Graphaturday – Economic Indicators

The Parliamentary Library released a research paper which divides numerous economic trends up by Governments from Whitlam to Howard. It turns out party hats don’t work so well in analysing these trends.

This is an interesting graph with a nice trend. Economic policy makers over the last forty years can take a bow. When averaged across administrations it shows that governments have had a consistent policy of stabilising inflation until we have the mechanism today where an apolitical body, the Reserve Bank, makes interest rate decisions. There are external influences as well such as the China joining the global manufacturing business and placing deflationary pressures on economies with open trade policies. But by and large it can be argued that reducing inflation has been a successful government economic policy – to the point that Howard is presiding over very stable and low inflation figures.

I do not know why it dipped during Fraser’s term but to put it into perspective that graph makes the dip look large because of its scale; it is the difference of 2% between Howard’s high mark and Fraser’s low one. Which suggests labor participation is pretty consistent.

This is the most significant graph of all of them as it shows a definite bump between Whitlam/Fraser and Hawke/Keating/Howard. The last three governments are doubling the growth rate of Fraser and quadruppling the growth rate of Whitlam. Two issues here; economic liberalisation is superior in producing growth outcomes and secondly globalisation has been good to Australia. By the same token globalisation is meaningless unless Australia adopts economic liberalisation. Since Hawke this has been a consistent government policy.

There is a dip in the Hawke/Keating years, but like the labor participation graph the dip is bigger than it appears with a 0.8% difference to the Howard government. Otherwise that graph would be a neat uniform upward trend.

Unfortunately there is a definite upward trend here from government to government. Successive governments are taxing more and funding more. If you compare the size of government under Whitlam it is pretty hardcore in comparison to a modern government. Even adjusted for inflation tax receipts have doubled in the last thirty years.

So what can we conclude from that smattering of graphs?

Mainly that Australia has had good governance and the economic policies have been consistent from one administration to another in seeking better economic outcomes. There was an obvious change to economic liberalisation or rationalism in the 1980s which has been continued to this day. In conjunction with globalisation this has advanced Australian growth and prosperity.

Where Australia has had bad governance it has usually been temporary and contained in small areas. It is an issue, but by and large, government policies are consistent across administrations enough that the party itself does not matter so much. The trends indicate that a party reading of this data does not work so well as the positive trends, such as inflation, and the negative trends, such as increasing tax receipts, are across parties and suggest consistent government policy rather than differential party policies.

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8 Responses to Graphaturday – Economic Indicators

  1. cs says:

    Mainly that Australia has had good governance and the economic policies have been consistent from one administration to another in seeking better economic outcomes. There was an obvious change to economic liberalisation or rationalism in the 1980s which has been continued to this day. In conjunction with globalisation this has advanced Australian growth and prosperity.

    Too Pollyannerish for my taste Cam. Most of these would look worse than the previous 30 years, except for how hard eeryone now has to work, and in any event they’re consistent with worldwide OECD trends. What can we conclude? Australian bureaucrats basically advise compliant governments to follow the international herd, leading us into an ever more precarious and overworked economy since the mid-70s. There now, I trust you suitably depressed.

    More seriously, that business investment graph could be a worry, if the world hits the wall (and the joint is rumbling as I type). It could be a long way down to square that pile off.

  2. Yobbo says:

    What can we conclude? If John Howard cured cancer, Chris Sheil would still think he’s worse than Hitler.

  3. observa says:

    “When averaged across administrations it shows that governments have had a consistent policy of stabilising inflation until we have the mechanism today where an apolitical body, the Reserve Bank, makes interest rate decisions.”

    Our Reserve Bank, like its fellow brethren around the world has just been shown to be full of overpaid, pompous gits masquerading as economic experts. The Austrians would be rolling in the aisles with laughter at these emperors without clothes, if their complete nakedness over the last few days was not so bloody serious. We had them raising interest rates (or those that didn’t mumbling about the need to soon), only to have them fling the money they’d effectively been rolling off the printing presses for years, to the screaming hordes below. Two hundred billion and counting-
    http://www.news.com.au/business/story/0,23636,22226076-31037,00.html
    The gross mismangaement and profligacy, not to mention the false economics of our central bankers, is now laid bare for all to see. It was hidden for years by a demographic cohort of baby boomers that drove the consequent malinvestments in asset prices to the absolute disaster that now must be totally unwound. Our central bankers are charlatans and impostors and so are all who travel with them. We had a simple mechanism for such rogues and snake oil merchants in the past. Tarring and feathering. Still the housing affordability crisis is about to be solved, providing you still have a job and Wayne Swan is soon to get a crash course in being the world’s graetest treasurer. I’d suggest you lay in a good stock of tar and feathers for starters Wayne.

  4. Jacques Chester says:

    Aaaaaand cue huginormagantuan monetary policy sh*tfight, stage right.

  5. You’ve linked to the wrong thing Cam. That is unless you really meant to link to the Parliamentary Library’s digest of “Tax Laws Amendment (2007 Measures No. 4) Bill 2007”

    One big issue is when to start the periods of the variouis Govts. Obviously their policies took a while to have an effect.

  6. Cam says:

    Nicholas, Doh. Fixed the link, it now points here.

  7. James Farrell says:

    1. The new low inflation regime had been in place for five years before Howard arrived: there is no distint ‘Howard chapter’ in the inflation story.

    2. The differences in investment and labour force participation are insignificant – an illusion due to the scale of the graphs.

  8. derrida derider says:

    “Economic policy makers over the last forty years can take a bow”
    Umm, surely that should be “economic policymakers of forty years ago deserve pillorying”?

    The Great Inflation is surely the economics profession’s great shame. Unlike the Great Depression it can’t be explained away by the difficulties of destroyed trade and capital markets due to war; the shocks that led to it were relatively minor. Macroeconomists, in particular, should not be congratuling themesleves that they are now merely “competent”.

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