Australians became more satisfied with federal public services, and more trusting of them, during the first months of COVID-19, according to survey results released by the Department of Prime Minister and Cabinet.
Between February and June this year, satisfaction with the public services delivered by the Commonwealth increased from 69% to 78%. In March 2019 it had been 71%. People were asked how satisfied they were overall with the Australian public services they had accessed in the last 12 months.
Trust in the federal public services rose from 57% to 65% from February to June this year, and compared with 59% in March 2019.
The results are in line with trends in trust and satisfaction in institutions and leaders that academic and other surveys have shown.
The Citizen Experience Survey, done regularly and nationally, measures public satisfaction, trust and experiences with Australian public services. It is led by the Prime Minister’s Department .
In total more than 15,000 Australians were surveyed over five waves. The first wave was in March 2019 and surveyed about 5,000 people; this was followed by four more waves, each surveying about 2,500 people.
These results dealt with services delivered at Commonwealth level, not state delivery.
The survey put a series of propositions to people who had accessed any federal services in the last year.
It found 57% agreed information from the service was easy to understand; 60% said the staff were knowledgeable; 62% said the staff did what they said they would do, 51% said the amount of time it took to reach an outcome was acceptable, and 66% said they were treated with respect. All the numbers had risen since February.
The picture of economic recovery painted by Prime Minister Scott Morrison is looking like a mirage. The 22 leading economists polled by The Conversation from 16 universities in seven states on average expect historically weak economic growth in all but one of the next five years, with growth dwindling over time.
Growth one percentage point above trend would average almost 4% per year.
Instead, The Conversation’s economic panel is forecasting annual growth averaging 2.4% over the next four years, much less than the long-term trend, tailing off over time.
The results imply living standards 5% lower than the prime minister expects by 2025.
The panel expects unemployment to peak at around 10% and to still be above 7% by the end of 2021.
It expects wages to barely climb at all, by just 0.9% in 2020, the lowest increase on record and even less than the rate of inflation, which it expects to be only 1.2%. It expects the share market to sink further in the rest of this year before climbing a touch in 2021.
Non-mining business investment, on which much of Australia’s recovery depends, should bounce back only 3.3% in 2021 after slipping 9.5% in 2020.
The Conversation’s panel comprises macroeconomists, economic modellers, former Treasury, IMF, OECD, Reserve Bank and financial market economists, and a former member of the Reserve Bank board.
Several admitted to much greater uncertainty than usual. One pulled out, saying “it’s really a mug’s game right now”.
One, who did take part, despaired that forecasting had been reduced to “guessing, in the context of an unprecedented event”.
Several cautioned that climate change, along with the prospect of new waves of coronavirus, makes five-year forecasts especially difficult.
Economic growth
All of the panel expect incomes and production to shrink in the June quarter (the one finishing now) after shrinking in the March quarter, meaning we will be in a recession (if there was any doubt).
Some are expecting a small bounce in the September quarter, although they warn that if JobKeeper and the coronavirus JobSeeker Supplement end as planned when September finishes, economic activity will turn down again in the December quarter, creating what panellist (and former Labor politician) Craig Emerson describes as a “W-shaped economic trajectory”.
Panellist Julie Toth cautions there is “no magic V ahead”. Without government action on adaptation to climate change, productivity, industrial relations, inequality and other matters, the best that can be hoped for is a partial recovery of some of the growth that has been lost.
In in 2021 the panel expects the economy to recover only half of what it lost in 2020. After peaking at 2.9% in 2023, economic growth will slip back to less than it was before the crisis.
The panel expects China’s economy to shrink 2.3% this year before bouncing back 4% in 2021. It expects the US economy to shrink 5.6% before recovering only 2.2%.
Steve Keen suggests that the underlying US performance will be even worse. It will have attained its measured performance by being prepared to live with adverse health consequences.
Tony Makin notes that China’s near-term economic growth is likely to be hampered by a move towards deglobalisation in countries wanting to make their supply of goods and health equipment less reliant on China.
Unemployment
The forecasts for the peak in the unemployment rate range from the present 7.1% to 12%, with most of the panel expecting the peak before the end of the year.
Julie Toth points out that even with no further job losses, “which seems unlikely”, measured unemployment will continue to rise for some time as people who have stopped looking for work start looking again and return to being counted as unemployed.
Saul Eslake says this participation rate makes forecasting the unemployment rate a “crapshoot”. The rate will depend largely on how many people choose to define themselves as looking for or no longer looking for work.
Living standards
The panel expects household incomes and spending to fall by about 4% over the course of the year.
The best measure of living standards, real net national disposable income per capita, should fall 4.5%.
Real wages, a key component of living standards, are expected to fall.
Never in the 23-year history of the Australian Bureau of Statistics’ wage price index has annual wage growth been much below 2%. Until now the lowest annual growth rate has been 1.9%.
The panel is forecasting growth of just 0.9% throughout 2020, a mere half of the record low to date. The forecast calls into question the timing of the current legislated increases in compulsory superannuation contributions of 0.5% of salary per year for each of the next five years, scheduled to start next year and set to eat into wage growth.
Headline price inflation should be only 1.2%, and underlying (smoothed) inflation only 1%, but both would be more than wage growth, shrinking the buying power of wages.
Share market
The spectacular recovery in the Australian share market (up 29% since late March after sliding 36% since late February) is not expected to continue this year.
