Shadow treasurer Joe Hockey has reaffirmed the “pessimistic” concerns of some media commentators and analysts regarding Australia’s economy, accusing the federal government of “hubris” yesterday for dismissing such concerns.
Hockey’s comments to the Committee for Economic Development of Australia came just hours after Prime Minister Julia Gillard criticised the media and some economists for “unreasonable pessimism” about the state of the Australian economy.
The Prime Minister labelled the economic forecasts as “irresponsible” and urged business people at the State of the Nation conference in Canberra to “challenge the negative sentiment that is around in some quarters”.
In recent weeks, the Australian sharemarket has plummeted, losing the gains it made earlier this year, while the dollar yesterday dropped to US92 cents.
In Hockey’s speech, he said he’d given thought to how to “safeguard” the Australian economy should the downturn in the private sector become more protracted.
“Australia has not experienced a significant downturn in over 20 years and I am determined that it will not occur on my watch.
“It is the height of hubris to dismiss, out of hand, dire warnings of a possible downturn from respected observers. It is wise to listen and prepare,” he said.
Hockey signalled there could be scope for stimulus measures under a Coalition government, with several possible impacts should the downturn in economic activity continue.
“Protracted downturns in economic activity are very damaging in terms of lost output and lost jobs and it can take a very long time for the damage to be made good.
“This could only occur if the normal cyclical fail safes of lower interest rates, a lower Australian dollar, and the automatic fiscal stabilisers were unable to provide complete countercyclical boost,” he said.
Hockey said if the Coalition was elected it will employ different measures to the Labor Party, as he criticised the handing out of $900 cheques, the money spent on installing “pink batts” and the funds dedicated to constructing school halls.
Re-affirming the end of the mining boom, Hockey called upon other industry sectors to step up.
“The 90% of the Australian economy that is not involved in the mining and resources sector will now need to shoulder more of the burden of growth,” he said.
JP Morgan economist Tom Kennedy told SmartCompany it’s predicting the growth rate will drop to 2.4%.
“What we’re seeing is the growth stepping down a gear since 2012. It is predicted to be more than a full percentage point below growth last year and below trend growth of 3%,” he says.
When questioned about Hockey and Gillard’s stance on the economy, Kennedy says both politicians are searching for voters in the lead up to the election.
“They’re both talking their book as the election is approaching and the performance of the economy is a hot topic.
“There are a variety of reports, but we do think growth will be sub-trend and it will be slower than last year, so any reports which tell a story similar to that are quite accurate,” he says.
Kennedy says throughout the remainder of the year the jobless rate will increase and various sectors will come under pressure, but it’s impossible to say how likely a recession is.
“There have been reports that there is a 20% likelihood of a recession and there will always be a chance of a recession, but it’s very hard to put a number on it,” he says.