When economic bad news is political good news

A slowing economy could boost the political party that’s invariably regarded as the more skilful economic manager, on the grounds that worse times require better economic leadership, writes Peta Credlin.

Slower economic growth would normally be bad news for an incumbent but this week’s result could, instead, turn people’s attention to the dire economic consequences of a Shorten government.

Remember back to 2007 when good times made economic management seem easy and voters thought that PM Kevin Rudd (the self-styled “economic conservative”) couldn’t do much harm.

This time, memories of a bad Labor government are still fresh, and the more ominous the circumstances the more wary voters might be of change for the worse.

Of course, governments don’t create wealth.

It’s business that creates wealth. Government’s job is to promote prosperity by making it easier for businesses to invest, to employ more workers and to sell more products or services.

Normally, that’s done by keeping taxes and regulation as low as possible and by creating a positive and stable environment so businesses can get on.

MORE FROM PETA CREDLIN: This was never about children in offshore detention

On the night the Coalition won, Tony Abbott declared that Australia was once more “open for business” and, in just five years, with the carbon and mining taxes gone, FTAs finalised, and some red tape slashed, our economy has created more than a million extra jobs.

Tony Abbott with his challenger in Warringah, former Olympian Zali Steggall, during a pre-election debate on Friday. Picture: Monique Harmer

But as this week’s national accounts showed, economic growth slowed to just 0.2 per cent in the latest quarter with an annual growth rate of just 2.3 per cent, well below the 3 per cent long-term average and below the forecast 2.75 per cent.

What’s more, with total federal and state government spending rising by 6.2 per cent over the past year, government accounts for 1.4 percentage points (or more than half) of total growth. Largely due to the ramping up National Disability Insurance Scheme, federal outlays are up 10 per cent on a year ago while state infrastructure spending is 12.5 per cent higher.

One analyst reckons that the private sector contracted by almost one percentage point in the second half of last year while the public sector grew by an unsustainable 7.3 per cent. Individual tax payments are almost 10 per cent higher, hence the feeling in most households that they’re being squeezed even though they’re told things are supposed to be good.

Lost in the overall growth figure is the sobering news that Australia has now suffered a recession-per-person, even if it’s not an overall one. It’s now more than a quarter of a century since Australia officially suffered a recession, which means, in technical terms, two consecutive quarters of negative growth.

But in 2000 and in 2006 we recorded two successive negative figures in GDP per capita, and we’ve just had it again. That’s why so many people don’t feel better off.

Prime Minister Scott Morrison has an opportunity to remind people that when it comes to the policies that matter, they’ve proven they can deliver. Picture: AAP Image/Richard Wainwright

Our world-beating record of continuous economic growth is built on high immigration, which adds to total economic growth — but only adds to growth per capita if immigrants are more productive, on average, than the existing population.

And as I’ve regularly pointed out here in this column, very high migration, especially in our big cities, imposes costs such as traffic congestion and overcrowded facilities, which the growth statistics don’t capture.

MORE FROM PETA CREDLIN: We’ve stopped boats, not the migrant wave

Still — and this is where economic bad news might turn out to be political good news — a slowing economy could boost the side that’s invariably regarded as the more skilful economic manager, on the grounds that worse times require better economic leadership.

The government is promising modest economic reform: more company tax cuts and, eventually, lower, flatter personal income tax. Labor, by contrast, is promising $200 billion of new taxes over the coming decade.

Abolishing franking credits, halving capital gains tax discounts and ending negative gearing for existing properties has been cleverly pitched politically as a hit on “rich investors” but those paying capital gains tax and taking advantage of negative gearing are actually the most productive people in our economy — and with the vast bulk on average incomes, they’re hardly the rich either!

Then there’s the impact of Labor’s much higher emissions reduction targets on heavy industry and power prices, and the impact of Labor’s sweetheart arrangements with thuggish unions on business confidence.

This week, Bill Shorten promised to end wage stagnation but the idea is ludicrous that you can simply order businesses to pay higher wages and not impact on jobs.

With the right campaign — and no one doubts Scott Morrison’s campaign skills — there’s an opportunity for the Liberals to remind people that for all their personality woes in recent years, when it comes to the policies that matter — economic security and national security — they have proven they can deliver.

Watch Peta Credlin on Sky News weeknights at 6pm.