Whither the Australian economy?
With prices, inflation, interest rates and pessimism rising and the Chinese economy faltering, what’s in store for gig economy workers?
I’ve got a pet theory that an ALP victory in a federal election is a reliable harbinger of economic doom. Not in the conventional sense that left-of-centre governments inevitably drive the economies they are put in charge of into a ditch. More in the sense there is some vengeful deity that hates Australian social democrats and invariably seeks to derail their plans.
I’m sensing some scepticism, so let me provide some key dates.
1949 – Having seen Australia through World War II and then embarked on a range of nation-building initiatives between 1941-1949, the ALP loses office just as the post-war boom is starting to heat up. It doesn’t regain office for almost a quarter of a century.
1972 – Had Whitlam won the 1969 election, as he came close to doing, his lack of interest in economic matters might not have been much of a handicap and Australian history might be much different. As it turned out, he didn’t get into office until the post-war boom was beginning to bust. As a result, he was one of many Seventies political leaders (think Gerald Ford, Jimmy Carter, Pierre Trudeau, Harold Wilson, James Callaghan and Whitlam’s conservative successor Malcolm Fraser) who weren’t prepared for the end of easy prosperity and who struggled to respond appropriately to previously unthinkable phenomena such as stagflation.
1983 – Bob Hawke and his Treasurer Paul Keating take office. This period of federal Labor Government is something of an outlier, in that Hawke and Keating took office near the end of the early 1980s recession that rocked the Western world and did enjoy a few years of economic sunshine before things started to turn to custard.
However, on October 19, 1987, stock markets around the world crashed and by the end of the decade Australia’s economy was struggling mightily.
Surprisingly, Keating won the 1993 election despite 17 per cent interest rates and 11 per cent unemployment being fresh in voters’ minds. But, as they often do when they grant on-the-nose governments a stay of execution, the Australian voters were waiting with baseball bats when the next opportunity to express their displeasure rolled around in 1996. (Shout-out to ScoMo!)
With some justification, Hawke and Keating spend their post-politics lives arguing the painful economic reforms the ALP pursued in the 1980s set Australia up for decades of recession-free affluence. Guess which political party was out of power for most of those years of plenty?
2007 – Kevin Rudd is elected. Australia has not had two consecutive quarters of negative growth for 16 years at this point. Economic commentators and envious foreign politicians are already starting to gush about what will come to be labelled a miracle economy.
What could go wrong?
Less than four months after Rudd moves into the Lodge, Bear Stearns implodes. Rudd puts in place policies that, as no less a figure than Joseph Stiglitz observes, “helped Australia avoid recession and saved up to 200,000 jobs”. Rudd gets little credit for this achievement from either the media or voters. He’s subsequently rolled by his deputy and then, after a short second stint as PM, is emphatically voted out of office.
2022 – After yet another longish spell in the political wilderness, the ALP returns to power federally. On the plus side, unemployment is at half-century lows and commodity prices are at record highs. On the minus side, nations are groaning under the weight of debt they took on trying to deal with the GFC and pandemic lockdowns, inflation is running out of control, interest rates are belatedly rising, China’s long run of double-digit growth appears to have come to an end (few boats have been lifted as much as Australia’s by the Middle Kingdom’s rising tide), supply chains remain fragile, productivity continues to be stubbornly flat, stock prices are plummeting, the cost of programs such as the NDIS is exploding, the baby boomers are continuing to reach retirement age in huge numbers, the US is showing no signs of pulling out of its decadent death spiral, World War III might just erupt any moment in Ukraine or possibly the South China Sea and a swelling chorus of economic experts is predicting an imminent and possibly severe downturn.
In his first remarks as Australia’s incoming Treasurer, Jim Chalmers warns the country faces a “dire” budget situation and says Australians should prepare to sink deeper into debt as budget deficits increase. “No new government can flick a switch and make $1 trillion of debt disappear, flick a switch and completely fix overnight the substantial issues that we have with skyrocketing inflation and falling real wages,” Chalmers proclaims.
How’s all that Roaring Twenties stuff working out for you?
It’s hard to believe that, only a few months ago, lots of respectable publications were running think pieces about how the 2020s would resemble the 1920s.
The argument, as far as I could understand it, was that Covid was our Spanish Flu, and just like many Western nations experienced strong economic growth between the tail end of the Spanish Flu epidemic in 2019 and the Great Depression-inducing Wall Street Crash of 1929, many Western nations, and plenty of Eastern ones, would experience strong economic growth from 2022 until (presumably) some unfortunate world-changing event in 2032.
Exactly why the 2020s should be a red-letter decade, beyond the fact it kicked off with a Spanish Flu-like pandemic, is the subject of some debate among Roaring Twentieists.
Some seem to believe we are on the cusp of tech breakthroughs that will rapidly propel us all into a sci-fi future.
Others hypothesise that the political hyperpolarisation threatening to tear nations such as the US apart will simply melt away (possibly due to prosperity-promoting tech breakthroughs).
Some argue that the imminent dissolution of national borders and/or an imminent outbreak of widespread income equality will prove to be just the shot in the arm the global economy needs.
Or that achieving final victory in the war for diversity, inclusion and equity will uncork vast reservoirs of entrepreneurial energy.
Or that a post-pandemic ‘hot summer’ era of sexual licentiousness will encourage consumers to loosen their purse strings.
Or that all the capital sloshing around in the global economy will make it possible for every man and his dog to launch startups that will then proceed to disrupt business models and markets, and power enormous fortunes.
Nobody knows anything
Perversely, I’m cheered that much of the cathedral (i.e. the world’s sensemaking institutions) have seamlessly and utterly shamelessly switched, almost overnight, from predicting we are on the cusp of a 1920s-style golden age to insisting we are headed into a 1930s-style decade of economic devastation and superpower conflict. It’s reassuring proof that, as William Golding used to observe about the movie business, “Nobody knows anything”.*
Maybe the next few years will be like the mid-1920s or maybe they’ll be like the mid-1930s. Possibly there will be a hard economic landing or possibly there will be a soft one. Perhaps some combination of AI and Big Data and blockchain and the Metaverse and Web3 and the quantum internet will see a fully automated, luxury communist utopia established within the next eight years. Then again, perhaps not.
And maybe my theory about a rare electoral victory for the Federal ALP inevitably spelling economic hardship for Australia, and usually the wider Western world, is correct but perhaps it’s just faulty pattern recognition.
*Full quote: “Nobody knows anything...... Not one person in the entire motion picture field knows for a certainty what's going to work. Every time out it's a guess and, if you're lucky, an educated one.”