Does the Liberal Party’s claim to be “superior economic managers” stack up? No. We dig back to Harold Holt, through 60 years of Australia’s Treasurers, to find the best and worst. A Callum Foote investigation.
“It’s not for me to tell the Australian people how they should spend their money”. That was Josh Frydenberg as Australia’s pre-Pandemic economy spluttered towards recession in 2019.
Last week though, remarking on the build-up in household savings, the Treasurer was urging Australians to spend their money. There is more than a mite of self-interest in this call to shopping action. Money in the bank does nothing for economic growth. Money spent with shop-owners flows mostly to the Liberal Party small business base, as well as GDP.
Moreover, Josh Frydenberg is racing up the ranks of Australia’s worst-ever Federal treasurers, admittedly stung like no others by the most devastating external shock to world economies since World War Two – but also stung by his own management of the economy. Australia was already veering towards recession before the Pandemic as his crusade for a Budget surplus effectively strangled economic growth.
He has one more set of National Accounts to announce before the Election next year.
On the hustings
Heading into the Election, we will be hearing a lot about the Liberal government’s claim to be “superior economic managers”. They wheel it out every cycle, and it works. The majority of Australians actually believe it. Even Labor seems to believe it. They are still shy, despite the evidence, to claim otherwise. Shy too to use the “I” word it seems – incompetent – despite the $40bn in JobKeeper waste and other things.
Last week, the National Accounts were revealed for the September quarter. They were ugly, as anticipated, with Sydney and Melbourne smothered by lockdowns for much of the time between June and September.
So it was that negative growth came in at a quarterly -1.9%. Better than the calamitous -6.8% recorded last June but bad nonetheless. In this, the first in our series on Election tactics, we examine the assertion that will be a centrepiece of Liberal electioneering, the claim of superior economic management.
We’ve run the updated Australian Bureau of Statistics’ numbers from this week’s National Accounts, going back to 1959 when ABS records started.
When we did this a couple of years ago, we discovered John Howard was Australia’s worst treasurer.
Howard had the 1st, 2nd and 4th worst growth numbers in any quarter with a personal worst of -2.9%. Harold Holt (another Liberal treasurer turned PM) had the 3rd and 5th worst. And Paul Keating (Labor’s treasurer turned PM) came in with the 6th and a worst of -1.1%. Josh Frydenberg would win this time if we just took the worst number ever – but that’s hardly fair. The Pandemic was well and truly beyond his control.
Last time we also looked at who scored a “pair”. A pair is two quarters of negative growth in a row (commonly accepted as a “recession”). John Howard scored worst again on this metric.
To be fair to John Howard too, Malcolm Fraser sacked his first Treasurer Phillip Lynch after he had 3 negative quarters out of 8 (strike rate of 38%) – and replaced him with John Howard – who immediately scored a negative. Who owns that one? Phillip or John? Either way, it was certainly Malcolm Fraser’s treasurer. Paul Keating had the same problem – he got hit with the last of John Howard’s negatives.
We let them lie where they fall. That gives John Howard 7 negative out of 22 (strike rate 32%). And a personal worst negative of – 2.9%.
Now to update our Treasurer Measurer with the new ABS numbers. We’ve decided to add the pairs to the strike rate: 10 points for a pair plus your strike rate (strike rate = negative quarters as % of all quarters in your term as treasurer).
From worst to … not as bad
The numbers are in
Which ever way you cut it, the Liberals are the worst economic managers with the top five worst treasurers, even when you take in to account that the Liberals have been in office for twice the time of Labor administrations.
Liberals total score: 255 (41 years in office).
Labor total score: 49 (21 years in office).
Circumstance has much to do with it. It is rarely brought up in the debate over economic management but, as an export nation, Australia is exposed more than most to trade and external factors.
So it is that the stewardship of Peter Costello and Wayne Swan, two of the best ranking treasurers, enjoyed the undeniable benefits of the China super-cycle. Unprecedented and massive demand from China for Australia’s coal, gas and iron ore buoyed their performance. So much so that this country was able to sail through the Global Financial Crisis during Labor’s tenure.
We were one of the only countries to dodge a recession, thanks to the commodities we dig out of the ground and drill from the sea-beds.
Nevertheless, these numbers are compelling and beg the question of why Labor is so reticent to combat the “superior economic managers” claim. Well, most of them.
