No matter how Morrison & Co try to spin the Australian Treasury's 2021 Intergenerational Report, it reveals lacklustre economic growth expected over the next 40 years

In June 2021 the Australian Treasurer and Liberal MP for Kooyong, Josh Frydenberg released the Treasury’s 2021 Intergenerational Report: Australia over the next 40 years

Although a traditionally impartial Treasury complied most of the report’s contents, the partisan political nature of this report can be found kicking off at Line 19 of the Executive Summary, which starts with this untruthful statement:

Australia entered the COVID-19 pandemic from a position of economic and fiscal strength. The budget was in balance for the first time in 11 years…..

North Coast Voices readers would be well aware that 2019-20 national budget papers released in April 2019 forecast a then as yet unrealised balanced budget and return to surplus by 30 June 2020, with surpluses continuing over the medium term. This was a risky assertion to make on the basis of optimistic assumptions not hard facts.

Just how risky became apparent soon after February-March 2020 when the word “surplus” was quietly scrubbed from the Liberal-Nationals political lexicon due to the social and economic upheaval caused by both six years of the Abbot-Turnbull-Morrison Government in Canberra and a highly infectious global pandemic.

By June 2020 Australia’s net debt was expected to peak at $392.3 billion and, by June 2021 there was an est. $829 billion in gross public debt and $617.5 billion in net public debt on the books and an underlying cash deficit in the vicinity of $161 billion, with no budgetary surplus on the horizon.

That might almost be considered to qualify as good news given some of the forecasts contained in the 2021 Treasury intergenerational report. Because that report clearly shows that the COVID-19 global pandemic could cease tomorrow and it would make little difference to Australia’s long term economic recovery.

There will be no post-pandemic ‘snapback’ which will see the national economy quickly flourish.

From 2014 to the present day successive federal governments have trashed the goodwill and tolerance of our political allies and trading partners with anti-science, climate change denialist polices, demonstrated a crass clumsiness and sometimes downright ignorance of international relations and, the complete absence of diplomacy in negotiations with our largest trading partner. While increasing impacts from climate change will, more frequently than in the post-climate crisis era, see a fall in the seasonal/annual volume of agricultural products for export.

The domestic industry and business mindset that insists employers are doing workers a favour by employing them on a low wage with no job security, rather than recognising that the worker creates cashflow and profits by producing actual goods to sell, will in all likelihood actively discourage decent wage growth over the next 40 years.

According to the Executive Summary in the 2021 Intergenerational Report:

….real gross domestic product (GDP) is projected to grow at 2.6 per cent per year over the next 40 years, compared with 3.0 per cent over the past 40 years. Real GDP per person is projected to grow at an average annual rate of 1.5 per cent, compared with 1.6 per cent over the past 40 years. Nominal GDP growth is projected to slow to 5.0 per cent per year over the next 40 years, compared with 7.0 per cent over the past 40 years. Real GNI is projected to grow at an average annual rate of 2.3 per cent, compared with 3.3 per cent over the past 40 years. Real GNI per person is projected to grow at an average annual rate of 1.3 per cent, compared with 1.8 per cent over the past 40 years. The larger slowdown in GNI growth than GDP growth reflects an assumption that the terms of trade will decline before stabilising at long-term levels.

Real GDP per person = Gross Domestic Product per person adjusted for inflation
Real GNI per person  = Gross National Income (wages & other earned income)
per person adjusted for inflation
Real GDP = Gross Domestic Product adjusted for inflation
Real GNI = Gross National Income (wages & other earned income)
Nominal GDP =  measures total value of the output produced in Australia, by
adding together Real Gross Domestic Product and prices to produce a close estimate.

Australia's terms of trade is calculated as the ratio of export prices to import prices. If this index increases it implies that Australia is receiving relatively more for its exports; if it decreases then Australia is receiving relatively less. An increase in export prices relative to import prices
implies that Australia is better off; thus an increase in the terms of trade
is sometimes referred to as a favourable movement in the terms of trade. [Australian Parliament House Library, retrieved 07.07.21].


After the 2007-08 Global Financial Crisis (GFC) Australia's terms of trade under Labor federal governments peaked in 2010-11 & 2011-12 at 2.1 before falling to 1.0. Subsequent Coalition federal governments peaked at 1.1 in 2020-21. Australia's terms of trade are predicted to return to the 0.9 of the Global Financial Crisis period and stay at
that level until after 30 June 2061. 



