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Is the Australian economy really screwed? 5 facts you need to know.

Do we have less of this stuff? Really?

Apparently, the Australian economy has gone to sh*t.

The GFC has hit us hard and Kevin spent money like it was going out of fashion, leaving us in lots of debt. Lots and lots of debt. MOUNTAINS of debt. KILIMANJARO sized debt. And we still haven’t recovered.

Jobs are disappearing, businesses are going bankrupt, cost of living is spiraling out of control and soon we will all be living in mud huts and probably won’t even be able to afford buckets to put down our near-empty wells, let alone draw any actual water. (We will however, have very clean and well kept mud huts because we’ll ALL BE UNEMPLOYED and have lots of time on our hands….)

If you listen to talkback radio, politicians in Question Time, or eavesdrop in on the conversations of strangers on the bus – that’s the rhetoric. That’s the line. Everywhere you look, and everyone you listen to, seems to be forecasting doom and gloom. And saying that it’s only going to get worse from here.

But is the situation really so dire? As it turns out, probably not.

Here are five things you need to know before giving into the economy doomsday-ers.

1.What was going on before the GFC hit?

Going into the GFC Australia was in a pretty damn good position financially. Props to the Howard Government for delivering successive surplus budgets and keeping us in good shape, with low net debt.

The independent Reserve Bank had slashed interest rates in response to growing financial instability and successfully kept Australians investing at a time of instability.

And one of our biggest trading partners, China, was and remains home to an economy that is rapidly expanding – and they rely on our resources to do that. You get by with a little help from your friends.

Kevin Rudd. Remember him?

2. What impact did Kevin’s stimulus package actually have?

When the Global Financial Crisis reared it’s Hydra-like, multiple-heads, attacking almost every country in the world, the situation looked grim. The Australian Prime Minister at the time, Kevin Rudd, stepped up, with his stimulus-spending scheme (remember those $900 hand outs? New big screen TV anyone?).

His aim was to stimulate consumer and business confidence and spending. He was trying to avoid that ‘put off buying it or building it now because the economy is in trouble’ mentality that we’re all pretty prone to…. except Mia when Sass and Bide is on sale.

A combination of this fast move to stimulate the economy when it otherwise might have failed, and the preceding conditions mean that comparatively Australia fared pretty well through the GFC. There were job losses, there were financial institutions that got into trouble and certainly there were problems with some stimulus programs that led to some pretty tragic outcomes.

But. Australia did despite the GFC pillaging economies globally, the Australian economy never actually entered into recession.  And that was a pretty big achievement. Unemployment rose by less than 2 per cent during that period – whereas is doubled across Europe and in the United States.

Wayne Swan. He’s in charge of the money (well, for now).

3. What’s happened since? Are we still doing okay?

Since then, Australia has continued to see solid economic growth, low unemployment and inflation has remained contained. For the non-financial nerds amongst us that means we are producing more stuff, people are keeping their jobs and the cost of things isn’t rising much faster than our wages are – so buying things isn’t unreasonably difficult.

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The Australian dollar is at a near-record high compared to other currencies (which means you should shop a lot when overseas and order in from ASOS. The economy wants you to) and unemployment is at 5.4% (that’s pretty gosh darn low, by the way. Half the rate seen in most of Europe).

And last year, Australia officially rejoiced (well Wayne Swan did) – and not just because we are young and free – but because we had completed 21 years of consecutive economic growth. If you imagine a chart on the wall that tracks your height progress? Well, we’re still getting taller, Mum!

And a few weeks ago the Australian Reserve Bank said that the Australian economy was doing “pretty well”. But he’s an economist and we suspect that perhaps the bank’s deputy governor Philip Lowe is the kind of guy who as a child would say that Christmas was an “okay time” and that he “kind of enjoys” Game of Thrones.

And last week global ratings agency Fitch confirmed the Australian economy’s AAA credit rating. The makes Australia one of only eight members of the “9As Club” which – rather than meaning we’re getting straight As in the High School of the World – means that Australia is one of the few countries that has been awarded an AAA rating from all three global ratings agencies: S&P, Fitch and Moody’s.

4. But what about the MOUNTAINS of debt? Huh?

The media and the Coalition have done a pretty good job at creating a narrative around Labor’s ‘debt’. And it is definitely true that the country is in far more debt than it was under Howard, as a percentage of all that we produce.

But the key here is to remember that some pretty big events have happened since then – including a global recession – and so you need to look at debt in context. And context means looking to the rest of the world.

This infographic provides just that:

Now, yes, infographics can simplify the complexities of any situation… but the comparison is still a valid one.

Yes, we’re in debt. Yes, it’s more than before. But given the global financial climate? Well, everyone has an advance on their pocket money at the moment and ours is only a few weeks rather than several year’s worth.

5. How can politics distort the facts this much? Surely, where there is smoke there is fire, right?

Wrong. Russell Marks wrote in a piece that was published on Mamamia back in February about why Tony Abbott’s “crisis narrative” will win him the next election.

This is Tony Abbott’s “constant crisis” narrative. As government MPs have been at pains to point out, not just this week but this term, the government has been nothing if not stable and will likely run full term, or close to it….

Abbott’s crisis narrative has been actively encouraged by business groups and right-wing media particularly hostile to minority government. The common charge from the self-interested corporates is that minority government forces too much “uncertainty” into the system. Not for them parliamentary democracy, it seems.

Paola Totaro, a writer for the UK Guardian, criticised our fair and sunshine-y land – or at least, Australia’s seeming lack of appreciation for being the “lucky country” – after the interrupted leadership spill a few weeks back.

She wrote:

Last June, Australia celebrated its 21st. No, not a birthday or coming of age, but the completion of its 21st consecutive year of economic growth. Yup, you heard right, 21 years. Of growth. 21.

While the rest of the world lurches from crisis to economic crisis, the land of Oz is powering ahead, enjoying an Aussie dollar at a record high, unemployment at near-record lows (5.4%) and basking in more sunshine than the rest of us can dream up. So what does its Labor government do? Attempt suicide.

Totaro continued:

Julia Gillard’s Government… Attempting suicide.

Viewed from Europe, where national governments are planning to bail out their banks by raiding the savings accounts not just of Russian oligarchs but pensioners too, news of yet another political attack against Australia’s leader smacks of a particular strain of antipodean madness.

For decades, it is the British who have worn the “whingeing Poms” label. Now, it’s time for Australians to accept the malcontents’ mantle, because it is they who appear incapable of seeing just how lucky they are.

Complaint has become the national default position, seen in a political class – and a mainstream media – who spend more time slinging mud or knifing each other than debating and analysing national policy. No other advanced economy can come close to Australia’s 21 years of growth.

That period, a full generation, saw governments of both political flavours at the helm in Canberra, and is even more impressive when you remember that it spanned the dotcom boom (and bust), the crisis of 1997-1998 (remember that one?) and the global catastrophe that was the Lehman Brothers crash in 2008. Every single time, opposition parties (again of both persuasions) channelled Chicken Little, warning the sky would fall down in Australia. It didn’t. It still hasn’t.

It didn’t. It still hasn’t. Powerful stuff….

You don’t have to like Julia Gillard’s government. A lot of us don’t. Especially after the last few weeks of hoo-haa.

But if you don’t like them, then make sure you don’t like them for real reasons. It’s scaremongering and misinformation like this about what’s happened in the past that distracts from the main game and that’s what the parties plans are for what comes next.

Do you feel like the economy in Australia is doing okay? Or are you worried?

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