The latest national accounts confirmed the Australian economy continuing to muddle along, with economic growth of just 0.4% for the December quarter, down from 0.7% in the September quarter and 0.8% in the June quarter. Annual GDP growth slipped to 2.4%.

The economy continues to undershoot the expectations of both treasury and the Reserve Bank of Australia who are banking on annual GDP growth lifting above 3% for the next two years.

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The reasons for this less-than-robust growth performance are many, but do not include global economic weakness as a factor. It is humming along, registering its strongest performance since the economic crisis of 2008.

The Coalition government lead by prime minister Malcolm Turnbull makes much of its management of the economy with its “jobs and growth” slogan, which will doubtless be a key factor in its campaign strategy as the next election draws near.

No doubt buoyed by polling that consistently shows the Liberal Party to be a better economic manager than Labor, the Coalition will go hard on the economy as it strives to turn the polls.

All this prompts the obvious question – just how valid is the claim that the Liberal Party is a superior economic manager to Labor?

One way (of many) to test this is to examine the rate of economic growth under each government. Faster economic growth would be judged superior to slower economic growth.

Another test, which takes some account of the impact on the Australian economy of overseas influences, is to judge Australian economic growth against that of the United States. This measure allows for the impact of both positive and negative shocks on the Australian economy that have little to do with local economic management.

For the purposes of this exercise, I have assumed the impact of a change of government occurs one quarter after it is sworn in. For example, the Hawke/Keating Labor government is estimated to be influential on the economy from the September quarter 1983 through to the June quarter 1996, inclusive; the Howard government from the September quarter 1996 through to the March quarter 2008; Rudd/Gillard from the June quarter 2008 through to the December quarter 2013; and the Abbott/Turnbull government from the March quarter 2014 to now.

The following table compiles average quarterly growth in real GDP for the duration of each government. It is presented to two decimal points to overcome some issues that emerge with rounding (to one decimal point, 0.56 and 0.64% are both 0.6%, but the difference is significant when compounded over the full term of a government).

It is worth noting that each 0.01 percentage point difference in GDP growth is equates to around $190 million per quarter in today’s dollar terms. Over a three-year term of government, this seemingly small difference has a cumulative effect of around $2.3bn.

* Quarterly change in real GDP

** Percentage points per quarter

Absolute economic growth

Australia’s fastest growth has been recorded under the Hawke/Keating and Howard governments at an impressive 0.91% per quarter.



In office for only three years, average quarterly growth under the Whitlam government was 0.69%, which is faster than under the Rudd/Gillard government, which recorded growth of 0.63% and 0.60% under the Abbott/Turnbull government.

The Fraser government presided over the weakest period for growth at just 0.46% per quarter.

Relative economic growth versus the United States

The government which saw the Australian economy out-perform the US by the greatest margin was Rudd/Gillard with a 0.37 percentage point per quarter gap. This is 1.5% per annum for the six years of that administration.

Next best in terms of relative growth was the Whitlam government with a 0.32 percentage point gap per quarter out performance relative to the US.

The Howard government did well, with a 0.17 percentage point out-performance relative to the US over an 11 year period, which is a solid 0.7% per annum.

The Hawke/Keating government achieved a marginal 0.04 percentage point out-performance over the US which is the same as the current Abbott/Turnbull government.

The worst economic manager on both the score of the absolute growth rate and an underperformance relative to the US was the Fraser government, which registered quarterly growth of 0.18 percentage points below the US.

So which side is the better economic manager?

On both measures, the level of economic growth and that growth relative to the US, Labor is a better performer than the Coalition.

One of the weakest economic managers since the early 1970s is the current Abbott/Turnbull administration where GDP growth has averaged a mere 0.60 per cent per quarter which is just 0.04 percentage points above the US performance.

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This makes its campaign on “jobs and growth” vulnerable to criticism from the opposition, which for many years has been hampered in its fight on macroeconomic issues by the public misperception that it is a weaker economic manager. Another few quarters of soft economic growth before the election might change that view.

End note

This methodology, quite plainly, takes no account of lasting policy reforms that deliver longer run benefits to the economy that do not show up in the term of the government implementing them.

Interpretations of how to measure economic management is an open issue, with many approaches worthy of detailed research and analysis. This is just one and I look forward to seeing other contributions on this important topic.

• Stephen Koukoulas is a research fellow at Per Capita, a progressive thinktank