The panel expects the ASX 200 to end the year down 8% before climbing 2.3% in 2021.
But the forecasts for 2021 fan out over a wide range, from a fall of 10% to a rise of 10%.
Housing
Sydney and Melbourne house prices are expected to reverse their gains of 5% and 3% in the first half of the year to close about where they started (Sydney) and down 1.3% (Melbourne).
New home building is expected to plunge a further 10% in 2020 after sliding 10% in 2019.
On balance it is not expected to improve at all in 2021, although again the range of forecasts is wide, from a recovery of 10% (Renée Fry-McKibbin) to a further decline of 10% (Stephen Hail).
Business
Mining investment is expected to continue to recover in 2020 and 2021 after huge falls between 2014 and 2019 brought about by the collapse of the infrastructure boom and the completion of several large liquefied natural gas projects.
Non-mining business investment is expected to fall 9.5% throughout 2020 before inching back 3.3% in 2021.
The Australian dollar is forecast to end the year near its present 69 US cents.
After initially diving to a low of 59 US cents as the coronavirus crisis unfolded, it and other currencies climbed against the US dollar from late March as the US response to the crisis faltered.
The price of iron ore has climbed from late March to a high of US$103 per tonne, well above the US$55 assumed in last year’s budget papers.
The panel is expecting most of those gains to be kept, forecasting US$97 by the end of the year, enough to provide one of the few welcome pieces of news for framers of the October budget.
Again, the range of forecasts is wide, from US$64 a tonne (Stephen Anthony) to US$110 (Margaret McKenzie).
Government finances
After ending 2018-19 almost in balance, the budget deficit is expected to blow out to between A$130 billion and A$150 billion in 2019-20, weighed down by about the same amount of stimulus payments.
The forecasts for 2020-21 and 2021-22 are centred around $150 billion and $100 billion respectively.
It’s a hard outcome to pick, in part because it depends on both the needs of the economy and government decisions about how to respond to them. In a report issued on Monday the Grattan Institute called for the government to spend an extra $70 billion over two years.
Forecasts for the 2021-22 budget outcome range from a deficit of $400 billion (Rod Tyers) to a deficit of just $10 billion (Renée Fry-McKibbin).
It’ll be easy to finance. The panel is forecasting a ten-year borrowing cost (bond rate) of just 1.4% per year, and it doesn’t expect it to climb that high until late 2021.
At the moment it’s 0.9%.
The Reserve Bank has committed itself to buy as many bonds as are needed to keep it low. The three major rating agencies have reaffirmed Australia’s AAA credit rating.
A survey of firsts
The 2020-21 survey is the first in 30 years not to ask for forecasts of the Reserve Bank cash rate, and the first since it has been published by The Conversation not to ask for the probability of a recession.
The Reserve Bank’s decision to push the cash rate as low as it conceivably could and leave it there for three years removed the need for the first. Australia’s descent into recession removed the need for the second.
The forecaster who proved to be the most farsighted on the recession was Steve Keen, who assigned a 75% probability to a recession in January at a time when Australia was dealing with bushfires and preparing to deal with coronavirus.
Other forecasters to assign a high probability to a recession (50%) were Julie Toth, Steven Hail, Warren Hogan and Richard Holden.
Australian economists narrowly back a wage freeze in the minimum wage case now before the Fair Work Commission, a freeze that could flow through to millions of Australians on awards and affect the wages of millions more through the enterprise bargaining process.
The annual case is in its final stages after having begun before the coronavirus crisis and been extended to take account of its implications.
In its submission, the Australian government called for a “cautious approach”, prioritising the need to keep Australians in jobs and maintain the viability of businesses.
The minimum wage was last frozen in 2009 amid concern about unemployment during the global financial crisis.
The Economic Society of Australia and The Conversation polled 42 of Australia’s leading economists in the fields of microeconomics, macroeconomics, economic modelling and public policy.
Among them were former and current government advisers, a former and current member of the Reserve Bank board, and a former head of the Australian Fair Pay Commission.
Each was asked whether they agreed, disagreed, or strongly agreed or strongly disagreed with this proposition:
A freeze in the minimum wage will support Australia’s economic recovery
Each was asked to rate the confidence they had in their opinion, and to provide reasons, which are published in full in The Conversation.
Half of those surveyed – 21 out of 42 – backed the proposition, seven of them “strongly”.
Nineteen disagreed, seven strongly. Two were undecided.
There was agreement among most of those surveyed that, in normal times, normal increases in the minimum wage have little impact on employment – a view backed by Australian and international research.
But several of those surveyed pointed out that these are not normal times.
Bad times for employers…
Gigi Foster said many businesses were operating closer to the margin of profitability than ever before, and were likely to stay that way for many months.
Rana Roy quoted one the pioneers of modern economics, Joan Robinson, as observing in 1962 that the misery of being exploited by capitalists was “nothing compared to the misery of not being exploited at all”.
John Freebairn argued that a freeze of labour costs, together with very low expected inflation, could provide a key element of certainty in the uncertain world facing households, businesses and governments.
Robert Breunig and Tony Makin suggested that with prices stable or possibly falling, a freeze in the minimum wage might cost workers little or nothing in terms of purchasing power.
Guay Lim and several others said if the government wanted the economic stimulus that would come from an increase in the minimum wage, it had other ways of bringing it about without making conditions more difficult for employers.
