When Josh Frydenberg sat down with his G20 counterparts in Fukuoka, Japan, last weekend, they would have been briefed on the weakened state of our economy.
Australian domestic data from the past week has been confronting but not surprising.
Wednesday’s feeble national accounts and the Reserve Bank’s decision to cut interest rates to new record lows on Tuesday shone a big spotlight on three facts: our economy is floundering, middle Australia is struggling and the government has no plan to turn things around.
Not since the global financial crisis has national economic growth been as meagre as it has been the past year.
And the RBA’s cash rate is now less than half what it was back then, a decade ago.
We’re in our third consecutive quarter of a so-called per capita recession — the longest period since the early 1980s downturn.
The underlying and neglected challenges in our economy fall under two broad categories.
First, in the part of the economy that matters most to families around the kitchen table, wages are stagnant, household consumption is weak, household saving is low and work is insecure.
RBA governor Philip Lowe pointed to household consumption as the “main domestic uncertainty” when the RBA board lowered the cash rate.
In the absence of wages growth, with cuts to penalty rates and rising household expenses such as electricity and childcare, more needs to be done to complement interest rate cuts to put more back into people’s pockets.
That’s why Labor is eager to help pass the first tranche of the government’s proposed income tax cuts, the more immediate relief designed to flow to low and middle-income earners from July 1.
We will continue to consider the second and third stages of the government’s plan, but they don’t come into effect until 2022 and 2024, so wouldn’t give the economy the boost the RBA is calling for in the near term in any case.
If the government were concerned about giving tax relief to people of modest means, it would split the bill to get the first tranche through straight away.
The second big challenge is declining productivity. The latest data shows GDP per hour worked has fallen for the past four consecutive quarters.
This is hardly a surprise, given the hollowing out of skills and human capital during the past six years. On top of that, business investment is falling across all categories and industries, and the government has slashed infrastructure investment, delivering $5.1 billion less than promised over its first five budgets.
Investment in infrastructure is declining at the same time as the Treasurer is claiming a $100 billion spend will stimulate the economy and boost growth.
He has failed to mention that most of that projected investment comes at the back end of the 10-year medium-term period and that only a small percentage will come during the next few years.
To stimulate anaemic growth, the Treasurer could speed up the rollout on the government’s investments to give an economic benefit while it’s needed.
Labor will play a constructive role on economic policy, prioritising what is responsible and affordable and what gives Australia the best chance to turn around flagging growth.
In time, we’ll propose our own plans to get the economy moving; to ensure it works for people, and not against them; and to build broad growth and opportunity by modernising the economy to create more and better jobs.
Ours will be a positive vision, as we go about reclaiming Labor’s rightful place as the party of aspiration and the suburbs.
We will take time to properly develop and consult on our policy and plans, and to get them right.
In the meantime, it’s the government that should be scrutinised and held accountable for the parlous state of domestic growth on its watch.
Perhaps the most ridiculous claim during the election campaign was that the Liberals had done a good job managing the economy. This past week has shown that the facts just don’t support these claims.
This opinion piece was first published in The Australian on Tuesday, 11 June 2019.