The national accounts of figures published yesterday by the Australian and Bureau of Statistics will be a welcome fillip for the Federal Government which has been lagging in the polls so badly in the past six months that it has looked as if its defeat at the election due later this year is inevitable. However, the figures published yesterday can give the Government some hope of presenting a case to the electorate that it deserves re-electing.
True, it has made a complete hash of many other areas of policy – – health insurance, digital television, reconciliation, treatment of asylum seekers, to name a few. However the Coalition has always presented itself as the better economic manager of the two major parties. Three months ago that claim looked hopelessly weak in the face of a December quarter growth figure of minus 0.6 percent. Many had predicted that the March quarter figure would also be negative, which would have meant Australia was in a technical recession – – technical recession being defined as two consecutive quarters of what the economists call negative growth. At best, economists had predicted a slight increase in growth in the March quarter. They were taken aback yesterday at the 1.1 percent figure which annualised forward would mean 4.4 per cent.
The only downside is that a large part of the extra growth can be put down the Government’s recent vote-buying spending spree which in turn might cause some over-heating in the economy. That would result in a serious risk of the Reserve Bank increasing interest rates. If that happens, the Government’s reputation as an economic manager would be in tatters, along with its re-election hopes.
Nonetheless, as the Treasurer, Peter Costello, pointed out, yesterday’s figure puts Australia’s growth rate as faster than any of the major industrialised economies in the world. The figure was good across the board. Consumption, investment, profits, in comes and exports were all up.
It means that the Australian economy has put the glitches of the introduction of the GST behind it. In the previous quarter, housing proved to be critical in the negative figure. This was because there had been a large rise in housing activity just before the introduction of the GST which had in turn resulted in a sharp decline after its introduction.
The Leader of the Opposition, Kim Beazley, tried to make the best of it by asserting that the economy should be booming at a greater rate – – “going gangbusters”, in his words. He argued that the state of the world economy was such that there was no impediment to an annual growth rate of four per cent. That the growth rate of in the past year was around two per cent, he argued, could be put down to the GST.
That argument is not a very good one. The fact is that the fall in imports noted in yesterday’s figure indicates that one element of the GST appears to be working – – namely that exports are not hit by the GST whereas imports are.
If the next quarter’s results are as good as these, the Government will have a reasonable case to put to the electorate that it is a good economic manager. However, economics is not the be-all and end-all of political and social life. Australians rightly remain concerned about such things as the treatment of the less fortunate people in society.
It may well be that despite justified concern about Labour’s capacity to cause rises in interest rates and a generally poor at economic performance because of its propensity to increase government spending, that the voters will spurn the coalition’s better economic credentials and to punish it for its social meanness.