A stagnant government has created a stagnant Australia

When your objective is to prevent a country from changing, it comes with a price. It’s a price that Australians are now paying as we face stagnation across all the major areas controlled by the federal government.

Our biblical-sounding seven years of wage stagnation — the RBA now predicts wages growth will still be at less than 2.5% until 2022 at the earliest — and our current tepid economic growth of just 2% are well-known. Less attention has been paid to the major productivity slump that has set in since 2013, despite regular warnings from the Productivity Commission, which the government has persistently ignored.

And while our jobs growth has been strong, it hasn’t been enough to prevent unemployment from rising back to 5.3% — or prevent Australia from falling into the ranks of the also-rans in the OECD on unemployment. In 2013, Australia had the eleventh-lowest unemployment rate in the OECD, narrowly behind Brazil and Iceland. Now we’re ten places lower in the rankings. Our rate is much higher than economies like Germany, the US, UK and New Zealand, where sub-5% and even sub-4% unemployment is the norm.

Worse, our jobs growth is now being driven entirely by the public sector, fuelled by government spending in education, health and social care: in the three months to August, ABS data shows, the economy put on a net 64,000 jobs — including 64,600 health and social care jobs and 82,000 education jobs. Major private sector employers like retail and construction are shrinking, and manufacturing is in freefall. It lost 37,000 jobs in the August quarter alone, seasonally adjusted, despite a bipartisan revival of Australia’s traditional protectionism in areas like anti-dumping and defence manufacturing.

That economic picture reflects the policies of the Coalition since 2013. In retrospect, the prime ministership of Malcolm Turnbull was marked by two policy decisions that have helped prop the economy up ever since. The first was his abandonment of the Coalition’s traditional refusal to fund urban infrastructure and, along with investment by the NSW and Victorian governments, a lift in infrastructure investment from the dire state Tony Abbott left it in. This enabled a much-needed “pipeline” of infrastructure spending to support growth.

The second was a politically inspired embrace of Labor’s policies on health and schools funding, which saw massive additional funding channelled into those sectors with their vast, mainly female, workforces. They have been the only workforces that have seen anything like substantial real wages growth in recent years. Both of these results have prevented the economy from falling into a serious slump since 2018, and illustrate the virtues of policy flexibility and the willingness by Turnbull to turn away from tradition to deliver outcomes.

But in the private sector, only a (now defunct) residential construction boom, fuelled by low interest rates, stimulated jobs growth — though not enough to provide any wages growth. Only a surprise spike in commodity prices stopped GDP growth from flatlining this year. The government has otherwise left the economy to its own devices. Its response to wage stagnation was to ignore it, encourage temporary migrant workers, demonise unions and endlessly predict wages would shortly pick up. It devoted considerable effort to trying to cut taxes for multinationals that already rort the tax system, before giving up tax reform of any kind.

Now it fetishises a balanced budget based on rising taxes rather than supporting growth. The result is an economy where business can delight in minimal growth in their wage costs. But economic growth has been crippled by stagnant household spending and, as the RBA has repeatedly pointed out, the government’s ever-rising tax take from Australians.

And it’s an apt result for a government whose entire economic policy is to oppose the other side’s reforms and look after the powerful interests that provide political donations — in other words, to maintain the status quo. But the stagnation that now characterises the Australian economy, and the policy vacuum that created it, applies beyond the economy to the nation as it whole.

Stagnation has become the defining characteristic of the nation itself under a government determined to maintain the status quo — to lock Australia firmly in place, incapable of progressing.

Tomorrow: climate, energy, Indigenous recognition — how a lost decade beckons a stagnating country