The Australian economy will suffer high unemployment and poor growth in the coming year as a direct result of the Abbott Government’s first Budget if private sector forecasts are realised.
In a note to its clients on Wednesday, Morgan Stanley said economic growth will “fall below 2 per cent” and unemployment will “reach almost 7 per cent” next year.
This is part of growing evidence that the Abbott Government’s first chaotic Budget is causing business and consumer confidence to slump.
In a damning indictment on the Abbott government’s economic strategy, Morgan Stanley specifically states that: “the alarmist Budget narrative has damaged animal spirits and the consumer’s willingness to dip into high savings, thus missing the opportunity to springboard animal spirits off the back of the strong housing cycle”.
This was followed by the Director Sentiment Index falling by 7.1 points during the second half of 2014, with almost half of the business leaders polled rating the government’s first year in office as poor or very poor, with most saying: “they don’t believe the government understands business”.
For months Labor has argued the Government’s first Budget was not only unfair, but was bad for the Australian economy through its direct attack on household budgets at a time when the economy needed consumer demand to be strong.
Joe Hockey’s rhetoric has always been overhyped and overblown. By attacking business and consumer confidence he’s delivered a Budget that is both unfair and bad for the economy. It’s a quinella that no Treasurer before him ever sought.
Morgan Stanley’s analysis comes on the back of collapsing consumer sentiment, still 14 per cent below where it was at the election, while business conditions have also fallen sharply in recent months.
And in another blow to this government’s credibility, the Australian Industry Group’s Performance of Services Index released today shows that the services sector went backwards again in October, to remain in deep contractionary territory. This comes on the back of last month’s Performance Services index which highlighted the ongoing concerns about the weak state of economy and the “effect of Federal Budget uncertainties”.
These new assessments are hardly surprising given the Abbott Government’s recent petrol tax ambush and talk about increasing the GST.
The Treasurer seems incapable of instilling confidence in the Australian economy, as he’s spent the last few years doing everything to talk down its prospects.
The Government needs to go back to the drawing board with its unfair and damaging Budget and develop a long-term strategy that promotes optimism rather than talking down the economy.