It’s the economy, Joe.

Here’s why the federal government will change in 2016.

wages growth

Today, data was released showing negative wages growth for the first time in six years.

The last negative quarter was September 2009. The March quarter of 2015 takes us back to those bad days.

In an environment of negative wages growth, people feel stressed and unhapppy. Jobs are being lost.  Negative feelings about the economy inevitably hurt governments.

It’s the economy, stupid! 

… is a classic of modern political communication for a reason. Governments get thrown out when times are bad.

What Joe Hockey and Tony Abbott need to do is buttress the economy during the time when mining investment is falling. They ought not be stressing about surpluses – there are far less abstract and more concrete things in the economy that need their attention.

If the government spends more (in the right ways) it can keep people in work. This is important not just for their current well-being but their long-term prospects. People who spend time unemployed lose human capital. This permanently reduces their potential and the potential of the national economy.

The most recent Budget is probably not succeeding in pushing the economy forward and keeping people in work. The next Budget will be a pre-election Budget, so it will likely spend up big and reverse the mistakes this government has made. But will it be too late? The mid-year economic and fiscal outlook is also an opportunity to change course.

Another opportunity to change course will present itself if the Treasurer and Prime Minister are changed. It’s not impossible – a poll today is showing that the coalition’s recent recovery is ebbing, with the balance back to 47-53.