5 economic issues facing the next Prime Minister of Australia
Published on: | by Filip Karinja
The people of Australia have voted, but as yet we are still days – even weeks – away from a result.
No matter who forms government to lead the country over the next four years, the next Prime Minister will face five major issues.
The most important of these issues is the economy, of which there are several sub-sectors to deal with including unemployment, foreign relations, budget deficit, cost of living and our place in the global economy.
What is the real unemployment rate?
According to former British Prime Minister Benjamin Disraeli there are three types of lies: lies, damned lies, and statistics.
When it comes to politics no matter what party a politician belongs to, statistics will be used to portray success.
Looking at the official unemployment rate put out by the Australian Bureau of Statistics, unemployment currently sits at 5.7%.
However according to Roy Morgan Research, unemployment is double that at 10.7%.
Despite how the figures are spun the reality is that in May 2016, 2.316 million Australians (18.1% of the workforce) were either unemployed or under-employed.
Buddha once said that like the sun and the moon, the truth cannot be long hidden.
This is likely to be the case when the real unemployment numbers eventually present themselves. At this point the government will have no choice but to acknowledge the depth of this growing problem.
China slowdown = End of the commodity boom
With some economists predicting the collapse of the Chinese economy, Australia should no longer rely on the demand from China for its mineral resources.
The Asian powerhouse economy is nearing economic lows not seen since the 2008 global financial meltdown.
Commodity prices have been walloped over the past few years and there are few signs of this trend reversing anytime soon.
GDP figures out of China show that their gross domestic product growth is dropping steadily, down to 6.7% year-on-year for the first quarter of 2016.
What will this mean for miners/jobs?
Are the days of the great Australian commodity boom over?
If so, Australia is going to have to find a new sector to prosper from.
Budget deficit and debt exploding
Australia’s debt problem has been labelled worse than China’s, according to Morgan Stanley.
For every $9 of debt used up in 2015, only $1 was added to Australia’s GDP number.
Australian government debt has also been on the rise, breaching the $400 billion barrier earlier this year to at time of writing be sitting at around $421 billion.
According to Deloitte, the deficit is forecast to continue its blow out.
How will the Prime Minister of Australia attempt to solve this issue?
Cost of living at global highs
A 2016 National Australia Bank study found that across all demographics (except for people over 50yo) the biggest issue facing them was the cost of living.
Coupled with a weakened dollar, the price of imports has risen substantially, making goods produced overseas more expensive for everyday Australians to purchase.
Australia has a proud history of being #1 in various sports, well here’s something else our nation is top of the charts with…
How will our leader keep the cost of living under control or will we win the title of ‘The World’s Most Expensive Country’ for a fifth consecutive year?
Global economy shaky
Fallout from the recent Brexit vote has shaken up global markets, with $2 trillion wiped from global equity markets.
Volatility across markets has been on the rise with the prices of commodities and currencies swinging wildly.
We still have debt problems facing countries like Greece, Spain, Italy, Portugal, Ireland, Puerto Rico, Venezuela, even Japan and the United States are reaching debt levels that appear to be unrepayable.
Despite being an island nation, Australia is not immune in today’s integrated global economy.
Central banks around the world are deploying negative interest rate policies and injecting countless billions of dollars into the markets to keep them lubricated.
The Reserve Bank of Australia, whilst not in negative interest rate territory, has been cutting rates in a bid to keep borrowing and spending levels from dropping.
If the global economy continues to slowdown the RBA may continue cutting rates like its central bank counterparts, however this strategy is not sustainable long-term and may require the Federal Government to step up its efforts to shield Australia from any potential downturn in global markets.
How the Australian government will begin to tackle these issues is yet to be seen.
As Ayn Rand once stated: “You can ignore reality, but you can’t ignore the consequences of ignoring reality.”