These must be anxious times for the captains of corporate Australia. Stuttering growth, falling investment and an inexorable fiscal imbalance are menacing signs for anyone expected to make a profit.
Yet it appears the economy is, at best, of secondary concern to 34 chief executives who insist the Prime Minister should spend his diminished political capital reversing his party’s plebiscite commitment on same-sex marriage.
“Enabling loving, committed couples to be married, regardless of their sexual orientation, will contribute to a stronger economy and a more inclusive Australia,” they gushed in a letter to Malcolm Turnbull last week.
It is 75 years since economist Joseph Schumpeter predicted that when corporations become bureaucracies run by executives rather than hungry entrepreneurs, capitalism will have planted the seeds of its own destruction.
The overpaid functionaries who manage our largest enterprises seem determined to prove his point, with their studious indifference to the market economy and contrived “economic case” for controversial social change.
It provided yet another distraction for the progressive classes who want to talk about anything except our sombre economic future.
Why should they? Six out of 10 working-age Australians have never worked through a recession. The relationship between economic growth and lifestyle seems remote; balancing the budget someone else’s problem.
Worse, the expansion of higher education has produced a cohort of graduates hostile to the capitalist order, just as Schumpeter predicted it would.
They are the irritating deep thinkers described in Philip Roth’s American Pastoral, “people who’d never manufactured anything or seen anything manufactured, who did not know what things were made of or how a company worked … people who knew nothing of the intricacies or the risks of building a business or running a factory but who nonetheless imagined that they knew everything worth knowing”.
Meanwhile a fiscal crisis is looming, the severity of which is growing because of the unwillingness of the sophisticates to recognise that something must change.
The demand for governments to spend is incessant, but the question of how it will be paid for is only cursorily addressed. Public services are being slapped on the credit card, one that doesn’t demand the discipline of minimum monthly repayments and has a credit limit of half a trillion dollars.
Governments have paid down debt before. Bob Hawke and Paul Keating did so in the late 1980s; John Howard and Peter Costello did so a decade later.
In both cases, however, the electorate granted the government licence to reduce spending, and neither government faced the long-term structural challenge of falling revenue and locked-in commitments that bedevil our future today.
These factors may provide an explanation but not an excuse. The task of fiscal readjustment cannot be delayed. The challenge of an ageing population is starkly reflected in the Treasury’s budget projections. The proportion of Australians who pay income tax will fall as the population ages compared to those claiming benefits.
Aged-care spending is expected to grow by 60 per cent in the next 10 years; and we’ll be spending 40 per cent more on public hospitals by 2026. The dependency ratio — the proportion of Australians of working age compared to those old enough to receive a pension — is shrinking rapidly. In 1975 there were 7.3 working-age Australians for every pensioner; today there are 4.5; and by 2050 there are forecast to be just 2.7.
In a sobering budget submission released last Friday, the Business Council of Australia warns that if government spending rises by 3 per cent annually next decade as Treasury predicts it will outstrip the economy’s capacity to pay.
The structural shortfall — the difference between what governments expend and the revenue they receive — will add $50 billion a year of additional debt.
Good luck to any government that tries to raise taxes to pay for it. A hike of $5300 a household is unlikely to be well received. In any case, taxes penalise the virtues we should be encouraging: hard work, risk-taking and enterprise, the qualities that have driven the Australian economy forward for 2¼ centuries.
Finding $50bn in cuts would require a politically suicidal gesture, like slashing the welfare budget by a third or sequestering the entire education and defence budgets.
The only alternative is to increase debt, pushing the burden to almost a trillion dollars in today’s money by the middle of the century.
“These numbers are not just bookkeeping entries,” the BCA warns. “They have real consequences for Australian households who will face severe cutbacks in services, higher taxes and lower economic growth and living standards.”
There are signs that Australians sense an impending crisis, despite the determination of the political and media classes to look the other way. The Australian Electoral Study reveals a sharp change of mood of voters at the last federal election compared with the one before.
Fewer than one in five expect their household to be better off in a year; only one in six expect the situation in the country to have improved, the lowest expectations for at least 30 years.
Qualitative polling in major capital cities suggests a sense of gloom is enveloping the middle class. Australians are working harder than ever but feel they’re not getting ahead. The tax burden is punishing and the cost of housing and energy is eating disposable income. They doubt their ability to support themselves in their old age and fear for the future of their children.
Trust in politicians was at its lowest level since the survey began in 1969. Fewer than one in nine voters believe the government is capable of positively influencing the economy; only 14 per cent think politicians know what ordinary people think; 52 per cent think they don’t.
The despondence in suburban Australia is hardly what one might expect as the economy enjoys a record period of unbroken growth. It is hard to reconcile the mood of pessimism with the Treasury forecasts that the growth will continue, pushing the budget back to a modest surplus in four years.
Nor does it coincide with the view from the chief executive suites in La La Land, where the occupants appear to be out to lunch.