Prime Minister Malcolm Turnbull addresses the media after his tour of the Snowy Hydro Tumut 3 power station in Talbingo, NSW, on Thursday 16 March 2017. fedpol Photo: Alex Ellinghausen Photo: Alex EllinghausenI don’t know what sort of juice they’re drinking over at the Treasury, but I sure wish I could get some. Perhaps they just delight in watching normally intelligent people treat economic forecasts as if they’re actually based on something more than political wistfulness or a stab in the dark. It’s easy to imagine the chatter over cappuccinos in the morning.
“Can you believe it? They’ve swallowed our projections whole,” the first says.
“Yes,” the person next to him in the queue responses, slapping his thigh in delight. “Wages growth (currently the lowest on record at just 1.9 per cent, although Australian Bureau of Statistics data only goes back to the late 1990s) has been stuck below 0.6 per cent a quarter for the past three years. Then, without bothering to give any reason for the change (other than suggesting it will ‘revert to the long-term average’), we assert it will suddenly zoom up and almost double. By 2020, it’s more than 1 per cent higher than inflation, yet no one bats an eye. The figures are quite literally incredible!”
A woman behind them isn’t so sure they’ve done the right thing. “But aren’t you worried we’ll be exposed? After all, the Australian National University’s Dr Anthony Swan pointed out (to the aid budget breakfast) that the last five budgets also confidently predicted a line to recovery using almost exactly the same 60-degree angle. Of course it’s never happened. Isn’t there a danger someone will twig and we’ll become a laughing stock?”
This conversation would never happen, of course, because, first, people don’t speak using parentheses and, second, no one need worry that the Treasury will be exposed. After all, it’s not in anyone’s interest to do so because pulling one card from the pile would risk seeing it all collapse.
That’s why the banks, the housing industry and Labor are engaged in reinforcing this conspiracy of silence over the great property swindle, each for their own reasons. The opposition doesn’t want to expose the fragility of the data because it would ricochet back to hit them.
And the banks need to keep lending. Last weekend, a Melbourne apartment above a busy restaurant in Collingwood sold for $740,000. Fair enough, except that exactly the same apartment sold in 2007 for $497,500. Because I’m not mathematically gifted, I can’t be bothered working out how this converts to an annual inflation rate. Nevertheless, what is obvious, even to me, is that these numbers bear no relationship whatsoever to official inflation statistics.
Yet housing forms the foundation of family finances. That’s why it weighs far more heavily in our perceptions of economic security than the part it plays in the composition of the mythical basket of goods and services used to calculate inflation statistics. Is it any wonder most Australians treat these as a joke?
Last weekend, the national auction clearance rate rose slightly to 77 per cent, while Sydney recorded a $9.3 million sale. In Canberra, a Red Hill house that sold for $1.38 million two years ago went under the hammer for $1.54 million. Are you surprised no politician wants to touch negative gearing? The backlash if anything happened to the housing market would be horrific. It means those with money – the very people who are doing increasingly well out of the current system – will continue to benefit from everything remaining exactly the way it is.
The system is broken. The only way this will change is if someone from outside the establishment, a non-politician politician, comes to change it. That’s the appeal of the Donald Trumps of this world.
But the people who’d vote for him aren’t buying this newspaper or paying my salary. So let’s move quickly on from their concerns and worry instead about the other substantial problems with the budget’s accounting.
Both Shane Wright in The West Australian and Peter Martin in Fairfax Media have already exposed the Treasury’s ludicrous pretence that, for some completely unspecified reason, government spending in 2019-20 will suddenly plunge by $6.3 billion compared to the previous budget. This deus ex machina arrives just in time to deliver Scott Morrison’s much-hyped path to surplus.
The problem is it relies on national disability insurance scheme spending dropping by $2 billion; pensions plunging another $2 billion; and the remaining savings coming from slashing carer support and defence equipment spending. The final saving is, perhaps, plausible, if not something this government would wish to boast about. The other savings rely on discovering both the fountain of youth and also an elixir to heal the lame. It’s difficult not to conclude such figures are pure fantasy.
Once again, no Treasury officials has leapt to back the predictions by wagering even a small portion of their salary on the integrity of these forecasts. They won’t, either, because they know full well exactly what witches brew the politicians have churned out.
I certainly don’t want to be the one destroying this heroic chimera. After all, look at what the budget’s promising me: wages up 2.5 per cent next year, 3 per cent the following year, and 3.5 per cent the year after that. I just hope someone’s told the editor. In the meantime, let’s have another cup of the Treasury juice. No substance perhaps, but plenty of froth and bubble.
Nicholas Stuart is a Canberra writer.
This story Administrator ready to work first appeared on Nanjing Night Net.