When Prime Minister Tony Abbott meets with US President Barack Obama and senior officials from the US administration, the economy is likely to be front and centre of their discussions.
With this being the case, Mr Abbott has a wonderful chance to show off just how wonderful Australian economic conditions have been, how adroitly economic policy has been implemented in the last few years and how that is showing up in an economic expansion and fiscal settings that people in the US could only dream about.
Recent data confirm the Australian economy into its 23rd year of unbroken economic growth. This is in stark contrast to the US which endured recessions in 2001 and of course in the period from 2007 to 2009. “Australian’s have forgotten how to spell ‘recession'”, Mr Abbott could quip, such is our economic success. The fiscal stimulus measures taken in during the global economic crisis, Mr Abbott could highlight, were a critical factor stopping Australia diving into a nasty recession with hundreds of thousands of jobs saved, new jobs created and financial stability maintained during these troubled times.
Last Friday’s US jobs data confirmed that, finally, the level of employment has returned to the peak prevailing just prior to the recent US recession. In other words, the US has seen zero net job growth over the last seven years.
Cue Mr Abbott. He could note that over this time, employment in Australia has increased by over 11 per cent, which in US terms, is equivalent to approximately 17 million jobs. Get that, 17 million jobs! “I’m just repeating Barack, had the US had recorded the same sort of job creation as Australia over the past seven years, employment in the US would be 17 million higher than it currently is. How’s that for economic management.”
Mr Abbott could also note that unlike the US, Australia has a triple-A credit rating with a stable outlook from the three major credit rating agencies. Indeed, just before the US was downgraded, Australia got its third triple-A rating after agency Fitch noted the near policy perfection during the GFC.
Mr Abbott could also brag about the fact that government net debt is going to peak at a chicken feed 14.6 per cent of GDP in 2017 before drifting back towards zero in less than a decade as the economic cycle chugs along. Mr Obama and his official might be a little humbled to note that US government debt is currently peaking at 90 per cent of GDP and on a best case scenario, is unlikely to be below 75 per cent of GDP in 2025.
Linked to that, Mr Abbott could then note that even during the worst of times during the global crisis, when government revenue was smashed and the stimulus measures were showering money into the economy, the budget deficit had only one year above 4 per cent of GDP, and just two years above 3 per cent. Mr Obama might cringe, noting that in the US budget deficit was 11.6 per cent of GDP in 2009, 9.3 per cent in 2010 and will finally get back below 3 per cent of GDP in 2015.
The recent experience for the Australian economy remains a case-study for global policy makers and academics to learn from. What is best to do when your economy is on the cusp of recession. Australia managed to get through it in good shape. If Mr Abbott is smart, he would highlight this not just to show off, but to reiterate that Australia is a major player and has a lot to offer the world.
