The Economic Story That Needs To Be Told And Sold
People with knowledge of the subject can see that the Australian economy is performing beautifully. GDP growth is around 3%, the unemployment rate 5%, inflation 2% and the year that the Budget returns to surplus starts in just a few weeks.
For individuals, an unbroken decade of real wages growth, tax cuts, pension rises and now lower interest rates are driving home the progressive rise in living standards and purchasing power for the vast majority of the Australian population.
Having been in power for 4½ years, one could assume this rare yet quite fantastic economic performance would show up in solid support for the Government more generally, and specifically, for the Labor Party.
A run of recent polls shows this is not the case with the Coalition side of politics judged to be the better economic managers by a margin of around 15 points.
Part of this economic undershooting for the Labor Party on economic management is self-inflicted. While it would be silly to go anywhere near the line that John Howard used when he was Prime Minister that “you’ve never had it so good”, the alarming and negative connotations of the lines used by Government Ministers, especially that “I feel your pain” and “working families are doing it tough” and “difficulties making ends meet”, are political own-goals. These sorts of comments filter into people’s fears, insecurities and misunderstandings and eventually voting intensions.
They have to stop.
It is any wonder the electorate thinks the Government is a poor economic manager when the Government itself is perpetuating the “tough times” and “pain” mantra? The electorate is saying, rhetorically at least, “well, you are in government, what are you doing about my financial pain and me doing it tough?”
The “working families are doing it tough” rhetoric is tantamount to talking down the economy, as it adds to consumer (voter) disaffection and creates an impression that the Government is not delivering good economic outcomes.
Can you imagine Paul Keating saying these things at any stage of the political cycle let alone when the economic performance is as stunningly good as it is now?
The low standing of the Government in the electorate on economic management appears linked to the timidity of the Government in taking ownership of the economic prosperity now being enjoyed. If the Government is to have any hope of winning the next election, it must change is the narrative on the economy.
The beauty of revamping and refining the discussion on the economy is that it can be facts based. There is no need for spin or cherry-picking the news. The cold, hard economic and financial facts paint a picture of a wonderful economic performance and a near perfect application of macroeconomic policy settings.
The Government should be dynamic, authoritatively managing the $1.5 trillion economy that is Australia; it is the 13 th biggest country in the World in terms of GDP, although its population is only the 52nd largest. Australia’s influence in the global economy is much greater than a population of 23 million would suggest.
The Government needs to lead the economic debate that is delivering reforms that are sustaining economic growth into an unrivalled 21st straight year. The Government should take ownership of the current low interest rate structure. While interest rate settings are driven by many things, there is no question that the tight fiscal settings have given the RBA room to cut official rates.
The Government needs to be upbeat and eliminate talk of tough budgets, financial hard times and doing it tough. It needs to start talking the economy up and its role in securing that growth.
Mortgage interest rates are around 150 basis points lower than those left by the Coalition Government in November 2007 meaning that someone with a $300,000 mortgage is saving $3,500 a year in interest payments.
One reason for this lower interest rate environment is that with a tight and prudent budget, the RBA has been aided by the Government in slashing the inflation rate. Underlying inflation has fallen from a peak of 5% in 2008 – just after Labor took office – to 2% now. This helps families make “ends-meet in the difficult economic circumstances”.
Then there are interesting little factoids that can be trotted out. Things like the size of the economy is $400 billion bigger under Labor: In 2007-08, Australia’s GDP was $1.18 trillion and it will be around $1.57 trillion in 2012-13. This is the Government of growth.
This bigger economy has helped to generate 800,000 new jobs since November 2007 and by the end of 2013, this figure will be close to 1 million.
The Government can then throw in the fact that average annual full time wages have increased from $57,200 at the end of 2007 to around $70,000 in early 2012. This rise of $13,000 a year is a big amount and more than covers the rise in cost of some items such as electricity that people put in their basket of economic pain.
The facts show the economy is doing well, but from the Government’s perspective, not many people feel it or give the Government credit for delivering these outcomes. Unless the perceptions about economic management are changed and changed quickly, the Labor Party will remain at long odds to win the 2013 election.
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