Shadow treasurer Jim Chalmers did have the audacity to call the government “incompetent”. But we are yet to hear it as a constant from Labor leader Anthony Albanese and others.
This despite Malcom Fraser selecting the 1st and 3rd worst treasurers: John Howard and Phillip Lynch with John Howard (over 5 years in office) being the worst treasurer by a country mile.
The K-shaped recovery
As Australia bounces back from lockdown, there is one seriously worrying aspect of this country’s economic recovery. Inequality. This is a recovery for the “haves”, but not the “have-nots”.
It is an economy whose resilience is masked by the dual boom in the sharemarket and the property market. Those with assets have done very well. Those without assets, particularly those with poorly paying jobs and especially those struggling below the poverty line on JobSeeker, are steadfastly locked out of the asset price boom.
Approximately 6.6 million Australian adults, or 35 per cent of the population, now hold listed investments, according to the ASX Australian Investor Study 2020 while 66% of Australian households owned their own home with or without a mortgage according to the ABS.
Josh Frydenberg’s volte-face
A devotee of Margaret Thatcher and Ronald Reagan, Josh Frydenberg had imagined himself as the CEO of a freewheeling economy. Small government, free markets, all that.
The reality however could not be further from the truth. Record debt, record cost of government, record $310bn in Reserve Bank money printing and record subsidies for large corporations are the reality.
So it is that the Treasurer has backflipped from his calls for fiscal prudence to a call for Australians to go shopping. If they heed this call, it will make his December quarter numbers (which come out in March ahead of the slated May Election) look good.
This is a grand departure from his former recommendation, a grand departure from his previous view that people should do what they like with their money; that they spend their savings rather than build up a deposit for a house, or pay down debt and increase the equity on their home.
He is hoping that all the money Australians saved during the pandemic, which saw the household saving ratio increase from 11.8% in March this year to 19.8% is going to be spent as soon as possible at retail stores:
“There is good news for our economy, in that consumer spending has lifted sharply since the end of lockdowns,” he told the National Press Club last week. “Retail trade up 14.9% … More than $5 billion spent on last Friday’s Black Friday sales, up 50% on the previous year.”
During the pandemic, household savings have risen by $28390m, that’s $1,100 saved for every Australian.
The irony of Josh’s change of heart is that he wants us to delegate the decision on where our money goes to someone else.
In July 2019, when he was facing the worst economic decline in Australian history at -6.8%, he informed The Guardian, “It’s not for me to tell the Australian people how they should spend their money, that’s for them to determine their priorities“ … “There’s an expectation that as household incomes are boosted, so is household consumption, but people have their own priorities.”
To the extent that punters heed his call, they will transfer both their savings and the decision about what to do with it, to shopkeepers. This is where Josh wants the money to go; the Liberal small business base. A bonus for Frydenberg is that every dollar spent adds to GDP too.
Once the shopkeepers have it, they will decide who gets how much. In fact, business owners have already decided how much goes to wages and suppliers (variable costs) and how much goes to landlords and their banks (fixed costs).
It’s really a simple plan. Shopkeepers need the money and they are far wiser than you at deciding where it should go. Spend your savings and Josh’s accounts will look great when they next come out on 1 March 2022.
Money that goes to the bank does not help GDP. It produces few goods or services; it doesn’t turn up in Josh’s Treasurer Measurer scoresheet.
The favours have been made for the Liberal Party funders, the big businesses which make donations. The Election war chest is in. Some $40bn in JobKeeper waste, billions in liquidity for the banks, that all helped on the corporate welfare front to deliver money to buy votes, along of course with another government record, the record amounts spent pork-barrelling.
So, with big business onside, small business – that represents the Party’s voting base – has been rewarded with low wages and a gig economy for cheap and flexible labour. It only remains now for Australians to get out there are spend their savings.
To that end we might expect to hear little about inequality – that doesn’t sell – or low wage growth and soaring debt but plenty about retail sales and a December quarter bounce-back in economic growth. And jobs, jobs, jobs. The labour market is tight. The scene is set. Over the coming weeks we will examine the other planks of Coalition election tactics.
Callum Foote is a journalist and Revolving Doors editor for Michael West Media. He has studied the impact of undue corporate influence over Australian policy decisions and the impact this has on popular interests.