…and bad times for workers
Those supporting an increase saw it as a way to bolster consumer confidence and redress unusually weak worker bargaining power.
Wage growth before the coronavirus hit was historically low at close to 2%, an outcome so weak for so long that in 2018 and 2019 the Commission awarded much bigger increases in the minimum wage, arguing employers could afford them.
James Morley was concerned that a freeze in the minimum wage would “mostly just lock in” inflation expectations that were already too low.
Peter Abelson said labour productivity rose with respect for workers and fell with disrespect. A wage freeze would disrespect workers.
Saul Eslake proposed a middle way, deferring a decision rather than granting no increase. He said the increase that was eventually granted should do no more than keep pace with inflation.
Unweighted for confidence, half of those surveyed supported the proposition that a freeze in the minimum wage would assist Australia’s economic recovery.
Weighted for confidence, support grew to 51.6%
The Fair Work Commission is required to complete its review by the end of this month.
We are four months into a global virus outbreak, and public health awareness could well be at an all-time high. Which is why it is astonishing to discover that 92% of Australians don’t know the difference between a viral infection and a bacterial one.
The statistic comes from a survey carried out by CSIRO in March to inform our work on the OUTBREAK project – a multi-agency mission aimed at preventing outbreaks of antibiotic-resistant bacterial infections.
Our survey of 2,217 people highlights a disturbing lack of knowledge about germs and antibiotics. It reveals 13% of Australians wrongly believe COVID-19, a viral disease, can be treated with antibiotics, which target bacteria.
More than a third of respondents thought antibiotics would fix the ‘flu or a sore throat, while 15% assumed antibiotics were effective against chicken pox or diarrhoea.
While 25% of those surveyed had never heard of antibiotic resistance, 40% admitted having taken antibiotics that didn’t clear up an infection. And 14% had taken antibiotics as a precaution before travelling overseas, despite this being unnecessary and ineffective for warding off holiday ailments.
Fuelling the rise of superbugs
The results are deeply worrying, because people who do not understand how antibiotics work are more likely to misuse or overuse them. This in turn fuels the rise of drug-resistant bacteria (also known as “superbugs”) and life-threatening infections.
While COVID-19 has brought the economy to its knees, superbugs pose economic challenges too. Australian hospitals already spend more than A$11 million a year treating just two of the most threatening drug-resistant infections, ceftriaxone-resistant E. coli and methicillin-resistant MRSA.
Without effective antibiotics, thousands more people will die from sepsis and people will be sicker for longer, slashing the size of the workforce and productivity. By 2050, drug-resistant bacteria are forecast to cost the nation at least A$283 billion and kill more people than cancer.
One crucial way to stop this is to improve public understanding of the value of antibiotics. Antibiotics that lose their effectiveness are very difficult to replace, so they need to be treated with respect.
Almost all today’s antibiotics were developed decades ago and, of the 42 antibiotics under development worldwide, only five are considered truly new, and only one targets bacteria of greatest drug-resistance concern.
No time to waste
We don’t know the full impact of drug-resistant bacteria in Australia. With about 75% of emerging infectious diseases coming from animals, there is no time to waste in getting a better understanding of how superbugs are spreading between humans, the environment and animals. That’s where the OUTBREAK project comes in.
This network, led by the University of Technology Sydney, uses artificial intelligence to analyse an immense amount of human, animal and environmental data, creating a nationwide system that can predict antibiotic-resistant infections in real time. It maps and models responses and provides important information to doctors, councils, farmers, vets, water authorities, and other stakeholders.
OUTBREAK offers Australia a unique opportunity to get on the front foot against superbugs. It would save millions of lives and billions of dollars, and could even be scaled globally.
Alongside this high-tech response, we need Australians to get to know their germs, and stop taking antibiotics unnecessarily. Without antibiotics, we may find ourselves facing a host of new incurable diseases, even as the world grapples with COVID-19.
Paul De Barro, Senior Principal Research Scientist, Ecosystem Sciences, CSIRO
Last month, the Australian National University contracted with the Social Research Centre (SRC) to survey more than 3,000 Australian adults about their experiences and attitudes related to the bushfires.
The study is the first of its kind to gauge how people were affected by the crisis and how it changed their views on a range of subjects, from climate change to the government response.
More than half of Australians felt anxiety
Our research shows the vast majority of Australians were touched in some way by the fires. We asked about eight different forms of impact, from lost property to disrupted holiday plans to difficulty breathing from the smoke.
About 14.4% of our respondents experienced direct exposure to the fires, either through their property damage or evacuations.
We can extrapolate further by looking at population estimates from the ABS and the number of visitors to areas impacted by the bushfires from the National Visitors Survey to estimate the total number of people directly affected at around 3 million.
And 77.8% of our respondents reported indirect exposure to the fires, such as having a friend or family member with damaged or threatened property, having travel or holiday plans disrupted, being exposed to the physical effects of smoke or feeling anxious or worried about the fires.
Breaking the data down by individual category, the severity of the public health challenges becomes more clear.
Nearly six in 10 respondents (57%) said they were physically affected by the smoke, while 53.6% said they felt anxious or worried about the fires.
Confidence in the government declined
The long-running Australian Election Study has shown that confidence in the federal government has declined substantially in the past few decades.
Crises have the potential to restore some of this trust if dealt with effectively and transparently. However, the government’s handling of the recent bushfire crisis seems to have had the opposite effect.
