Australia’s dismal economic future

The front page story in the AFR today is: Weak incomes for years to come, International Monetary Fund warns. A bit of the story, all depressing:

Real incomes are poised to barely grow over the next six years and living standards are destined for a slowdown, unless a wave of major economic reforms and technology innovation by business can unleash a productivity boom like in the 1990s.

The International Monetary Fund has projected that incomes adjusted for inflation would average just 0.3 per cent growth a year through to 2024, well below the long-term average of 1.8 per cent since the 1960s.

We are still suffering from the effects of the GFC, not the actual financial meltdown which disappeared a decade ago, but from the massive incompetence of the stimulus program put in place at the time. Keynesian economic management – that is, the kinds of stupid ideas that remain au courant within Treasury and the RBA even now – have spiked our ability to grow, with these people unable to work out why wasteful public spending and ridiculously low rates of interest have caused the damage they have. A reminder of the words of our departing former Treasurer on the massive damage he has caused.

“In short, you don’t feel the bullets you dodge. And we dodged a huge one,” Mr Swan, who will not contest the next election, expected to be held in May, said this afternoon.

Mr Swan said the enormous stimulus package devised by the Kevin Rudd Government had worked.

“Ten years ago, there was a deeply weird attraction in some quarters to the idea that a ‘cleansing fire of recession’ wouldn’t be such a bad thing for Australia,” he said.

“I rejected it then and I reject it even more forcefully now, precisely because of the potentially terrible human consequences.

“We did all this knowing full well that our opponents would hound us with slogans about ‘debt and deficit’.

“In departing this place, I have a perspective I didn’t in the heat of battle, and can honestly say I’m happy to wear that criticism as the price of saving Australia from much worse.”

Really, he wouldn’t know which way was up if he didn’t have the words “it’s the other way, stupid” painted on his shoes. It is his advisors in Treasury and the RBA who are responsible and who are still there directing traffic. It really is a tragedy.

Doubling down on incompetence

What else is he going to say, I suppose, but say it he did: Labor’s record spending while in power has been used as an attack for years. Wayne Swan, responsible for the debt, says he’s proud of it. That is exactly what he said in his Swan Song, his final speech to Parliament.

The man responsible for the billions lost on school halls and pink batts, and up to his ears in the NBN disaster is proud of his legacy of debt and the subsequent years of slow growth. The fall in real incomes across the labour force even today is his legacy. There are unfortunately Keynesians everywhere. But if he thinks he has left behind a how-to manual on dealing with a downturn then that is the greatest worry of all.