Going by the numbers, Josh is on a winner

While Barnaby Joyce grabs the headlines, the real story is Josh Frydenberg’s recent wins in Treasury.

The bounce back partly orchestrated by the Treasurer has insulated so many from the long term pain usually felt in the aftermath of a technical recession. Picture: Getty

The attention this week in Canberra was understandably on Barnaby Joyce’s return to the Nationals leadership. But the successes Josh Frydenberg has been having in the Treasury portfolio shouldn’t be discounted. That’s the real story of the first half of this year as MPs and senators enjoy the long winter recess.

This is not a hagiographic assessment of the Treasurer’s performance. The build-up of debt and the risk of inflationary pressure driving up interest rates are real. Equally, the subsequent risk of a sharp downturn similar to what we saw in the early 1990s, driving Australia towards another recession, remains. These are challenges Frydenberg needs to manage, and arguably he’s a little too nonchalant about them.

But on any measure the Treasurer has presided over unexpectedly good economic news so far this year and, as we count down to an election, that could be the difference between victory and defeat for the government. At the very least it is an important counterweight for the Coalition to the bad news associated with the vaccine rollout and hotel quarantine. These are the twin areas Labor wants to focus on, not the state of the economy.

Australia’s AAA credit rating, initially put on a watch list, now has been confirmed as safe by leading ratings agency Standard & Poor’s. Other nations should be so lucky. The agency praised the government for keeping borrowing costs low with its “swift and decisive” actions.

The latest economic growth figures are an extraordinary 1.8 per cent for the first quarter of this year. It’s impressive and well ahead of market expectations, even if lockdowns and Covid-19 problems may put the next set of numbers under pressure. The simple fact is that Australia’s economy is bigger than before the pandemic, which is not something most advanced economies have come close to replicating. It certainly is not something commentators or economists expected so soon.

The unemployment rate has been the standout economic indicator for this year, down to 5.1 per cent on the latest figures when it had been expected to surge well past 10 per cent at the height of the pandemic. It is good news by any measure. The latest dataset also reveals underemployment is the lowest it has been since 2014, a sure sign the unemployment numbers reflect wider good news in the jobs space. People aren’t just employed, they are finding more work than they have for years. Casual and part-time workers therefore are doing comparatively well despite sluggish wages growth across the economy.

Labor has been humiliated when it comes to the unemployment numbers. It had been warning that JobKeeper needed to be broader and last longer than the coalition was allowing, which there may well be social policy reasons to agree with. But if the argument to spend so much extra money on the unique scheme was because failing to do so would be catastrophic for unemployment outcomes (and that was the argument Labor put forward), the facts have debunked the opposition’s case unequivocally.

In March, Anthony Albanese said JobKeeper was “the only support that was keeping the economic roof from crashing down”. Wrong. Labor senator Kristina Keneally said the withdrawal of JobKeeper payments would be a “recipe for economic calamity”. Wrong. Deputy opposition leader Richard Marles said the end of the program would result in “tens of thousands of Australians los(ing) their jobs”. Wrong. Opposition Treasury spokesman Jim Chalmers said cutting JobKeeper would have “diabolical consequences for workers and small businesses, and the jobs that people rely on to feed their loved ones”. Wrong. They were all wrong.

The unemployment rate has fallen dramatically since the scheme wound up, which is one reason Chalmers has taken a bit of a back seat in question time lately. The opposition leader, Marles and Keneally have moved on to other issues.

Labor always starts economic debates from a position of disadvantage. Fairly or otherwise, voters perceive the Liberals to be the party of better economic management. This would be a risk for Labor even if the economy were in post-pandemic trouble. Frydenberg and others would have warned voters not to risk handing Labor control of the Treasury benches lest it made a bad situation even worse. But now?

With high growth and low unemployment, all within the envelope of a triple-A credit rating ensuring low interest rates on new debt, the Coalition will want to focus on the economy every single day until the next election if it can.

Let’s not forget, it already has legislated the removal of an entire income tax bracket and on July 1 the tax rate for companies with a turnover of less than $50 million a year will fall to 25 per cent.

Meanwhile, Labor mulls putting income taxes back up, which would require it to lose skin in a campaign arguing for such a thing, only to be likely to fail to pass such a change through the Senate even if it won. You have to wonder what some members of shadow cabinet are thinking when they argue for such things.

The Treasurer also had a big policy win to end the first half of the parliamentary year. The future of super reforms have passed the parliament. Labor was spruiking that this wouldn’t happen and the failure would represent egg on Frydenberg’s face. The reality has been the exact opposite.

Despite opposition from unions and industry superannuation funds, Frydenberg managed to negotiate his way to success. Getting the legislation through the Senate without the assistance of former crossbench deal-maker Mathias Cormann was no mean feat. The naysayers have been left to lick their wounds, Labor especially. Because the opposition overpromised and underdelivered, industry funds and the union movement directed their anger at the opposition, after it gave them virtual guarantees the bills would never be legislated.

There is no doubt Frydenberg now stands as the heir apparent to Scott Morrison, and not merely because other contenders have fallen by the wayside.

That said, there is no denying the seriousness of the debt risk being built up on Frydenberg’s watch, and the challenges into the medium term of keeping a lid on inflation and interest rates. The government talks about the housing boom as if it is a good thing for the economy. It certainly is not. If that bubble bursts, as it will if rates head north too soon and too quickly, the sharpness of the downturn in the aftermath will be a shock to a generation not used to tough times.

In this respect the pandemic doesn’t count because the bounce back partly orchestrated by the Treasurer has insulated so many from the long term pain usually felt in the aftermath of a technical recession.

Peter van Onselen is political editor at Network 10 and a professor of politics and public policy at the University of Western Australia and Griffith University.