Confidence in the federal government declined by 10.9 percentage points from 38.2% in our survey in October 2019 to 27.3% by January 2020.
Confidence in other institutions, meanwhile, was quite stable over the four-month period, and higher than for the federal government. Rural fire-fighting services had the highest level of public trust in our survey at 92.5%.
We also found a significant decline in the percentage of people who said they would vote for the Coalition if an election was held that day. This dropped from 40.4% in October 2019 to just 34.8% in January 2020 – nearly even with those who said they would vote for Labor in January (33.4%).
Significant increase in concern over global warming
We also tracked significant changes in people’s attitudes towards the environment.
For instance, 49.7% of people reported the environment as one of the top two issues facing Australia in January 2020, compared to 41.5% of respondents in October 2019.
Another interesting finding: 10.2% reported fires, natural disasters or extreme weather as the most or second-most important issue facing Australians, up from nearly nonexistent in October 2019.
Our findings showed consistently higher concern among Australians when it comes to specific environmental issues. Comparing responses from our January 2020 survey and a 2008 ANUpoll, we saw two large increases in concern for loss of native vegetation, animal species or biodiversity (13 percentage points) and drought and drying (nine percentage points).
There was an even larger increase in the proportion of people who believe global warming or climate change will impact their lives.
Nearly three-quarters (72.3%) of respondents said global warming was a very serious or fairly serious threat, a substantial increase from the 56% who said so in 2008.
The majority of those living in capital cities said they felt global warming was a very serious problem (62%) or a threat (74.9%). Perhaps even more surprising, however, was the fact these views were shared by people in non-capital cities (52% said it was very serious, 65.5% said it was a threat).
Support for new coal mines has also declined sharply over the past eight months. In our January survey, 37% of respondents said the government should allow the opening of new coal mines, down from 45.3% in an ANU survey from June 2019.
While being exposed to the bushfires appears to have made people more aware of environmental issues, the drop in support for new coal mines does not appear to have been driven by the crisis itself. Rather, it appears to be consistent across the population, with the biggest decline occurring among those who voted for the Coalition in the 2019 federal election (57.5% supported new mines in January 2020, down from 71.8% in June 2019).
There is still much work to be done to fully understand people’s attitudes towards climate change and how this correlates with natural disasters like bushfires.
But the data in our survey provide opportunities for future research and new insights and will be made available through the Australian Data Archive. Future surveys could test for changes in people’s attitudes taking into account different variables and track how those attitudes change over time.
The mental health survey will be run in 2020, with new data on how common mental illness is due the year after. This is a welcome announcement for the mental health sector, because information gathered in a survey like this can be used to shape policy reform.
But eating disorders, a major category of mental illnesses, have been neglected by all previous important data collection initiatives in Australia so far. Notably, they were missing from the last national mental health surveys in 1997 and 2007.
Eating disorders are not yet an official part of this new survey, but we understand they are being considered.
If people with eating disorders are not counted, they don’t count. In other words, we need to know who has these severe and debilitating conditions, and then work towards improving the treatment and supports available for them.
National surveys ask the public if they have experienced symptoms of various mental illnesses, either in their lifetime or during the past 12 months.
People who answer “yes” to particular clusters of symptoms are “diagnosed”, or assumed to have had the illness.
Asking the public about their symptoms is the best way to understand how common mental illnesses are. This is because most people with a mental illness don’t seek treatment and may never have had a diagnosis. So collecting data from health services or based on reported diagnoses doesn’t provide a full picture.
Also, for some mental illnesses, such as anorexia nervosa or psychosis, people might not realise they have a diagnosable illness. But they are likely to respond “yes” to direct questions about their experiences with body dissatisfaction or thinking difficulties.
Eating disorders are more than just anorexia
A person with anorexia nervosa engages in dangerous behaviours to maintain a very low body weight, or to lose more weight. Although most people have heard of it, anorexia is not common. We know this from other countries who have previously studied the prevalence of anorexia in community surveys.
That being said, it’s very serious and can be fatal. It has the highest mortality of all non-substance use mental disorders, and one in five of those deaths is by suicide.
Other eating disorders include bulimia nervosa, binge-eating disorder, and “other specified feeding and eating disorders” (OSFED), a catch-all group for those who don’t fit anywhere else.
People with bulimia nervosa or binge-eating disorder experience cycles of binge-eating, often after periods of restricting foods, which cause shame, guilt and discomfort.
Those with bulimia compensate for binge-eating through vomiting, fasting, exercise or other methods, while those with binge-eating disorder do not.
Binge-eating disorder is the most common of all eating disorders and occurs more equally across men and women than other eating disorders.
As well as continued weight gain, people with binge-eating disorder are more likely to experience depression and anxiety, and other significant health problems (such as asthma, diabetes, and arthritis) than people with a high BMI (body-mass index) but no binge-eating disorder.
Binge-eating disorder is the most common eating disorder. From shutterstock.com
One example of OSFED is atypical anorexia nervosa – when someone shows all the symptoms of anorexia and has lost a significant amount of weight but their BMI is in the “normal” or “high” range.
People with eating disorders often have a negative body image, and a strong perception their self-worth is tied to their appearance or body weight.
Burden of disease
Every year in Australia, millions of years of healthy life are lost because of injury, illness or premature deaths in the population. This is known as “burden of disease”.