Australian Treasury tables attached to the 2021 Intergenerational Report predict that Average Labour Productivity Levels will remain at 1.5
until after 30 June 2061. This is the same level of average labour productivity between approx. 1981 and 2020.


In those same tables Average Gross National Income per person adjusted for inflation is expected to fall from the current 1.8 to 1.3 for the next 40 years. This does not indicate strong wages growth across the board over the next four decades.


After credibly surviving the 2007-08 Global Financial Crisis under a
Labor federal government, Australia now faces forty years of struggling
to move past social and economic consequences of the current federal Coalition government’s six years of poor policy decisions and its appalling mismanagement of the global COVID-19 pandemic once it became clear the virus would breach our national borders.

Last Friday Scott Morrison pushed state and territory leaders to urgently ease border restrictions. He had mixed success.

This was Australian Prime Minster & Liberal MP for Cook Scott Morrison on his feet in the House of Representatives on Thursday, 3 September 2020:

“Australia was not meant to be closed. Australia was meant to be open. Australians want to see Australia become open, as the founding members of this place ensured it was from the outset, and Australia must become whole again. This is the way—that's what success looks like…...We need to ensure that we are clear with Australians that we will seek to make Australia whole again by Christmas this year” [Hansard, 3 September 2020, p.6]

The very next day he pushed state and territory leaders to urgently ease border restrictions. 

He had mixed success. West Australia refused to march to Morrison's drum, Tasmania said it would go its own way and the other states and territories agreed to consider coming to an agreement at some time in the coming months. None would consider opening their borders quickly. Nor have they yet agreed with Morrison's national definition of a COVID-19 "hot spot".

When it came to easing restrictions on cross-border travel for agricultural workers, Queensland, West Australia & Tasmania refused to participate in the model Morrison put forward, but agreed to observe how matters play out in the three other states to date which will have committed to participating in that scheme.

In response to the refusal to open borders quickly and refusal to agree to containment of affected populations within a state/territory based on area lockdowns instead of state/territory borders, Morrison informed the premiers and chief ministers that the National Cabinet would no longer be a consensus forum.

This is reportedly being interpreted by the states that he intends to change how the national cabinet operates. A case of 'I'm changing the rules so I don't get rolled' and giving himself permission to publicly attack those states or territories which disagree with him during national cabinet meetings.

Revising recent history, Morrison then told the world that there have been times during this pandemic he feared Australia would "break apart". Perhaps intending to raise fear levels in order to drive the national electorate towards agreement with whatever he has planned in the next few months.

Easing border restrictions is important to 'Scotty From Marketing' because he needs to brag about future increases in trade and consumption ahead of the October budget announcement in order to buttress his claim he has found a way out of the first recession in 29 years.

Because as it now stands the national figures below indicate October budget projections will likely be dismal.

Australian Bureau of Statistics, Australian National Accounts: National Income, Expenditure and Product, Jun 2020, Contribution to GDP growth, seasonally adjusted:

The Gross Domestic Product (GDP) has suffered its worst fall on record, household consumption, private capital formation exports are down, along with a terms of trade increase best described as slight.

While general government consumption is not looking that healthy either and appears an inadequate response in the current situation and, workers share of the national income is at a 61 year low.

The June Quarter 2020 GDP breakdown is:

Graph: ABC News, Stephen Letts

Interestingly, from March 2020 to June 2020 the states and territories showing the smallest falls in seasonally adjusted state final demand (combined consumption expenditure, public & private gross fixed capital formation) were those with the strongest border restrictions.

In other words, community confidence appears relatively higher in those populations behind strong borders.

For some reason Morrison appears to believe that if he bullies state premiers and territory chief ministers into opening borders before community transmission is contained, that any ensuing drawn-out increase in the national number of COVID-19 infections and deaths won't hold the Australian economy back.

He can't make it any clearer that he is willing to sacrifice lives in the mistaken belief that this will improve his own government's 2020 budget projections.

Even though government economic experts in Treasury and the Reserve Bank have on more than one occasion pointed out that stronger economic recovery is possible if faster progress in controlling the virus is achieved in the near term. 

It is only after faster progress is made in suppressing or eliminating the virus that a faster unwinding of activity restrictions and greater confidence will potentially lead to a faster recovery in consumption, investment and employment. 

A proposition that Morrison seems to find politically unpalatable - he prefers to  trample over the bodies of the coronavirus dead in his pursuit of another term as prime minister.

