Greg Jericho comments in The Guardian (13.6.17) on Australia’s stagnating economy, arguing that government intervention is necessary since ‘the old fixes of cutting rates and reducing the deficit won’t work because consumption is weaker than almost any time for 60 years’.
His analysis continues: ‘The Australian economy is going through a massive change at the moment, and yet there is a bizarre belief within the government and Reserve Bank that economic policy can behave as if things are the same as always. The way the differing parts of the economy no longer seem to fit together as they used to and yet there is little change from the old solutions of low interest rates and a return to surplus.
‘Last week the latest GDP figures found that in the past 12 months the economy grew by just 1.7%. In the March quarter the economy grew by just 0.3%. So weak is the economy running that to stay steady at 1.7% annual growth we need the economy in June to grow by more than twice what it did in March. That is certainly achievable, but it does highlight how precarious things are.
‘But if you were to look at the statements of the Reserve Bank and the pronouncements in the budget you would assume everything is running as it should. But things are not as they once were.
‘… If interest rates cuts are off the table, that leaves the federal government. In the same period of low interest rates we have also had the constant calls for a need to return to budget surplus. If the pieces fit together like they used to that might be sensible. But with an economy featuring historically weak levels of investment and consumption growth, record low wages growth and record low interest rates, perhaps the missing piece is the government?
‘Ministers made a great noise before the budget about infrastructure. It’s clear more than noise is needed.’