Like national surveys, burden of disease studies are extremely important for planning and funding health services. They use prevalence statistics, or how many people per 100,000 Australians are assumed to have a particular illness. Given we don’t have good data on how prevalent eating disorders are, we likely underestimate their burden of disease.
The recently released Australian Burden of Disease Study 2015 lists eating disorders among the most burdensome illnesses for Australian females, being the tenth leading cause of total burden of disease for females aged 5-14 and women aged 25-44.
Importantly, the most common eating disorder – binge-eating disorder – is not included in burden of disease studies, meaning all these figures miscalculate the impact of eating disorders by a long way.
Eating disorders are on the rise
Despite our lack of prevalence data, there is evidence showing eating disorders are an increasing problem and should be regarded as a national priority.
Consecutive population surveys in South Australia showed the numbers of people with eating disorders climbed over a ten-year period.
Annual youth surveys demonstrate body image, the most potent risk factor for eating disorders, is year after year among the top concerns for young people.
A recent study on adolescents in the Hunter Valley region of NSW found one in five had experienced an eating disorder.
Eating disorders were estimated to cost the health system A$99.9 million in the year 2012 alone.
Better treatment and prevention of eating disorders would reduce the cost and the burden of disease. But we need the data to show where the treatment gaps are and how to fund better services.
There are many promising elements of the proposed Intergenerational Health and Mental Health Study. These include surveying multiple people in a family, gathering physical and mental health data, and a target of more than 60,000 Australians. But it’s time eating disorders were included.
Things will continue to look good enough for long enough to help the government fight the election. Beyond that, the Conversation Economic Panel is worried. Wes Mountain/The Conversation, CC BY-ND
The Australian economy will remain healthy for long enough to enable the government to claim it as a strength in the lead-up to the May election, but the first Conversation Economic Survey points to a fairly flat outlook beyond that, with a 25% chance of a recession in the next two years.
The Conversation has assembled a forecasting team of 19 academic economists from 12 universities across six states. Among them are macroeconomists, economic modellers, former Treasury and Reserve Bank economists, and a former member of the Reserve Bank board.
Taken together their forecasts point to no recovery in the share market during 2019, no recovery in wage growth, no further improvement in the unemployment rate, further modest home price falls in Sydney and Melbourne, and to a budget deficit next financial year despite the official forecast of a surplus and Treasurer Josh Frydenberg’s commitment that the government will fight the election continuing to forecast a surplus.
Weighing heavily on Australia’s economy during 2019 will be a much weaker US economy, with what the forecasting team says is the possibility of a US recession, and weaker growth in China. Australian consumer spending is forecast to continue to grow during 2019, but no faster than it did during 2018. The best measure of living standards is forecast to advance at a crawl.
Most of the team expect the Reserve Bank to sit on its hands throughout all of 2019, leaving its cash rate unchanged at the all-time low of 1.5% for what will be a record 40 months.
Economic growth
The panel expects the Australian economy to grow more slowly in the year ahead, by 2.6%, down from recent annual growth of 2.8% and 3.1%. None of the panel expects growth to exceed 3%. One, Steve Keen, formerly of the University of Western Sydney and now at University College London, expects growth of only 1%.
Most of the panel expect China’s growth to continue to slow, from the annual growth of 6.7% typical over recent years to just 6.2%, the weakest growth since the 2008 global financial crisis and the weakest calendar year growth since 1990.
Former Treasury economist Nigel Stapledon now at the University of NSW nominates China as the biggest threat to Australian and global growth. He says it has a good record of stimulating its economy to get out of difficult corners but one day it might get it wrong.
The panel expects US economic growth to hold up at 2.8% during the year ahead but to weaken or go into reverse by year’s end as the “sugar hit” from the Trump tax cuts goes into reverse.
Former Treasury and International Monetary Fund economist Tony Makin points to US high public debt that will need to be rolled over, soaking up funds that could have been more productively used for investment, to higher US interest rates imposed by a central bank concerned about inflation, and to the escalating trade war with China.
ANU modeller and former Reserve Bank board member Warwick McKibbin says the US economy is “very likely” to begin to go backwards towards the end of the year. Craig Emerson, a former Australian trade minister now with Victoria University, says the US is likely to enter a recession in 2020. Former Treasury economist Mark Crosby at Monash University says if there is a US recession, it won’t hit until late 2019, with the impact greatest in 2020.
Rebecca Cassells from the Bankwest Curtin Economics Centre says a lot depends on the outcome of the US-China trade war: “The two biggest economies are going head to head, but both are almost as reliant on the other to sustain their growth trajectories,” she says.
Australia should look to other parts of the world to drive its economic growth. “India is one of them, and is rising rapidly with no downgrading of its growth trajectory of 7.75% for 2019.”
Living standards
Nominal GDP, the money earned in Australia unadjusted for price changes, is forecast to grow more slowly in 2019, by 4.5%, down from recent growth in excess of 5%, reflecting weaker iron ore prices.
The best measure of living standards, real net disposable income per capita, is expected to barely grow, climbing just 1.1% over the year to December, much less than recent growth in excess of 3%, but much more than its performance in the dismal years between 2012 and 2016 when it went backwards.
Forecasts for the unemployment rate cluster around its present 5.1%, with only four below 5% and one above 6%.
Wage growth is forecast to climb no further in 2019, finishing the year at its present 2.3% instead of climbing to 2.75% on its way to 3% by mid 2020 as forecast in the budget update.
