After the national accounts showed economic activity contracted in the September quarter, Treasurer Scott Morrison called for “partners” in the parliament to drive the government’s economic plan through.
Real GDP contracted by 0.5% in the September quarter for only the fourth time since 1991. In the 12 months to the end of September the growth rate was 1.8%.
Morrison played down the impact for the December 19 budget update, saying that in nominal terms, which had the biggest impact on the budget, the economy grew by 0.5% in the quarter.
He also tried to make the best of the figures by pointing out that Australia’s annual real growth was better than six of the seven G7 economies, second only to that of the United Kingdom.
But the quarter’s result was “not sustainable”, he said. The contraction was not just a wake up call and a warning. “It is a demand to support economic policies that drive the investment needed to support job security, the hours and wages that hard working Australians need to deal with rising costs of living – especially on energy and businesses, and the need to survive in a very tough and competitive economy.”
Shadow Treasurer Chris Bowen said this was a “deeply concerning result”.
It was the second worst economic growth result in the last 25 years, he said.
Morrison harked back to the Hawke government years saying the Coalition then had supported the Labor government’s economic reforms, which helped set up 25 years of prosperity.
“We’re looking for partners in this parliament who want to go on that journey with us so we can set up the next 25 years of growth – and today’s data says it’s time to join the national economic plan for jobs and growth.”
In particular the government is looking for support to get through the Senate its decade-long company tax cut. At present there is only backing for the early stage of the cut, which would go to smaller businesses.
Morrison said the quarter’s weakness was broad based but the dominant cause of the contraction was the decline of 3.2% in new business investment. Through the year new business investment declined by 8.5%.
“Increasing business investment to drive jobs and earnings must continue to remain the core goal of economic policy,” Morrison said. “Driving investment is the challenge. Getting capital out of its cave.”
This was why the government was so adamant about its tax plan, and its infrastructure plan. “We must be competitive. We must attract the capital, both internally, domestically, as well as internationally.”
But what was needed could not be done without getting partners in the parliament “that will engage with us in the national interest, that won’t be engaging in party political games. That won’t engage in negative politics and wrecking and destroying but will engage to lift the burden on business so they can invest and employ more people.”
Support was needed for the tax cut plan so Australia was not left stranded behind the United Kingdom and the United States where they were taking their tax rates to 17% and 15% respectively, he said.
Bowen accused Morrison of a pathetic response, trying to blame the Labor Party. “The Labor Party is not in office. Scott Morrison is the treasurer. Scott Morrison must take responsibility.”
The ACTU said the 0.5% contraction of GDP “lays bare the total failure of the Abbott/Turnbull Government’s ‘plan’ for the economy, which is now just three months of negative growth away from dragging the country into a recession.”
The figures “are just the latest in a litany of warning signs that this government has no idea how to manage the economy, create jobs and improve quality of life for all Australians”.