UPDATE

The verbal attack on Labor states begins on 5 & 6 September 2020 with the Initial Commonwealth response to Victorian Roadmap media release

Australia 2020: and now for some economic bad news

On 23 July 2020 Australian Treasurer and Liberal MP for Kooyong Josh Frydenberg delivered a national economic and fiscal update.

He dutifully posted an upbeat media release and published the official update documents.

Here is a preliminary takeaway from this update*:

• total federal government payments have increased by $58.0 billion in 2019-20 and increased by $187.5 billion over the two years to 2020-21. The net impact of policy decisions since the 2019-20 MYEFO has increased payments by $58.0 billion in 2019-20 and $113.7 billion in 2020-21.

• declines in taxation receipts were $31.7 billion in 2019-20 and are expected to be $63.9 billion in 2020-21;

• the underlying cash balance is expected to decrease to an $85.8 billion deficit in 2019-20 and an $184.5 billion deficit in 2020-21. This is a a deterioration of $281.4 billion over these two years since the 2019-20 MYEFO;

• as a percentage of GDP the underlying cash balance is expected to be -9.7 per cent in 2020-21;

• debt levels have increased significantly. Gross debt was $546 billion (28.1 per cent of GDP) at 30 June 2019 and $684.3 billion (34.4 per cent of GDP) at 30 June 2020 and is expected to be $851.9 billion (45.0 per cent of GDP) at 30 June 2021. With net debt at 30 June 2019 standing at 373.5 billion (19.2 per cent of GDP), expected to be $488.2 billion (24.6 per cent of GDP) at 30 June 2020 and increase to $677.1 billion (35.7 per cent of GDP) at 30 June 2021;

• on a calendar-year basis real GDP fell by 3.75 per cent;

• real GDP is forecast to have fallen sharply in the June quarter 2020 by 7 per cent;

• nominal GDP is expected to be -4.75 per cent in 2020-21;

• nationally 709,000 jobs were lost in the June quarter 2020;

• the unemployment rate in June 2020 was 7.4 per cent and is expected to peak at around 9.25 per cent in the December quarter 2020 and is forecast to be at 8.75 per cent in 2020-21;

• Treasury has predicted that immigration will fall to 31,000 individuals in 2020-21 which is likely to affect the national budget bottom line; and

• the Morrison Government's go-to remedy for the poor economic outlook is to (i) consider reducing the federal government's taxation income even further by est. $143 billion in personal income tax receipts over 10 years commencing in 2021-22, (ii) reduce welfare spending by further limiting eligibility and reducing payment levels for JobSeeker and JobKeeper recipients from 25 September 2020 with the Coronavirus Supplement due to be removed completely by 31 December 2020, (iii) incease the level of casual and insecure work via industrial relations 'reform', and (iv) encourage women to have more babies to compensate for the current moribund population growth rate.

NOTE

* The Economic and Fiscal Update June 2020 is affected by the economic impacts of the 2020 COVID-19 pandemic and to a lesser extent by the the impacts of the 2019-20 bushfires. 

Componding the situation is the high level of federal government borrowings which regularly occurred after 18 September 2013.

On 30 September 2013 the gross national debt stood at est. $220.67 billion and net national debt was $174.55 billion. At that time net national debt was in the vicinity of 13% of GDP. 

By 2 April 2019 the Abbott-Turnbull-Morrison Government had raised the gross national debt to $534.42 billion. That's more than double the national debt left by the previous Labor federal government. 

On 2 April 2019 Frydenberg was predicting that gross national debt would rise to $627.26 billion by end of June 2019 with net national debt coming in at $373.47 billion and net debt predicted to come in at 19.2% of GDP by end of June. 

By 30 June 2019 the federal government paid est. $18.15 billion in interest on this debt in the 2018-19 financial year. 

The bottom line is that before either the bushfires or the pandemic even began the Morrison Government gross national debt stood at $546 billion or 28.1 per cent of Australia's GDP and net debt stood at 373.5 billion or 19.2 per cent of GDP by 30 June 2019.

Therefore emergency national funding for bushfires and pandemic only accounts for est. 23.5 per cent of the current national debt.

As at 30 May the Morrison Government's total liabilities in 2020 ran to $1,324.95 billion against assets of $700.74 billion according to Australian Government General Government Sector Monthly Financial Statements May 2020.