Australia’s Labor Government led by Prime Minister Anthony Albanese has been in office since May last year. Virtually all measures of a healthy economy have improved markedly over those nine months. The nation’s economy is not yet ranking number one in the world, as it did for most of the Rudd/Gillard Labor period, but it’s on track.
The foundation has been laid already for significant economic and social reform.
Solid economic growth
Growth in gross domestic product (GDP) for the last three months of 2022 was reported last week by the Australian Bureau of Statistics (ABS) at 0.48% for the quarter and 2.66% for the year.
Among the 33 developed members of the Organisation for Economic Cooperation and Development (OECD) which have posted GDP data for last year’s fourth quarter so far, Australia ranks a creditable ninth on both quarterly and annual GDP growth, with both measures well above the OECD averages.
Signals from the national accounts
Positive news in last week’s data include more homes being built, more spending on travel and continuing robust trade.
Challenges ahead are signaled by persistent inflation, increasing interest rates, softening consumption growth, declining corporate investment and a sharp reduction in savings as mortgage payments increase.
Interest rates and inflation
Australia’s cash rate at 3.35% is now the highest in more than ten years. But it is better than the OECD’s average of 4.6%.
Inflation in January was 7.8% to the end of December, but declined to 7.4% in January. This ranks 14th in the OECD, where the average is 11.2%.
Strong jobs market
Australia’s latest unemployment rate was a creditable 3.7% in January. This is slightly higher than levels through the last six months, but that is consistent with jobless rates rising worldwide. Australia ranks eleventh among the 38 OECD members, virtually unchanged over the last six months.
Healthy budget position
The budget is on track to yield a deficit substantially better than the $36.9 billion forecast last October.
Net debt is reducing, at just $566.5 billion in January. That is well below the peak of $626.3 in August 2021, and lower than last January’s debt of $609.4 billion.
Share of the income pie going to wage and salary earners
Compensation to employees has increased significantly under Labor already. Overall compensation rose 2.0% in the December quarter, the highest for any December quarter since 2010. Simultaneously, corporate income increased 3.2%, a much higher rate than workers enjoyed.
This knocks aside the suggestion, which Chalmers was quick to ridicule last week, that inflation is due to wage pressures.
The income share going to workers remains too low. This is the result of decades of wealth and income shifting progressively from workers to corporate profits. See blue chart, below.
The pressure is now on the Albanese Government to get this level back where it should be, above 55%.
Substantial reforms now affordable
The Government is now in a strong position also to raise pensions, increase the minimum wage, expedite some of the infrastructure projects neglected by the last administration, and build new social housing.
The capacity to deliver these will be enhanced further with less corporate tax evasion. These can be done. They should be done.
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This is an abbreviated version of an article published today in Independent Australia. The original article is available here in full for free:
https://independentaustralia.net/politics/politics-display/labor-can-manage-the-economy-now-lets-fix-the-inequalities,17296
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