Employment in Canberra
Australia may well be ‘open for business’ but financial strategists at Morgan Stanley aren’t so sure.
In a note issued on Wednesday, one of the headline issues was a predicted drop for business investment of significant proportions. How much? Well, in a bleak outlook, MS claims that this year, with fear and loathing spreading nationwide via a tough budget, a reduction of 4.6% is likely.
If that sounds bad – especially considering overall growth is looking likely to come in around 3.2% – wait until 2015. Thanks to continuing effects of dropping commodities prices and the end of the housing boom, a prediction of a mere 2.1% on GDP contains a horrific slump in business investment of over 10%.
Of course, this is at the extremely pessimistic end of a range of analyses, however MS lays a lot of the blame at the feet of the current government. The report claims the last 12 months of high volume alarm regarding the so-called ‘budget emergency’ has caused nervousness in the business community and an aversion to the risk of taking on new projects and employees.
One final risk that hangs out there barely over the horizon is the rapid reform of the Chinese economy as it moves from a construction and manufacturing economy to one that is much more self-sufficient, and also looking to value-add through technology and innovation.
In the immediate future, this doesn’t bode well for Canberra. We are suffering enough shocks through the Australian Public Service’s recruitment freeze, and the news this week that annual wage increases for Government workers are likely to be reduced to at least two points below the five year average for growth is more unwelcome news. It all points to money being moved into balancing the Federal budget rather than moving through the local economy.
Oh, wherefore art thou, tax reform?