Our Finance Minister of the Year study takes into account various factors, including the extent to which the minister (or treasurer, in this case) can exercise power over the country's economy. Today's entry has little control over the minutiae of economic management, but has been found wanting when tackling some big-picture challenges.
RANKED 7TH: AUSTRALIA'S SCOTT MORRISON
Reforms in the 1990s handed day-to-day management of the Australian economy to the country’s central bank, which can therefore be credited with 26 years of consecutive positive growth. Little credit goes to Scott Morrison.
As treasurer in Malcolm Turnbull’s relatively conservative Liberal government since September 2015, Morrison has been hamstrung by outspoken right-wing members of the ruling party, intent on scrutinising foreign investments and protecting large corporations, particularly financial institutions and commodity exporters. Australian households and businesses face a crisis of confidence on three fronts.
First is a rise in energy costs, which is driving up electricity bills and making it difficult for local manufacturers to compete in global markets. Some manufacturers are passing increased costs on to consumers while others are laying off workers. Electricity prices could be eased if Morrison took a harder line on gas companies, which favour export contracts over domestic contracts and send most of their supply offshore. In September the government convinced producers to divert more gas to local buyers, but action is still needed around developing a sustainable energy policy, especially in the area of renewable power.
Second is political interference in large-scale investments. Investors feel uneasy about recent rule changes to the tax treatment of investment vehicles and the concentration of big opportunities in a couple of key states. A number of projects have also been cancelled or materially altered. In a survey by Infrastructure Partnerships Australia and Perpetual, investors expressed concern about rising political risks. Only 27% of respondents said it was easy to do business in Australia in 2017, down from 60% in 2016.
The third crisis is a Royal Commission into the banking sector, which is likely to uncover dodgy practices among the country’s big-four banks. For much of 2017 Morrison and Turnbull argued strongly against holding the enquiry, conscious of how important bank credit is to the property-driven economy. But their vehemence backfired and began to hurt confidence in the financial services system. Eventually the bank CEOs clubbed together and forced Morrison to capitulate, preferring to air their dirty laundry than live with the uncertainty. The Royal Commission got under way in February and will deliver its report in 12 months.
A bright spot on Morrison’s report card is job creation. Employment rose by 2.8% in the year to September 2017. Such strong and sustained growth in employment points to an economy supported by rigorous fundamentals. Morrison also reduced the budget deficit by over A$4 billion more than targeted thanks to cuts in social services. “What this shows is that the government has been keeping expenditure under control,” he said at a press conference in September.
Government debt is still high by historic standards and has been climbing steadily for the past six years. Debt-to-GDP in 2017 was 41% compared to 32% in 2014 and 22% in 2011.
What Australia needs now is for wages to grow at a faster rate than consumer prices. Only then will there be an improvement in consumer spending, which accounts for over half of GDP and has been stagnant for some time. And only then will the economy be back on a healthy path.
Despite those difficulties – or, to be blunt, because some of his peers were even worse – Morrison still moves up from 9th out of 12 last year. He ranks above Thailand's Apisak Tantivorawong, Taro Aso of Japan, Paul Chan of Hong Kong, Malaysia's Najib Razak and Taiwan's Sheu Yu-jer.
TOMORROW: A newcomer with high hopes