It’s not global headwinds causing Australia’s economy to tank. As Alan Austin argues, we should be catching the global tailwinds — if the captain of the ship only had a proper map, the first mate could work the compass and the petty officers didn’t get tangled up in the rigging.
MATHIAS CORMANN is doing it again. He seldom gave an interview in his early years as finance minister without insisting “global headwinds” were impeding Australia’s economic progress. These ten pages show that. He belayed this in 2018 – four years into the current global boom – and switched instead to spruiking Australia’s “jobs and growth”.
Now the jobless rate is creeping up, economic growth has stumbled, interest rates have been cut and other indicators are sliding, he is back to “global headwinds” again.
There are no significant headwinds. The government wants to trick us into believing there are. Mainstream economics reporters know this is a ruse but play along.
Janet Albrechtsen in The Australian last Sunday claimed
“the 2019 election augurs well, given global economic headwinds.”
On Tuesday, Eryk Bagshaw, who knows better, wrote in The Canberra Times that
“the tax cuts alone were in the economy’s best interest amid growing economic headwinds.”
Neither writer queried – or established – the validity of the expression.
Today’s winds are definitely from abaft. The global economy is as strong as it has been since the balmy breezes of 2006 and 2007 before the typhoons of 2008.
How can we tell? Simply by tracking the key measures of global economic health.
One barometer to fare the weather is the table of annual GDP growth numbers for all 36 wealthy member countries of the Organisation for Economic Cooperation and Development (OECD). The World Bank DataBank has this data from 1961 to 2017. Trading Economics has quarterly figures up to March 2019.
Our first chart shows the average annual GDP growth in 2007 was a robust 4.60 per cent. Australia ranked 17th among those 36 countries on 3.78 per cent. Just below average. Note that all 36 countries were in positive growth.
Then came the devastating global financial crisis (GFC) which sent all but a few OECD economies into reverse. By the end of 2008, the average growth was just 0.75 per cent, with only Australia, Poland and Slovakia growing above 3.6 per cent.
By 2009, the devastation was deeper. The average growth had plummeted to negative 4.42 per cent. Only five countries recorded growth above zero — Australia, Israel, South Korea, New Zealand and Poland.
The green chart shows Australia with the second strongest GDP growth in 2009, at 1.92 per cent. Only Poland was higher, at 2.82. Now, those were headwinds!
Through the Labor years, Australia was in the top five OECD economies by GDP growth three times. The yellow chart, below, shows that in 2013 when Labor lost office growth was 2.64 per cent, ranking eighth
For much of its history, Australia’s robust economy has been in the top ten. It should still be there today. It was only after the change of settings in the Coalition government’s 2014 federal budget that the sails lost their trim and the vessel began to list to starboard.
Since then, Australia’s economy has gradually slipped back through the OECD rankings until on the latest figures, for the 2019 first quarter, it sits at an historically low 18th.
The fact that 34 of the 36 OECD members are in positive growth confirms that conditions are excellent for a well-set spinnaker. The average of 2.09 per cent is higher than the average of 1.61 per cent over the last twelve years.
Looking beyond the OECD, the evidence is even stronger. Average GDP growth for the top 100 economies is currently 3.05 per cent. That is higher than the twelve-year average of 2.99 per cent.
Global employment levels
The US President tweets incessantly about jobs, claiming“Jobs surge in April, unemployment rate falls to the lowest since 1969”. Although at 3.6 per cent jobless, this is true, the USA is no longer a global leader. Malaysia, Germany and the Netherlands are below 3.5 per cent. Iceland, Hong Kong and the Czech Republic are below 3.0 per cent. Japan, Switzerland and Singapore are below 2.5 per cent.
From one of the world’s strongest employers through the GFC, Australia is now lagging badly. At 5.2 per cent Australia’s jobless rate ranks 75th in the world, out of 180 economies, and a lowly 19th in the OECD.
Demand from China
China’s demand for imports from Australia and elsewhere remains strong. Annual GDP growth in China is still well above six per cent, the highest of all major economies. Yes, it is below the double-digit levels claimed ten years ago, but there is an argument those figures were inaccurate.
China’s total imports for the calendar year to May totaled $827.9 billion. That is the second highest level ever for the first five months of a year, just below last year’s record of $860.1 billion.
Australia’s export values
Value of Australia’s exports reached an all-time high in April of A$40.43 billion. The chart below shows monthly values for the last two years, courtesy the Bureau of Statistics. A fresh record has been achieved ten times over that period.
Iron ore prices are high and climbing higher. It is now US$102.99 per dry metric ton. That’s up from $76.00 in January and below $70 for most of last year.
Coal is now at US$82.32 per metric ton, down from recent highs but still well up on prices over the last five years.
Beef is fetching record prices outside the brief 2015 price bubble. Lamb is recovering nicely from the 2015 price slump and getting US$6.00 per kilo again. Excellent prices are fetched today for crude oil, gold, zinc, copper, bananas and other fruits.
Failing to catch the tailwinds
Other confirmations of benign tailwinds include global productivity, wages, profits, retail sales, budget surpluses, debt reduction and infrastructure investment.
The problem is not the sea or the wind. These are highly advantageous – if Australia tacks accordingly.
The problems are the captain who took the helm after last year’s mutiny doesn’t appear to have a map, the first mate can’t work the compass and the petty officers are tangled in the rigging.
Alan Austin is a freelance journalist with interests in news media, religious affairs and economic and social issues.
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The Morrison government, Immigration Minister Alex Hawke and the business lobby desperately want a surge in immigration to fire the economy but 330,000 migrants remain stuck on bridging visas as the permanent migration program remains mired at an intake of 160,000.