidate only to be forced to conflict their interests between constituents and party dogma and donors. Clever, competent people don’t conflict their interests.

    It is this reality, demonstrated in politics on a daily basis, that lies at the heart of our problems as a nation. Until we confront it head on we are pissing against a hurricane.

    You don’t cure cancer by excising tumors. You cure it by not bathing in the carcinogenic soup.

  3. Allan Kessing says:

    It would be a delicious irony were Mr Shouty & Co be clobbered by the international situation & events beyond their control, as was Whitlam by the Arab oil Embargo, among other downturns beyond these shores.
    It would hilarious if 2019 turns out to be an election “Labor” was lucky to lose.
    Pity about us, the mug punters.

  4. Rex Williams says:

    “Greece is on the way up, while Australia is on the way down”

    Morrison and his collection of public servants, his creative and imaginative economic manipulators may give the IMF the big finger, as suits their own political interpretation of the climate, but the Mid-Year Economic and Fiscal Outlook may be a harder result to whitewash, a task falling to Frydenberg as he addresses in his normal exaggerated and optimistic fashion the reality of Australia and its future, yet again.

    We escaped the last economic tornado under a different government with some costly inputs from the government of that day but this time there will be no similar relief.

    We seem to encourage the Reserve Bank to make out dollar worthless (that should be worth less) and as a result increase the level of indebtedness of the people and the government, wondering why the figures for consumer spending are decreasing as each week passes; we allow our resources to be owned offshore, (a result of a worth less dollar) with the products sold offshore for export while the same much needed resources are sending our consumers into unmanageable debt, just two examples being liquid gas and meat products; we are happy to see dairy farmers go out of business as the devious multinational retailers manipulate the price they receive for their tiring efforts; and lastly, we labour under the illusion that this government has one single idea on how to stop Australia emulating Greece as the latest economic basket case.

    Does anyone anywhere feel confident?

    Talking up the situation, which is the only action that marketeers like Morrison can offer, will not make us whole again. One has to hope that somewhere in the current collection of LCP politicians there is someone with the common sense to make decisions, one who has a desire to make Australia independent of very bad alliances, who is also able to change direction to prioritise matters when it is needed and who can add a level of respect and credibility to the role of Prime Minister of Australia.

    Right now we have none of these things.

  5. Anthony Pun says:

    MacCullum’s article deals with the lack of political will however my comments may compliment the article in saying why we doing worse then Greece.
    Story: Australian economy tipped to grow slower than Greece as signs show tax cuts haven’t worked (SMH media comment published 16Oct2019)
    With GDP of 1.7%, Australia’s growth rate is alarming slow. Solar power research at the UNSW is a world class but the research is a joint effort between Australia and China when you look at the large numbers of PhD Chinese students in the research department. Australia has the same problems as the US, as it lacks the capacity for large volume high tech manufacturing and high labour costs. Multinationals in Australia and US are making tons of money in making the consumer goods in China. Yes, we can accused of becoming complacent & enjoying selling our commodities and become “lazy”. The provision of education and tourist services are lucrative for Australia (revenue in the billions) and we can provide these services effortlessly. However, these services are at risks when opposed on unwarranted ideological and national security grounds.
    https://www.smh.com.au/politics/federal/australian-economy-tipped-to-grow-slower-than-greece-as-signs-show-tax-cuts-haven-t-worked-20191015-p530uv.html

  6. James O'Neill says:

    “this does not mean they will not obfuscate and dissemble, because that is what they do”. Unfortunately this is the reality. Morrison came to power because of the internal dysfunction of the Liberal Party, and that has not changed. He is acutely aware that Dutton is watching and waiting, but more impatient by the day. And to be brutally honest, the current leadership of the Liberal Party simply lack the intellectual firepower to make the right decisions. Their fixation about a budget surplus is a classic illustration.

    • Ken Dyer says:

      They don’t need intellectual firepower, they have advertising slogans, another of which was on display at today’s Question time. Each lickspittle or dixer asked had this ending, “…can the Minister advise what alternatives may exist (to this issue)”.

      Obviously answered only in the affirmative, “We are getting on….blah,blah). and kicking Labor for six years ago

      Labor has no answers to this lowbrow bully boy tactic, particularly during Question Time, not even a peep about that conga line of LNP Prime ministers over the last six years.

      Labor are going to have to find some moxie soon, or Greece or not, Australia is looking down the barrel at another LNP government in 2022.

      • Lorraine Osborn says:

        Labor must indeed find some moxie, pronto. The propaganda and rewriting of history is hotting up. Liberals now claiming Menzies devised child endowment and the Snowy Mountains Scheme. I can see Scooter being proclaimed as the second coming before too long.

      • Joska Som says:

        “Labor are going to have to find some moxie soon, or Greece or not, Australia is looking down the barrel at another LNP government in 2022.”

        By then Labor’s membership of the Coalition will have been formalised.

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