Smart companies will heed the call from Santa to get out and grow their business before Christmas. Next year is going to be very different now that Treasury secretary Dr Martin Parkinson has been encouraged to walk the plank.
On election night, incoming Treasurer Joe Hockey urged Australians to spend big over Christmas. Since then, Roy Morgan Research reports that there has been a steady increase in business and consumer confidence.
Now 43% (up 4%) of Australians expect to be ‘better off’ financially this time next year compared to just 12% (unchanged) that expect their family to be ‘worse off’ financially.
Also 42% (up 2%) of Australians expect the Australian economy to have ‘good times’ over the next five years (the highest since January 29/30, 2011) compared to 17% (up 2%) that expect ‘bad times’ for the Australian economy. But as the reality of the Abbott government sinks in, the curve will flat line.
The Australian economy is on the threshold of its greatest ever era,” says Hockey. “There’ll be no austerity. People just expect us to be careful with their money. You’ve got to look after taxpayers’ money as you’d look after your own.”
Treasury briefings have driven home to the new government the risks to the economy of any delays in severe cuts to the spending of all government departments. The economic forecasts and predictions contained in the Pre-Election Economic and Fiscal Outlook (PIFO) are seen as obsolete. The austerity audit is seen as urgent, providing a backdrop to the criticisms of Treasury by Hockey.
To keep things calm and disciplined, we will have to wait for the Christmas and New Year holidays to learn how much things have slowed down in a new mid-year Treasury financial report.
Bank of America’s chief Australia economist Saul Eslake told investors in New York the Coalition’s new position on budget policy was encouraging. “I think that is appropriate given what I consider to be a challenging outlook for the Australian economy over the next few years,” he said. “The right thing to do in that context is to boost infrastructure spending.”
Some have indicated that Treasurer Joe Hockey is poised to take on a new role as the incoming government’s Scrooge after previous incarnations as Santa in North Sydney. Parkinson last month forecast deeper budget deficits in the next three years and cut its growth estimate for 2013-14 to 2.5% from the 2.75% seen in May.
Deloitte Access Economics’ Chris Richardson argues that the Reserve Bank of Australia would shoulder most of the responsibility to stimulate the economy through low interest rates.
The period of maximum danger is between now and the end of 2015. “Across that time, we will see the wind-down in spending on mega-mining projects. The shrinking by 2.5% to 3% as a share of the economy almost takes one year of economic growth away over three years,’’ he says.
The Bank of International Settlements (BIS) annual report suggests that governments need to start reducing their debt and central banks need to start raising interest rates. Ben Bernanke, outgoing Federal Bank Secretary agrees but says that now is not the time.
The economic inner circle of cabinet is not going to be bluffed into an austerity drive, bringing forward billions of dollar spending by our infrastructure PM as his version of the pink bats and school halls efforts of the previous government to maintain construction spending. It wants us all to go out and buy a new car now that it has shelved the FBT rise and promises a $5.5 billion a year parental leave scheme.
“You can be a more generous Santa if you make it easier for people to raise money,” Hockey said. “You can only give away presents if you’ve got something in the bank and we have to make sure we do that.”
It’s time to heed the call from Santa and prepare for an austere New Year.
Dr Colin Benjamin OAM is the chairman of Cultural Infusion Ltd and director general of the Life: ‘Be in it’ Australia charity.