The Australian economy, despite some of the headlines of recent weeks, is in pretty good health.
Today’s employment report, showing the Australian economy added 37,700 jobs in March, was at the very upper limit of the market’s expectations.
Low interest rates and a falling Australian dollar have been working. There’s a lot of stimulus in the economy at the moment and businesses are hiring as a result.
The next big event in the story of Australia’s transitioning economy is the federal budget. Joe Hockey will get on his feet in Parliament on the evening of May 12 and the country will hang on every word.
It’s worth a quick reminder of what happened last year to consumer sentiment after the Coalition’s first budget.
Sentiment regularly falls around budget time, but last year’s whack to the national mood was one of the worst on record. The conversation around Australia’s economy hardened late last year around the poison of political instability. RBA governor Glenn Stevens and Treasury secretary John Fraser, the country’s two top economic officials, stressed to an extraordinary Cabinet meeting earlier this year that low confidence was holding the economy back.
Put crudely, Hockey’s job this time around is to avoid a repeat of last year’s scare. Sentiment readings can sometimes be dismissed as a “mood thing”, but over time, if consumers are worried about the state of the economy, they will change their behaviour and spending decisions. There’s a night out skipped here, a cheaper car bought there, and sooner or later, it adds up to real money.
The other problem with the policies announced in the budget last year was the lack of a coherent political strategy for actually passing legislation. The government had powerful ideas, but it completely failed to mount a convincing case for its reforms, resulting in the fiasco over Medicare co-payments and the collapse of the higher level education reforms.
The problem remains that this government has not shown it has a track record of clearing difficult political hurdles. We can expect some robust scepticism about whatever Hockey announces next month.
But there are signs that at least some of the lessons of last year have been learned. An influential Liberal told me this week that now Jacqui Lambie has cut her ties with Clive, she seems more interested in building bridges. He added: “But if you want to talk to Jacqui, you have to discuss Tasmania.”
The wheels are turning in the background. Over to you, Treasurer.
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