Hewson's view: Can our PR PM accept economic reality?

She'll be right: Prime Minister Scott Morrison and Treasurer Josh Frydenberg at Parliament House in Canberra last week where they vowed to hand down a surplus budget in April, ahead of the federal election. Photo: Dominic Lorrimer
She'll be right: Prime Minister Scott Morrison and Treasurer Josh Frydenberg at Parliament House in Canberra last week where they vowed to hand down a surplus budget in April, ahead of the federal election. Photo: Dominic Lorrimer

PM Scott Morrison, as an ex PR/Advertising man, tends to “spin” rather than answer questions, or comment in detail on issues and developments. His usual aim is to create as positive an impression as possible. He has a pocket full of slogans. If you were to ask him a question, or to comment on some issue, he’ll offer you a slogan in response. But, don’t expect him to supply much more detail.

This was particularly noticeable when he was Treasurer, and still so today when he comments on our economy and economic developments. Unfortunately, it is not really possible to “spin” the economy for very long, in an attempt to make it seem stronger than it really is, as the release of subsequent economic data may soon expose you.

If Morrison is to have any hope of winning the next election, he must sustain the perceived “supremacy” of the LNP in economic management. He has certainly made this a key plank of his election strategy.

However, two factors are already working against him on this. First, as much as he may prattle on about their relative “strength” in economic management, about “jobs and growth”, after some 27 years without a recession, voters have increasingly taken economic management for granted, especially those under the age of say 45-50, who don’t have the lived experience of a recession.

So, while aggregate growth and employment numbers have been a constant boast of the government, voters are increasingly concerned about the “distribution” of those jobs and growth, about income security as well as job security, having to live with increases in their costs of living with their wages stagnant – having to fund their daily lives by running down their savings and/or increasing their debts.

Second, our growth is weakening already, falling well short of the government and the Reserve Bank’s previous forecasts The data for the September quarter released this week recorded the weakest growth rate for two years (0.3 per cent, half the consensus prediction) and, at 2.8 per cent for the year to the September quarter, was well short of the forecasted 3.3-3.5 per cent. The data also revealed that the household savings rate had fallen to pre-GFC levels, wages remained flat, public spending was almost twice as strong as private sector spending, and real national disposable income per capita was actually negative for the quarter.

So, households are struggling with one of the highest levels of debt in the world, while their wages are flat, and their house prices are falling (with some predicting the biggest collapse since the recession of the early 90s), and the stock markets are much more volatile and correcting.

Moreover, the global economic outlook is weakening, and being compounded by geo-political tensions. Of particular concern is Trump’s trade war – he warned the Chinese this week that he is a “Tariff Man” – and the slowing US economy as the “sugar hit” from Trump’s tax cuts wanes. Also, the Federal Reserve is still promising more interest rate increases, and the US bond and stock markets are particularly “skitzy”.

The global economic outlook is weakening, and being compounded by geo-political tensions.

 Against this background, Morrison will find it most difficult to put and sustain a “gloss” on our economic performance and prospects. Indeed, he would be most unwise to try.

Most recently he has “promised” to deliver a budget surplus next financial year in a budget foreshadowed to be earlier, now on April 2. However, this has been built on the recent unexpectedly strong corporate tax receipts, which are unlikely to be sustained. Corporate tax has been operating as a resource rent tax, and receipts have exceeded previous estimates simply because commodity prices have been stronger than predicted. With global, and particularly Chinese, growth slowing, commodity prices will flatten out.

The budget task will also get much tougher as we move into the 2020s, as both sides have committed to very significant increases in education, health, NDIS, defence, and infrastructure spending running right through that decade.

With an electorate sick and tired of political games, point scoring, and blame shifting, wanting authenticity and genuine policy outcomes, Morrison would do much better to be honest and realistic about our economy, and the risks and challenges we face as a nation, and to map out a deliverable path forward.

Key question: Can a PR/Ad man change his spots?

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