Australian economy slows even further

SARAH FERGUSON, PRESENTER: Laura, obviously economic and political implications of these numbers. First of all, what do the numbers tell us about the economy?

LAURA TINGLE, CHIEF POLITICAL CORRESPONDENT:  Well, the numbers show that the economy is very soft, Sarah. It’s the seventh household recession, quarterly household recession so far. 

They’re the weakest figures since the 1990s. We’re not in recession, partly because of immigration but particularly because of government spending. 

Now that’s holding the economy up, as is immigration but of course, both of those issues are a double-edged sword, both economically and politically. 

You can say government spending, holding up the economy, may also be helping keep inflation higher. But on the other side, if it wasn’t for government spending, we’d be in recession. 

Now what makes up those government spending figures I think is really crucial here and the Treasurer is pointing out today that the biggest federal amount of spending is defence spending, and the biggest amount of government-sector spending is actually from the states. 

The Opposition obviously says it’s all about Labor’s big government and its spending too much money and it should stop immediately.

SARAH FERGUSON:  Just on those economic implications and for our poor, beleaguered audience who are mortgage-holders, why doesn’t this very slow, very sluggish growth make an interest rate cut more likely to come sooner?

LAURA TINGLE:  Well, the figures today were below market expectations. So people have started to waiver a little bit about what the view is of what the Reserve Bank will do. 

But, nonetheless, and these figures are well below the Reserve Bank’s own forecasts for growth. But, having said that, the Reserve Bank has been so insistent that it wants to be sure that it’s going to be back in that 2 to 3 per cent target range before it cuts rates, that it really makes it seem pretty unlikely that they’d move really sharply as a result of this one set of numbers. 

Now crucial to all of that, I think, is what happens and what’s the perception of what’s happening in the labour market and there’s a very lively debate now within the economics profession about how strong the labour market is. 

And the Reserve Bank now has a very strong position, which is in contrast to some of our big banks, and even is in conflict, is too strong, but has a stronger position than the Treasury, saying that there’s all this strength in the labour market which, once again, potentially, means the economy’s stronger and is a reason why they can’t cut rates sooner rather than later.

SARAH FERGUSON:  Back to the more raw politics. We’ve heard a lot of focus, obviously, from the Opposition on the numbers that show a fall in living standards. Angus Taylor said today that these numbers, the accounts, are the equivalent of a fail mark for the government. ‘It’s a nightmare’ is the language he used. How does the Government defend itself against that attack?

LAURA TINGLE:  Well, I think it’s very hard for the Government to defend itself – just in the sense that people are hurting, obviously. People feel the pain of high interest rates. People feel the fact that, these figures reflect the fact that people have stopped spending a lot of money. 

Consumption is falling or is lower. So, their lived experience of this only seems to be confirmed by these numbers. 

So, it is a very hard sell for the Government so close to an election. All it can do, I think, is what it’s been doing which is to say ‘Look, this actually partly represents the government keeping the economy afloat, keeping jobs afloat, helping with your cost-of-living measures,’ but it is a very hard argument to make just against that raw political angst in the community.

SARAH FERGUSON:  One of everyone’s favourite highlights in soccer, you can feel me shifting the ground here, but everyone’s favourite highlights is watching the poor, beleaguered goalkeeper or a defender score an own goal. Can I bring you now to Commonwealth Bank today and its own goal? What happened there?

LAURA TINGLE:  Well, maybe it was an own goal before today, which was, of course…

SARAH FERGUSON:  We saw the highlights today.

LAURA TINGLE:  Yes. The decision by the Commonwealth Bank to impose a $3 charge on withdrawals, obviously, has gone down not very well. So, they’ve basically backed off that decision today. 

The Treasurer has not exactly claimed credit for it but pointed out that he had spoken to the Chief Executive of the Commonwealth Bank about this, and the Commonwealth Bank has decided that it probably wasn’t the best move it had ever announced.

SARAH FERGUSON:  Now, on a different topic, so today, Australia’s now one of 157 countries that’s voted to express support for a two-state solution between Israel and the Palestinians. We’re talking here about the West Bank and Gaza. In Australia, what is the political significance of this move by the Australian Government in the UN?

LAURA TINGLE:  I think it’s really interesting, Sarah. Technically speaking, as you say, we’re one of 157 countries that have backed this. 

On the other side, of course, on this occasion the US and Israel haven’t backed it. 

We’ve always had a position of support for a two-state solution, but the way we prosecute that has been cautious under this government. 

Penny Wong has always said, “We back UN calls when we think it will help facilitate the process of peace in the Middle East,” and she has argued in the past that some of these resolutions have not been helpful at that particular time. 

Obviously, the context of the Middle East is always the framing of these judgements. I think the significant thing is that, clearly, the countries that have signed up to this, this time around, are trying to send a message to the incoming Trump administration, who’s running a very sort of strong, pro-Israel line, that they’ve got problems with this. 

But of course, in Australia, Peter Dutton and the Coalition have got a very strong pro-Israeli line as well. The Jewish community, or some of its representatives, have reacted with great hostility to this decision, as has Peter Dutton and the Opposition, who are saying that it’s a shift in Australia’s position and it’s a shift in favour of the pro-Palestinian cause. 

So, once again, we’re seeing an escalation which we haven’t really seen for, I can’t remember when this issue has played so viscerally into our domestic politics.

SARAH FERGUSON: Laura, thank you very much for indeed for talking to us this evening.

LAURA TINGLE:  Thanks, Sarah.