Rebecca Cassells points out that much of the increase we have had has been driven by the Fair Work Commission’s decision to lift the minimum wage 3.5% from June 2018, suggesting very low growth elsewhere. Disturbingly, she says more and more enterprise bargains are being terminated, with employees falling back on awards.
Overwhelmingly, our panel is of the view that the only thing that will lift wage growth out of its slump (and budgets have been incorrectly forecasting a bounce out of the slump for eight years now) is higher productivity: producing more per worker.
Victoria University economic modeller Janine Dixon notes that the December budget update actually downgraded its forecast of productivity growth, from 1.5% to 1%, and so is not optimistic.
She says even if productivity growth did pick up, excessive market power in some industries combined with weakness in labour market institutions means it might not easily be passed on to workers.
Tony Makin, a supporter of company tax cuts, says the best thing to lift productivity would be new (perhaps foreign) investment embodying productivity-enhancing technology.
The saving grace for workers facing yet another year of historically-low wage growth is that price increases will also remain low.
Inflation has been right at the bottom of (or below) the Reserve Bank’s 2% to 3% target band for four years now, meaning that even at the continuing low rates of wage growth forecast, wages should continue to climb just faster than prices.
The panel expects consumer spending to climb by only 2.5% in real terms in 2019, most of which will reflect population growth of 1.6%.
The average forecast for inflation is at the very bottom of the Reserve Bank’s target band. Only two panel members expect inflation to edge back up to the middle of the band. They are Warwick McKibbin and former Treasury and ANZ Bank chief economist Warren Hogan, at the University of Technology Sydney.
Interest rates and the budget
Without either a lift in inflation or a substantial weakening in the economy there is little reason for the Reserve Bank to move interest rates in either direction.
Governor Philip Lowe took the job in September 2016, just after the board cut the cash rate to a record low of 1.5%. He hasn’t moved the cash rate since, although on several occasions he has said the next move is most likely to be up.
Five of the panel do expect at least move up this year, including the two who think inflation might approach the bank’s target. Three expect cuts, taking the rate below 1.5%.
The government says it will deliver a budget surplus next financial year, of A$4.1 billion, the first surplus in a decade.
The panel doesn’t think so, all but one member predicting a lower budget surplus than the government, and seven predicting deficits. The average forecast is for a deficit of A$3.5 billion rather than a surplus of A$4.1 billion.
Monash University macroeconomist Solmaz Moslehi identifies optimistic wage growth, weaker than expected mining investment and a hit to consumer spending from the housing downturn as the biggest risks to the forecast surplus.
Julie Toth, adjunct professor at Deakin University’s Master of Business Administration program and chief economist at the Australian Industry Group, says the latest indicators suggest that neither employment nor wage growth will accelerate by as much as the government expects.
Michael O’Neil from the South Australian Centre for Economic Studies says the biggest immediate risk to the forecast surplus is thermal coal prices, given China’s efforts to cut coal imports and the shift to renewables in China and India.
The biggest long term risk is the scale of the company tax cuts and the ongoing shift of income from highly-taxed labour to more lightly-taxed capital.
Margaret McKenzie of Federation University identifies the biggest risk to the surplus as a change of government, something she says she welcomes because with extensive idle capacity and underemployment, a surplus would be unhelpful.
Home prices
The panel expects Sydney home prices to fall by another 5.8% and Melbourne prices by another 5.1% in 2019, taking the slides over two years to 14.7% and 12.1%.
Only Macquarie University and former Reserve Bank economist Jeffrey Sheen expects prices to move back up throughout 2019, by 2% and 3%.
Reassuringly, none of the forecast falls are bigger than 10%. The biggest are predicted by Steve Keen, Tony Makin, Margaret Mckenzie and Craig Emerson.
The lower prices will be accompanied by much slower growth in housing investment, expected to climb only 2.1% in 2019 after climbing more than 7% in the year to September 2018.
Non-mining business investment is forecast to grow more slowly this year, by 5.7% instead of 11.4%, and mining investment is expected to keep sliding, losing a further 3.4% after losing 11.2% last year rather than climbing as the government’s budget update predicts.
Five of the team believe that mining investment to turn the corner in line with the budget forecast. Nine expect it to fall further.
The Australian share market will for practical purposes not grow not at all during 2019 according to the average forecast, which is for barely perceptible growth of 0.1%. A steady share market would come as a relief to super funds and share owners after last year’s slide of about 7%.
The range of forecasts for the ASX 200 is wide, from slides of more than 6% to gains of more than 6%.
Fortunately for a government the panel expects to need to continue to borrow more in order run continued budget deficits, what it pays for to borrow via the 10-year bond rate is expected to remain little changed at 2.6%. Only Warwick McKibbin expects a much higher bond rate, of 3.5%.
The panel’s average forecast is for an broadly unchanged Australian dollar, of around 70.5 US cents. The highest forecast is for US$0.80, the lowest for US$0.62.
The iron ore price, at present close to US$74 a tonne, is expected to fall to around US$64. Only one panelist, Warwick Mckibbin, expects it to stay near where it is, at US$75. The government itself is cautious, using a price of US$55 in its budget forecasts, a number it might lift in the April budget, allowing it to forecast more revenue.
On average, the panel believes there is a 25% chance of a conventionally-defined recession within the next two years.
