Australia’s New Course Is To Be Managed Decline

Written by:
16 May 2024
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In this article, John Roskam contextualises and disseminates the findings of the the IPA’s research into federal government debt and spending.

The budget is our politics writ small: too lacking in confidence and optimism to seek out new growth.

A federal treasurer’s speech on budget night isn’t a reflection of every aspect of the country, it nevertheless paints a picture of the nation. While its focus is economics, a budget speech reveals something about the condition of our politics and our culture.

On Tuesday night, Jim Chalmers listed 11 achievements in the 2024-25 budget. They ranged from “a tax cut for every taxpayer” to “a fairer go at every checkout” to “stronger Medicare in every community”. “An economic plan where growth and opportunity go together” was mentioned last.

Chalmers’ speech was almost entirely a list of handouts: “new power bill relief”, “cheaper medicines”, “debt relief for students”, “more help for renters”, “more housing for students”, “boosting care economy wages”, and so on. It is a budget of and for sectional interests. The budget is Australian politics writ small. It’s all about who gets what, when that “what” is paid for by someone else.

There are two main reasons why Chalmers is reluctant to talk about growth.

The first is that there’s no meaningful growth to speak of. The treasurer admitted in his speech the economy will grow “just 1¾ per cent this financial year and 2 per cent next year”. This is compared with the long-term average growth rate of about 3.5%. Today, the little growth there is is almost entirely the product of immigration.

The second reason why politicians don’t talk about growth, let alone something like productivity is because of a shift in the ideology of the political elite and changing public expectations.

To the elites, “net zero” is a mindset, of which reducing emissions of carbon dioxide is only a small part. ESG – environmental, social, and governance standards – says nothing about the importance of growth.

The years of COVID taught people to appreciate what they have. The public demonstrated how averse to risk it was, but aiming for growth inevitably involves risk. An increasing number of employees would prefer to work from home rather than go into the office to work longer hours for better pay or improved promotion prospects.

On the evidence of Jim Chalmers’ budget speech it’s hard to avoid the conclusion Australia’s best days might be behind it.

Albanese and Chalmers are most certainly not Hawke and Keating. But as difficult as the economic conditions in Australia in the early 1980s were, Hawke and Keating could tap into a sense of national self-confidence, even optimism, which four decades later is close to absent. Hawke and Keating did real things that had tangible outcomes. In contrast, a centrepiece of Tuesday’s budget was the promise to spend billions of dollars on technologies that don’t exist and may never work.

If governments can’t finance spending from growth, they’ll use debt. Which is precisely what’s happened. On Wednesday morning, commentators fussed over whether a $300 government subsidy to households should be means-tested. Total spending on that measure is less than half of 1 per cent of budget expenditure. The annual interest payment on federal government debt is nearly 10 times that amount.

The Commonwealth’s debt management expense is projected to go from $22.5 billion this financial year to $35.7 billion in 2027-28. In four years, Australian taxpayers will be paying nearly $100 million a day in interest on federal debt. Over the next four years, while interest payments will increase by $13 billion, defence spending will increase by $10 billion. In four years, the Australian government will be spending an amount equal to 65 per cent of its defence spending on interest.

All of this is in addition to the interest on the debt carried by state governments, which is estimated currently at $600 billion on top of the federal government debt of $900 billion.

On the evidence of Jim Chalmers’ budget speech it’s hard to avoid the conclusion Australia’s best days might be behind it. Decline is not inevitable. We can choose to fight the fall in our prosperity, or we can manage that decline. At the moment, Anthony Albanese and Jim Chalmers show every indication of opting for the latter alternative.

The challenge for Opposition Leader Peter Dutton and shadow treasurer Angus Taylor is to decide whether the public is ready to vote for anything beyond cautious gradualism. A Fightback! might have to wait until the finances of the country and of voters deteriorate even further.

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