Zombie Doctrine: Belief in the Coalition as ‘economic super managers’ persists, despite evidence to the contrary

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Australia’s economic performance. Not a good look. Photo: @justzoric, Unsplash

The Coalition as “senior economic managers”? The data demonstrates the polar opposite. Alain Austin examines key measures of economic performance over 10 years and finds that Australia has fallen sharply relative to other nations. The bright spot? Company profit.

A federal election is looming. We are told by commercial radio and television, daily newspapers and even the ABC that the election will be decided on economic management. They all agree, to varying degrees, that this means the return of the Coalition.

The last two ABCs Four corners the programs explored in depth the political opinions of ten thoughtful undecided voters and a number of professional commentators.

None indicated the slightest awareness that Australia had the best performing economy in the world during the last Labor period, or that the Australian economy today ranks outside the world’s top twenty. Many asserted with confidence that the Coalition always manages the economy better than the Labor Party.

Zombie Doctrines

It’s a classic example of what Paul Krugman calls a zombie creed – “a doctrine that has repeatedly been proven wrong, but refuses to die; instead, it just hangs around, eating people’s brains.

It is instructive to compare the Australian economy today to that of a decade ago – at the same stage of recovery from the previous global recession. It’s also pretty simple, which is why it’s pretty negligent of mainstream economic writers to refuse to do it.

It is true that, thanks to the GFC and for three years later, Australia occupied a unique position on the world stage as a huge exporter of raw materials to China.

Yet numbers are numbers; and there is no doubt that Australia has crumbled under the leadership of federal coalition governments.

Income per person

Australia’s gross domestic product (GDP) per capita in 2011 was US$62,574 (AU$59,032), which was the fourth highest among developed OECD nations, behind the smaller nations of Luxembourg , Norway and Switzerland. That, according to the World Bank, was up from 18th place five years earlier.

By 2021, GDP per capita had fallen to US$51,693, ranking 11th in the world.

Median wealth

Australia had the highest median wealth per adult in the world in 2010 and 2011, according to Credit Suisse. In 2011, Australians owned US$211,704, ahead of Luxembourgers with $164,720 and Italians with $155,953.

Australia’s dominance gradually slipped after 2013 as income flowed out of the country untaxed. The 2021 Wealth Report shows median wealth at just $238,072, far behind Luxembourg at $259,899 and just ahead of Iceland’s $231,462.

Credit ratings

Australia surprised global markets in November 2011 when ratings agency Fitch gave Australia its triple-A credit rating for the first time in its 100-year history, completing the package. Australia was the only country to benefit from an upgrade during the Global Financial Crisis (GFC).

Economic freedom

In 2011, Australia remained first in the OECD on economic freedom, a variable which, according to the Heritage Foundation, signals “effective democratic governance. This allows people to exercise greater control over their daily lives.

Australia fell from fifth place in 2006 to first place in 2009 – where it remained until 2015. The latest rankings, released last week, show Australia have now plummeted from first place in the OECD and third in the world, behind Singapore and Hong Kong, to a dismal tenth in the OECD and 12th in the world.

Economic growth

Australia’s annual GDP growth rate in December 2011 was 3.46%, ranking it seventh in the OECD, behind Chile, Estonia, Israel, Switzerland, Poland and Mexico.

The latest annual GDP growth figures, for the September quarter of last year, show Australia ranked 26th out of these 34 peer economies.

Unemployment

In December 2011, the unemployment rate in Australia was 5.20%. This ranked sixth in the OECD, behind only Japan, Norway, Switzerland, Mexico and South Korea.
In December 2021, the declared unemployment rate was 4.16%, significantly lower than ten years ago. But while the post-GFC world has moved into a phase of high employment, this only ranks a modest 13th.

(As reported here last week, the current number of “employees” includes half a million additional civil servants, or more than three percent of the workforce.)

Productivity

Defined as GDP generated per hour worked, productivity exploded during the Labor years, ending 2011 at a record high of 92.7 index points. That was 2.0 points higher over the year and an impressive 4.6 point increase over the previous three years.

By contrast, productivity rose only 0.1 points over the past year to 102.6 points, and only 2.4 points over the past three years.

Wage increase

Wages rose 3.83% in 2011, but less than half of those in 2020 and 2021.

Wage growth 21 years through June 2021 FC.jpg

Government debt

The International Monetary Fund reports that Australia’s gross debt in 2011 was 24.1% of GDP, placing it fourth in the OECD, behind Luxembourg, Chile and Estonia. By 2020, the percentage had exploded to 63.1 and the ranking had fallen to 20th place.

Australian dollar value

From under 64 US cents in January 2009, the Australian dollar soared in value to $1.06 cents at the end of December 2011. It remained high – increasing the wealth of all Australians – until mid-2014 , when regular devaluation set in. Last level yesterday was a measly 71.8 US cents.

Interest rate

Australia was one of only two OECD countries to keep interest rates within the optimal range of 2.6% to 4.8% through the GFC, from 2008 to 2013. another was Mexico. Interest rates have fallen disastrously since then and are now at a low of 0.1%.

Taxation to GDP


According to the Treasury’s MYEFO, total tax levies to GDP in 2011 were the lowest on record, at just 19.9%. The tax increased steadily after the 2013 elections, reaching 21.8% in 2015, 22.7% in 2018 and peaking at 22.9% in 2021.

MYEFO Tax take Jan 2022 Final 2.jpg

Other Variables

We could also look at household spending, pensions and benefits, infrastructure investment, manufacturing, retail sales, budget deficits, inflation and corruption rankings and see this pattern repeat itself. . These are all historically stronger under Labor than under the Coalition.
The main variable higher under the Coalition is corporate profits.

International honors

There is no doubt that the Australian economy as a whole between 2009 and 2013 was the best performing in the world, based on all key indicators, but only because of its status as a huge exporter of steel and coal. during the Chinese boom. Next come Switzerland, Luxembourg and the United Arab Emirates, probably in that order, but by far.

The world was watching. Australia received both Infrastructure Minister of the Year and World’s Best Treasurer awards in 2011. The former went to Anthony Albanese, who also won the title of Minister for aviation of the year in 2010.

Among the more than 150 economists and other commentators who have expressed their admiration for Australia’s economic rise through the GFC are Joseph Stiglitz, Henry Paulson, Timothy Geithner, Stephen Martin, Bruno Martorano, Pádraig Collins, Fabrizio Carmignani, Ken Henry, Rodney Tiffen, Mark Thirlwell and Stephen Bell and Paul ‘t Hart.

Today, Australia ranks well outside the top twenty economies in overall performance, behind many OECD economies and the United Arab Emirates, Taiwan, Hong Kong and Singapore. The decline in rankings on major indicators over the past eight years has been greater in Australia than in any other country.

Yet the undead notion that the Coalition is superior at economic management continues to drag on, no matter how many rotting body parts it leaves in its path.

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