One of the really difficult things about the Abbott government’s first term will be explaining to voters why – if the carbon tax repeal goes ahead – their standard of living continues to be eroded.
A successful small businessman and friend told me last year that the tax was “wrecking the economy”, but was totally unaware of the tiny impact the tax had on CPI, what the revenue raised was being spent on, or even how much extra he was paying in electricity bills due to the tax.
That, in itself, is a triumph of political spin. The campaign against that Gillard government policy was so long, relentless and pointed that the single message – the carbon tax is wrecking the economy – got through to my financially savvy friend. However, the actual numbers did not.
The ‘raw numbers’ read out in the House of Representatives during the last parliamentary sitting, particularly by then-MP Sophie Mirabella, added to the impression that the wrecking ball was doing its work, but had statisticians tearing out their hair. Raw numbers are always found at the heart of propaganda.
But repeal or no repeal, the bigger issues that should have been debated in the House (but weren’t) are coming home to roost. In particular, the daily ‘suspension of standing orders’ tactic that the Abbott opposition used to interrupt question time took the nation’s eye off the real game.
Let’s start with rising unemployment. Between 2010 and 2013, Labor tried to take all the credit for the jobs boom created by China’s giant stimulus-splurge on our minerals and energy resources. You can’t blame them for trying, but the reality – as economists continually bleated – was that when that mining boom construction phase ended, we’d have rising unemployment.
And abolishing the carbon tax was supposed to fix that, remember? We will now watch relatively good GDP growth during the volume phase of that boom without jobs growth, and by 2016 realise that the carbon tax had little bearing on either.
The lower dollar, now at around 88 cents, will drive some job creation. But there are plenty of job cuts to offset that structural change. There were the 14,500 public service job cuts Labor’s efficiency dividend was designed to force (the ‘secret’ job cuts that allowed the Abbott government to abandon its pledge to cut 12,000 public service jobs), to the SME-supplier and corporate job cuts flowing from the tailing off of Ford and Holden production, to mining construction jobs and the services they supported.
Then there’s inflation. I’m still astonished that economists, who in their offices and homes are surrounded by newish objects stamped ‘Made in China’ did not pick more of an inflation spike in the tradables sector of the economy.
While yesterday’s ABS CPI data showed the non-tradables sector inflation did most to push up prices, it was the tradables sector where there was a big turnaround – which is pretty basic arithmetic when the Australian dollar has fallen from 105 cents to 88 cents.
Non-tradeable inflation moved a tiny amount, from 3.6 per cent in the previous year to 3.7 in the year to December.
At the same time, tradables inflation moved from -0.1 per cent to 1.0 per cent over the same year (especially on fruit and veg and tobacco), and tradable services jumped to 2.6 per cent, which the ABS puts down to “international holiday travel and accommodation”. So long Singapore. Bye-bye Bangkok.
Jobs and inflation aren’t the whole picture, of course. Two other likely sources of misery in 2014 will be subdued growth (or falls) in equities and house prices. The wealth effect flowing from each asset class is huge, and investors who geared up to buy into housing – or expect last year’s equities rebound to continue – will be disappointed.
Put those three factors together – few jobs, rising inflation and slow moving or falling asset prices – and voters must realise that the carbon-tax impost on the 5 per cent of their income they spend on energy really didn’t matter at all.
What can the Abbott government do to convince voters in 2016 that it was all Labor’s fault?
Probably keep repeating the ‘debt and deficit’ mantra, because the net debt they inherited was indeed large, even compared to the debt Keating left Howard to pay off. (And this time around, there is precious little federal tax revenue spare for paying down the debt.)
It could also engineer a crisis to take consumers’ minds off the crimping of their standard of living over these three years. Wars are good for that. The creation of a faux war – an armada of ‘illegals’ attacking our northern coastline – should do it.
There’s not a lot that is fair in politics. Tony Abbott got away with murder as opposition leader, killing off Labor’s electoral prospects with the blunt instruments of carbon pricing, boats and debt and deficit.
Now, as structural forces way beyond his control ravage Australia, there will be little that’s fair about the negative press that generates for the Coalition.
What goes around comes around, it would seem.