Households suffer as ALP gets its priorities wrong

The slide towards poorer living standards is on. And Australians accustomed to working hard and putting together a nest egg will hate it. After countless warnings from responsible economists and industry groups in these pages and elsewhere, the Albanese government is presiding over the longest-running household recession on record, as political editor Simon Benson reveals. GDP per capita has gone backwards for the past six quarters in a row, in a trend that is longer than at any period in the past 50 years. Economists warn it inevitably will continue unless Labor reverses its direction, which is centred on enlarging the government’s economic footprint at the expense of private enterprise and pandering to the international climate change lobby to secure the COP31 talks for Adelaide in 2026. Doing so would come at a heavy price. The Albanese government, regrettably, is unlikely to be swayed from its current course, which bears a closer resemblance to the Whitlam government at its most reckless than reformist Hawke-Keating economic management. Six months from an election, the nation’s predicament puts the onus heavily on Peter Dutton to address the dearth of Coalition policies. For starters, he should reverse Jim Chalmers’ irresponsible decision to break open the Future Fund from 2032-33 for spending on renewable energy, housing and “nation-building” projects. The Coalition also must commit to restoring the link between wage rises and productivity gains, and tackle the uncompetitive corporate tax system putting Australian businesses at a disadvantage in competing for capital.

Falling GDP per capita, a sure pathway to poverty in any nation, is far from Labor’s and Australia’s only economic problem, however. As the Treasurer prepares to release the mid-year fiscal update next month, heavy pre-election spending and a drop in company tax receipts are expected to send the federal budget deeper into the red than anticipated, Jack Quail reports. Deloitte Access Economics is predicting the most severe deterioration in the bottom line recorded, apart from during the height of Covid. It estimates that Canberra’s underlying cash deficit will be $33.5bn this financial year, $5.2bn worse than expected. After last year’s $15.8bn surplus driven by soaring tax collections, the $50bn turnaround for the worse would represent the largest deterioration in Australia’s fiscal position recorded in a non-crisis period. Dr Chalmers has already foreshadowed smaller-than-anticipated company tax collections as China’s weak growth outlook reduces demand for iron ore and other commodity exports.

The Treasurer and Anthony Albanese cannot avoid responsibility for the budget malaise after their boasting about delivering surpluses in their first two budgets. Deloitte predicts the deficit will widen in 2025-26 to $46.8bn, $6bn worse than Treasury’s official projections. Neither can the government ignore the fact its position is worse than the numbers suggest. A surge in off-budget spending is hiding the depth of Australia’s deficits, economists warn. That spending includes Labor’s $16bn populist giveaway to slash student debt, which will not be included in the budget numbers. Off-budget spending is a growing problem. In the Coalition’s final budget in March 2022, it was projected at $33.7bn across five years. In this year’s May budget that had climbed to $80.5bn after the establishment of new investment vehicles, including the Future Made in Australia plan. As economist Chris Richardson said after the student debt decision: “We are increasingly hiding our deficits from ourselves.” Without a significant turnaround, this and future generations will suffer a decline in quality of life, both in terms of their ability to support themselves and the ability of future generations of taxpayers, as the population ages, to fund healthcare, aged care, childcare, disability care, education and welfare services.

If the decline is to be reversed, reforms to drive productivity, growth and wealth generation in the private sector must be prioritised, as we argued on Monday. And the government’s adherence to the COP agenda, which promises to create a new world economic order at the cost of ordinary Australians, must be nipped in the bud. As Graham Lloyd wrote in Inquirer, political expediency led Energy Minister Chris Bowen to a catastrophic mistake in withdrawing from our closest allies, the US and Britain, researching fourth-generation nuclear power. On Monday, opposition climate change and energy spokesman Ted O’Brien asked how much Labor’s goal of hosting COP31 would cost. He also pressed for details on how much had been spent on climate compensation to developing nations. In his address at COP29 in Baku, Azerbaijan last week, Mr Bowen said Australia would become the sixth-largest contributor to the fund for responding to loss and damage. But Australians are entitled to question whether that is a feasible fit in current economic circumstances.