Half of the probability estimates are between 20% and 30%. Averaging all of them together other than Steve Keen’s estimate of 95% produces an estimate of 22%.
A recession is conventionally defined as two consecutive quarters in which gross domestic product falls instead of rises. Australia hasn’t had two consecutive quarters of negative growth since 1991.
The most recent negative quarter was in September 2016. Before that there was one in March 2011, and before that in during the global financial crisis in December 2008.
Ross Guest of Griffith University makes the point that his estimate of 20% should be considered low. There will always be a risk of a recession. By itself two quarters of negative growth needn’t be a disaster. The impacts on the government and on consumer and business confidence would be more important than the downturn itself.
Guay Lim of the Melbourne Institute of Applied Economic and Social Research assigns the lowest probability of any of our panel to a recession, 5%, saying the most likely catalyst would be a global trade war.
Warren Hogan assigns the highest probability to a recession after Steve Keen, 40%, saying Australia is facing the end of a major construction boom and has heavily indebted households. It will be vulnerable to any negative shocks and especially vulnerable to higher inflation and interest rates.
Steve Keen says the only thing that has kept Australia afloat since the China boom has been the housing bubble, which the banking royal commission has been discovering was built on fragile, and in places fraudulent, foundations.
Nigel Stapledon says the biggest drag on the economy will be the collapse in the construction of residential investment units. Labor’s proposed increase in capital gains tax will make it worse, notwithstanding Labor’s decision to exempt new construction from its crackdown on negative gearing.
Rebecca Cassells says on the bright side Australia is set to become the world’s biggest exporter of liquefied natural gas, the biggest exporter of iron ore to India and the world’s biggest producer of lithium, needed for batteries.
And if there is a global economic downturn within the next few years, she says another positive is that Labor is likely to be in power, making the successful deployment of a stimulus package more likely than if the Coalition had been in office.
One in every four Australian households rents, and it’s not just those on low incomes.
A new nationally representative survey of 3,182 renters, funded by the Bankwest Curtin Economics Centre, finds that while 60% of renting households have a household incomes below A$78,000, 30% are on incomes of more than A$100,000.
Although many households on low incomes and those headed by single parents are undoubtedly struggling to meet rental costs, those on moderate or higher incomes are generally positive about the experience.
Many of us rent
Despite its reputation as a nation of homeowners, Australia has the 10th largest private rental sector in the 37 nations that make up the Organisation for Economic Cooperation and Development.
Comparison of international private rental sectors. OECD Housing tenure distribution 2014 or later. ABS Census data 2016
Six in ten renters do it because they can’t afford to do anything else. The rest rent by choice.
Most are happy with what they rent
Perceptions of dwelling quality are positive with only 6% reporting that their dwelling is in a poor or terrible condition. 81% report a good or excellent relationship with their landlord.
Add a property manager into the mix and this falls to a still respectable 69%. Fewer than than 5% of respondents reported a poor or terrible relationship.
Around half of respondents claim to have a good to full understanding of their rights as tenants.
Overall, when asked whether their rental property felt like home, just over 60% reported it did, with less than 20% being negative about their experience.
The longer a tenant lives in a rental dwelling, the more it feels like home, highlighting the importance of security of tenure.
Generally, levels of satisfaction with the sector are high given the proportion of tenants who would rather be owners.
Satisfaction with the private rental sector by age group. Bankwest Curtin Economics Centre Private Rental Sector Survey
Two thirds of renters have been in their current property for less than three years. Almost 40% have rented four or more properties during their time as renters.
While two thirds of moves are by choice, around one third are forced with the primary reason being the owner selling the property.
Moves are stressful, expensive and disruptive, particularly for households with children. Around half of all renters say they would gladly choose to sign a lease longer than 12 months if given the option because it would offer greater security and a stronger sense of home.
As does discrimination
One in five renters report some form of discrimination when applying for rental properties.
Those households most likely to suffer from discrimination are single parents with children.
Some important issues addressed in the legislation are highlighted in the BankWest Curtin Economics Centre report which found the vast majority of respondents are on short-term leases (12 months or less).
The typical proportion of gross income spent on rent is 28%, with almost half of all renters paying more than 30%, a figure that rises to 63% for renters over 55.
One in seven renters are paying more than 60% of their income in rent.
When asked the reasons for such high rental payments, almost six in ten report being forced to pay that much through a lack of available alternatives.
Commonwealth rent assistance was regarded as important or very important by nine out of ten of those receiving it.
What we could do to help
One of the best ways to make rent more affordable would be to reintroduce a subsidised rental scheme that offered a financial incentive for developers to invest in housing that would be leased to low-income households at below-market rents along the lines of the National Rental Affordability Scheme by Prime Minister Kevin Rudd in 2008.
It was wound up by his successor tony Abbott in 2014.
Workable build to rent schemes could also help boost supply and security of tenure, and the negative gearing and capital gains tax concessions tax available to mum and dad investors could be tied to the delivery of long–term, below market rental dwellings.
Our survey finds the private rental market is performing quite well for those on moderate to high incomes. But not for those on low incomes who will never access home ownership and need secure long term tenure.
The parliament is preparing to rush through anti-vilification legislation to apply during the postal ballot on same-sex marriage.
Under the bill a person must not vilify, intimidate or threaten another person because of their views, expressed or believed to be held, or because of their religious conviction, sexual orientation, gender identity or intersex status.
