This is, without qualification, the most difficult time to predict how global economic and social events will unfold. I have been analyzing and predicting economies since the late 60s, and I managed to predict most of the major developments over that period. But now it’s a very new, and different, ball game.
I used to say it was unpredictable that BT – Before Trump. But it is now an even more significant challenge.
With our politics now little better than a very short-term game, they are no longer driven to deliver genuine reform, or good government.
So they tend to ‘spin’ issues, also attempting to create the impression that they can deliver the magic, instantaneous, silver bullet solutions to whatever the challenge. However, raising expectations in this way, and then failing to deliver, creates the global movement that is anti-government, anti-institution, disbelieving of our politicians and political processes, reflecting their concern that they have been missed, ignored, and/or left out.
It is therefore very difficult to try to predict how such forces and movements may play out, and what they will mean for growth, incomes, employment, and inequality.
Against this background, this year’s budget is looming as a very significant challenge. Not only because the government has been put on notice by the rating agencies, reviewing our much coveted AAA status, but also because the average voter is looking for leadership and outcomes on the issues that dominate their daily struggles.
Voters want answers on issues such as housing affordability, now a crisis after some decades of neglect, but, realistically, where governments can only hope to make marginal improvements in the near term, and now need to delineate a range of integrated policies that may work to ease the crisis in the medium term.
Treasurer Morrison has also been propagating the myth that he can achieve budget repair by concentrating on further expenditure restraint, when, obviously, he is also facing a revenue problem – some taxes and charges will also need to increase if he is to be able to paint a deliverable path to budget surplus by early next decade.
The policy drift of the last couple of decades is now becoming serious. Our unbroken, 25 years of sustained growth may be coming to an end. It surely will if the Chinese bubble bursts, or if Trump initiates a trade war, or destabilises the delicate geo-political balances.
We are also seeing the potential fragmentation of Europe as they digest Brexit, and the French Presidential election has the possibility of ‘Frexit’, and who knows whether Merkel will survive in Germany. Not to mention Syria and the mounting tensions with Russia, the rest of the Middle East, Turkey, North Korea, the South China Sea, and many more.
It would be reasonable to hope that the government might address the significance of these and other global challenges, in setting the framework for the budget. It would also be good to see that they are working to a well-structured medium-term strategy, both internationally, and domestically.
But I fear the budget will be another band-aid job, claiming much and delivering little. Turnbull should have recognized by now that his poll collapse, the biggest and most rapid of our history, was the direct result of having raised expectations and then failed to deliver. He now needs to stand up for genuine reform.