Amid the myriad political scandals of the recent parliamentary sitting fortnight, a report by the IMF on prospects for the Australian economy was released to a distracted Canberra press gallery. Among the IMF’s many economic projections was one measuring the material living standards of Australians. It received no coverage whatsoever. Yet in that official projection lays Australia’s economic challenge and the Morrison government’s immediate political challenge.
As Ministers participated in the scandal-a-thon, it was hardly surprising that the IMF’s report on Australia received so little coverage outside of The Financial Review. It certainly was not top of the bulletins on the nightly television news.
The IMF wasn’t downbeat in its rhetoric but its projections were. IMF Directors noted that the government had been ‘rebalancing’ the economy after the mining boom, infrastructure spending was helping, and the GDP and the labour market numbers were pretty good. Yet what really matters is people’s standard of living.
A measure of material living standards could be found, if you sent out a search party, in line 57 of the IMF’s official projections. It is the percentage change in real net national disposable income per capita. Despite projecting the economy to grow on average at 2.6 per annum between now and 2024, the IMF projects the living standards of Australians to grow at a trifling 0.3 per cent per annum.
But a majority of everyday Australians will not even get their hands on these slim pickings. We know that the income distribution in Australia – as in all countries – is skewed towards the top end; that is, a majority of Australians earn less than the average level of income. Since those at the top of the income distribution will continue to fare better than their less privileged compatriots, the IMF is projecting no improvement in material living standards for the majority of Australians over the coming six years.
This would come as no surprise to most working Australians. Between 2012 and 2018, real net national disposable income per capita barely rose. And if the average didn’t rise much, then the incomes of the majority of Australians probably didn’t rise at all.
This explains why voters are saying that, despite all the Morrison government’s boasts about the strength of the economy under its stewardship, the economy just isn’t working for them. They complain about the cost of living, yet inflation is low by historical standards. Their real grievance is that they are struggling to make ends meet, as wages barely keep pace with inflation. It seems a long time ago when they last received a substantial wage rise.
It is highly unusual for an IMF report to comment on the policies of Australian opposition parties. Yet the IMF indicated that Labor’s policies of lowering of the capital gains tax discount and applying limits on negative gearing would be worthy reforms – in the context of a broader tax reform. But if the Morrison government’s hysteria about these worthy reforms – abetted by vested interests and a complicit News Corp media – is any yardstick, the hopes for comprehensive tax reform are forlorn.
The party that wins the coming election will have its work cut out for it if the IMF’s projections about material living standards are any guide. Shirking hard decisions in favour of populism will, ironically, fail to gain popular support, as workers continue to struggle on flat wages in a slowing domestic and global economy.
If Australia is to continue its world-beating run of recession-free economic growth, it will need a new, productivity-raising economic reform program whose benefits are fairly shared. Yet the energies of the present government seem to be devoted to ensuring that, come what may, its Ministers get their fair share and a few cherries on top.