The safeguards bill will be introduced on Wednesday and passed before parliament rises on Thursday. It has a sunset provision that means it only lasts for the duration of the ballot, the result of which will be announced on November 15.
Civil penalties will apply, to a maximum of A$12,600. But the attorney-general, George Brandis, must consent to a person taking enforcement action under the vilification and related provisions.
People are also protected from being discriminated against – in employment or by being denied access to membership of a union, club or other body – for making a donation to the campaign.
The bill requires that broadcasters, if they give opportunities for one side to put their views, must provide the other side with reasonable opportunities.
The government negotiated the emergency legislation with the opposition over the last few days.
The bill also includes requirements for authorisation of advertising and other provisions that apply to ordinary elections but did not automatically cover this voluntary postal ballot.
In the Coalition partyroom meeting one person objected to the anti-vilification provisions. But Acting Special Minister of State Mathias Cormann gave an assurance that Brandis’ approach would have a “bias towards freedom of speech”.
Labor claimed credit for securing “important concessions from the government that prohibit vilification and hate speech” during the ballot. But opposition spokespeople Mark Dreyfus and Terri Butler said in a statement: “Let’s be clear – this safeguards bill does not in any way legitimise this survey process, which has been foisted upon Australians at a massive cost”.
The High Court’s decision to allow exceptional government spending on the marriage postal survey makes way for the latest bizarre, but typical, episode in the history of political responses to changing social attitudes to marriage.
The voluntary postal survey is unique and bizarre, in that no government has yet conducted such a statistically unreliable exercise in gauging public opinion on a contentious social issue. Yet it is typical, in that political responses to social change in areas of sex and morality are usually slow, fiercely contested, ideologically confused, but nonetheless important.
Political change in response to changes in social values is slow
The slow and strange political processes in Australia over the political recognition of same-sex marriages are actually typical of those around the world. The legislative histories of many previous changes to marriage law have been far longer and more drawn out than the recognition of same-sex marriage in Australia is likely to be.
In an era of high maternal death and limited social welfare, it was common for deceased women’s sisters to marry their brothers-in-law and assume their sister’s role as wife and mother. The churches regarded such marriages as incestuous, and fiercely opposed law reform to legalise them. It took almost 70 years for this now forgotten reform to pass.
Reforms to permit divorce, interracial marriage and to administer traditional polygamous marriages were similarly contested and slow to be formed and reformed.
It should, therefore, not be a surprise that legislative reform in Australia to allow same-sex couples to marry is taking longer than a decade.
The complex relationship between religion, law and marriage
In some jurisdictions, in some times, religious institutions have legislated and adjudicated for marriage. This has never been the case in Australia. Between 1753 and 1836, the Church of England did enjoy sole political jurisdiction and administration of marriage in the British world.
However, from federation, Australian marriage law has always been secular. Religious organisations have made their own rulings about what marriage practices their own members should engage in. But while “churches, mosques or synagogues might bless nuptials, marriage itself is not a religious institution”.
Nor is it the law’s role in Australia to impose moral standards on society. Since at least 1971, when censorship law was reformed, lawmakers have sought to use legislation to enforce current community standards, rather than impose ideologically based absolutes.
The government’s ostensible rationale for the optional postal survey is actually in line with this norm: to assess community standards. Both proponents and – especially – opponents of change have been careful to frame their arguments in relation to shared community values.
Marriage equality is about more than marriage
The case for marriage law reform to allow same-sex couples to marry has been relatively simple and consistent around the world: a claim that to include same-sex couples in marriage will increase equality and social inclusion.
As this case has gained traction in the West, opponents of change have had to innovate in order to combat rapidly changing community standards.
As I have argued elsewhere, opponents of marriage law reform are primarily motivated by religious conviction. However, in a largely secular context, where moral values cannot easily be imposed on a population, “they are attempting to hide religious and moral arguments in the Trojan horse of health and human rights discourse”.
The “No” campaign has so far largely sidestepped the social justice argument of the “Yes” campaign. Instead, they have raised fears about children in rainbow families.
Conservatives have argued that children have a “right” to a mother and a father, and that same-sex parenting necessarily involves the “removal” of a child from one of its natural parents. These are innovative arguments.
Same-sex parenting is clearly not in contravention of the UN Convention on the Rights of the Child. The right to a mother and a father is a completely novel human right for children, and one that is impossible to guarantee. And research clearly shows that children raised by same-sex parents show no different health or wellbeing outcomes to children raised by opposite-sex parents.
Similarly, when donor assisted reproduction became popular and was debated 70 years ago, governments and churches considered it at length. However, the major objection raised in these historical debates was that donor assistance in reproduction was equivalent to adultery.
Today, individuals and couples of all sexualities access assisted reproduction technology and have done so for many decades. Equating the donation of sperm or eggs to child removal is a completely novel argument.
As the postal survey goes ahead, we can expect to see more of these novel arguments from the “no” campaign. But it’s important to remember that legal change around marriage is historically slow, and that this debate is not about religious values, but community values. Specifically, it is about how we value LGBTI people, their relationships, and their families.
The ballot papers started to go out on Tuesday.
As the postal survey goes ahead, we can expect to see more of these novel arguments from the “no” campaign. But it’s important to remember that legal change around marriage is historically slow, and that this debate is not about religious values, but community values. Specifically, it is about how we value LGBTI people, their relationships, and their families.
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