Hewson's view: You can only spin the economy for so long

The Liberal/National parties have consistently been seen over many years in the polls as “better economic managers”. Again, in the run up to the next federal election in May this year, the Morrison government’s strategy has been to capitalise on this by attempting to control the economic narrative, while creating “fear” and “anxiety” about the “risks” of a shift to Shorten’s ALP, and their “economy wrecking policies”.

In recent days the government has been “spinning” economic developments to their advantage, basically exaggerating “how well we are doing” – claiming strong growth, strong employment and low unemployment.

Emperor's new clothes?: Treasurer Josh Frydenberg maintains the Australian economy is in fundamentally good shape but recent figures may suggest otherwise. Photo: Alex Ellinghausen

Emperor's new clothes?: Treasurer Josh Frydenberg maintains the Australian economy is in fundamentally good shape but recent figures may suggest otherwise. Photo: Alex Ellinghausen

They even went to the ridiculous extreme of claiming that figures showing household savings have fallen to pre-GFC levels was a reflection of “consumer confidence” in our economic circumstances, rather than admit that it was hard evidence that households were struggling day-to-day with the cost of living, with their wages flat lining, house prices falling, and under the weight of one of the highest levels of household debt in the world, having to run down their savings to survive.

This week their economic “illusion” was blown out of the water, with the release of our economic growth numbers for the December quarter, completing the picture of 2018.

Our economy grew by a mere 0.2 per cent in the December quarter, following just 0.3 per cent in the September quarter. This was the worst back-to-back quarterly result since mid-2006, taking the annual growth down to 2.3 per cent, way short of the 3-3.5 per cent growth the government/Reserve Bank had led us to believe was the case.

Moreover, the data revealed that we are in a “per capita recession”, as GDP per person dropped by 0.2 per cent, the second consecutive fall in this widely accepted measure of our living standards, and the third per capita GDP recession since 1991, even though the government is now suggesting we are heading for our 28th year without a recession.

This week their economic “illusion” was blown out of the water.

Against all this, the Treasurer was still at pains to claim that “our economy is in fundamentally good shape”, but did concede that the annual figure “did represent some moderation on the back of strong results”.

Frydenberg had to acknowledge the results were due to a decline in residential construction, lower mining investment, still weak consumer spending, and the drought. Indeed, without the positive impact of government spending, growth in the quarter would have been negative.

In electoral terms, the Morrison government now has a real problem in that its economic narrative is simply not reflecting the lived experience of most Australians. It has allowed the Shadow Treasurer, Bowen, to make the similarly exaggerated claim that the government has “lost the moral authority to campaign and talk about the economy”.

This is against the background of the OECD slashing its global growth forecasts this week, reflecting the global trade tensions and falling consumer and business confidence, and China admitting its growth was faltering by lowering its growth target.

The OECD reduced its forecasts of our growth to 2.7 per cent this year and 2.5 per cent in 2020, which could still be very optimistic if Chinese growth is more like 4-5 per cent, than the target of 6-6.5 per cent, and the US is actually heading towards a recession in 2020.

With voters increasingly losing respect for, and confidence in, our politicians and our political process, they really are no longer listening to what our pollies say. They are desperate for authenticity, and policy outcomes that will genuinely shelter, if not improve, their daily lives.

The challenge for both the Morrison government, and the Shorten opposition, is to Stop the Spin, and offer an honest assessment of where our economy sits, and of its prospects, and challenges. Then, only on such a base, to outline deliverable solutions on key elements of the cost of living – housing, power, school and medical fees and charges, childcare, and so on.

Moreover, to then offer some “vision” of where they would like to take our economy and society over say the next couple of decades, again with honest assessments, detailing genuine policy responses, in respect of our longer-term challenges with climate change, ageing, productivity, defence, and our place in our region and the world.

Hard to imagine, isn’t it, when they are so self-absorbed in the now 24-hour political game of point scoring and blame shifting. It's all about them, not about the rest of us.

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.