Hewson's view: Government oblivious to our economic woes

How good is this?: Prime Minister Scott Morrison speaking in Parliament earlier this month. His mantra of a "strong economy" is not the reality for millions of Australians, according to recent reports. Photo: AAP
How good is this?: Prime Minister Scott Morrison speaking in Parliament earlier this month. His mantra of a "strong economy" is not the reality for millions of Australians, according to recent reports. Photo: AAP

While the Morrison government sticks with its slogans about the state of, and prospects for, our economy - essentially "We have a strong economy" and "We are Making it Stronger" - the evidence is mounting as to just how tough many people are finding it.

In recent days the media have carried stories under very disturbing headlines, such as "Millions of Australians are forced to live pay to pay and would be broke in a month if they lost work", and "Credit card debt increasingly catching older Australians".

The first story quotes analysis from the financial comparison website finder.com.au suggesting that 46 per cent of Australians could be living pay to pay. They state that, "this equates to some 5.9 million people who might find themselves unable to cope with the sudden loss of their jobs, only able to survive financially for a month or less".

Even more disturbing was the finding that some 16 per cent - or about two million - are living day to day, in precarious positions where they could only survive for a week if they lost their jobs.

The second story reports an ASIC claim that 1.9 million Australians have "problematic credit card debt", against the background reality that Australia has one of the highest levels of household debt in the world, at about 120 per cent of GDP, and nearly 200 per cent of household disposable income.

Organisations at the coalface, such as the Salvation Army financial counselling service, the Consumer Action Law Centre, and the Wesley Mission, confirm the recent significant increase in requests for help by older Australians. And, of course, it's not just older Australians, as there is also evidence that younger Australians are racking up more debt than they can hope to pay back.

All this reflects the fact that the key elements of the cost of living - housing, health, electricity and gas, child and aged care, and more - have run away on most households, at a time where their wages have remained flat, they have had to run down any savings, their house prices have been falling, and they have become very concerned about the security of their jobs.

Essentially the government takes the view that "there's nothing to be seen here", and is relying on recently legislated tax cuts, and cuts in the official cash rate by the Reserve Bank, to sustain consumer spending, and therefore the overall growth of our economy. But it is doing very little to directly reduce any of these cost "explosions".

However, their response is little better than a punt. At the same time the government is committing to a run of budget surpluses over the next decade that would be deflationary overall.

The government also hopes that when people get additional cash in their pockets, they will actually spend it, rather than say seek to reduce their debts, or save a little?

Of course, the recent RBA cuts to the official cash rate may also not be fully passed on by the banks, and credit card interest rates have barely moved far from about 20 per cent, even though the cash rate has come down from 7.5 per cent to a historically low 1 per cent over the last decade or so since the GFC.

But governments really don't want to dirty their hands with this sort of detail. They just repeat and repeat their slogans about how well we are all doing!

Governments don't want to dirty their hands with this sort of detail. They just repeat and repeat their slogans about how well we are all doing!

It is also instructive at how begrudgingly the government has recently adjusted the "deeming rate" for those seeking and relying on the aged pension, and how both sides of politics are resisting a commitment to raise the unemployment benefit, Newstart, which is well below any measure of the "poverty line", and hasn't been increased in real terms for nearly 25 years.

Wile the measured rate of unemployment has indeed fallen, it is still above its historic lows, and underemployment, that is those who want to work more but can't, is more than double that rate. An increasing number of workers are very concerned about their job prospects, now being compounded by concern about the likely impact of "disruptive technologies" and the "gig economy".

While the Morrison government would have us believe that their "economic duck" is travelling smoothly across the dangerous domestic and international economic seas, the rest of us have been left to paddle furiously under the surface.

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.