Time for government to rediscover nation building

Ian Bushnell 26 July 2020 13
Light rail

Light rail should be fast-tracked as part of a national infrastructure effort. Photos: File.

Prime Minister Scott Morrison’s avowed new pragmatism will be put to the test when the Federal Budget finally comes down in October but the signs aren’t good.

The PM has been praised for his stewardship during the COVID-19 crisis, and particularly for eschewing ideology as the government continues to extend support to Australians impacted by the restrictions designed to keep us all safe.

Gone is the carping about debt and deficit, and the rewriting of history to tarnish Labor’s internationally recognised textbook response to the 2008 global financial crisis as the government presides over record spending to ameliorate the effects of the economic shutdown and the depression we now face.

Even its financial hard man Senator Mathias Cormann has responded: ”What else would you have us do?”

But when the numbing numbers were rolled out last week in the Budget update, missing was any hint of what the government had in mind for regrowing the economy.

Instead, it almost reverted to type, talking about more labour market flexibility to help business and, of course, tax cuts, despite the COVID-19 situation in Victoria where the casualisation of the workforce and the gig economy has exposed the state when it needed to close down to contain the virus.

The fact is workers without sick leave can’t afford to stay home.

That came after the federal government reimposed mutual obligation conditions on people receiving the now-reduced JobSeeker payment, echoing its indulgence of employer rumours about workers knocking back shifts and insisting the ”leaners” needed an incentive to find a job that is supposed to be out there waiting for them.

Despite most economists dismissing tax cuts, especially for the well-off as an option to prime the economy in the current hemorrhagic circumstances, the government says they are still in the toolkit.

It’s time for government to stop throwing money at people who don’t need it.

Scott Morrison

Will a newly pragmatic PM choose the big picture?

If anything, the coronavirus crisis and the response has laid bare the poverty of the economic ideology that has dominated government thinking for decades, no matter which party has been in power.

It has also provided a pause for reflection about what is really important and confirmed that there is such a thing as a society and a community, and they are worth preserving.

With private sector investment falling, including in such staples as housing, and predicted to slump even further next year, it’s government that is going to have to come to the party, if recovery is to be swift.

With money so cheap, this is the time to build the infrastructure we have been told we could not afford and add much-needed assets to the nation’s bottom line to be paid for over succeeding generations who will benefit from them as well, as was previously practised before the neo-liberals convinced us otherwise.

This is a time for strategic public investment in transport, renewable energy, housing and communications, including fixing the NBN.

In the ACT, public and social housing, light rail and the national cultural institutions are obvious areas.

It’s also the time to reimagine Australia as a place where we actually make things, given the new risks of our relationship with China and how easily trade routes can be disrupted.

COVID-19 has exposed the frailties and limits of the service economy and serious thought should be given to where we need to develop self-sufficiency.

Then there is climate change. Surely this government which has relied so heavily on the science to steer us through COVID-19, can acknowledge the predicament the world is in and start repositioning the nation for a post-carbon world.

But again, the signs aren’t good on this issue if its idea of a climate policy is swapping king coal for big gas, the mirage of storing CO2 underground and more prescribed burning to stop bushfires.

The advice is always to never let a good crisis go to waste. This is as good as it gets.


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13 Responses to Time for government to rediscover nation building
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HiddenDragon HiddenDragon 7:21 pm 27 Jul 20

“COVID-19 has exposed the frailties and limits of the service economy and serious thought should be given to where we need to develop self-sufficiency.”

True, but the obstacles to self-sufficiency are very substantial – not least because the winners in a globalised economy hold power, and will very reluctant even to partially wind back a system which has bestowed upon them so much wealth and privilege.

Those winners don’t just include the people at the very top of the wealth tree – much of upper middle Australia (including a fair chunk of the Canberra population) – have done very nicely from a system which forces some to compete in a race-to-the bottom global labour market, while others selectively reference global income standards to justify incomes which have grown substantially in real terms. The latter is the only explanation I can see for the fact that a country which has a smaller population and economy than some US states now has some of the highest paid public officials in the world.

On the subject of public “investment” (the quotations marks are because some public spending is just that, and no more, it’s not investment in any honest sense of the word), the pause in immigration due to almost-closed borders will allow for some catch up on infrastructure, and some provision for the future, but beyond that, the experience of Japan over the last few decades is a reminder that there is such a thing as seriously diminishing returns when governments pay to build things.

Capital Retro Capital Retro 4:15 pm 27 Jul 20

This article in lots of ways echoes a manifesto by Andrew Barr published in B2B Magazine, November 2013. Its underlying theme was “borrow, borrow, borrow” and Barr even quotes noted lefty economist Joseph Stiglitz as saying “Australia should seize the opportunity afforded by low global interest rates to make prudent public investments in education, infrastructure and technology that will deliver a high rate of return, stimulate private investment and allow businesses to flourish.”

Within 12 months the ACT Government had borrowed $2.5 billion for some of the things generally mentioned by Stiglitz but I can’t recall where that money went.

Can you help me JC?

    JS9 JS9 6:38 pm 27 Jul 20

    So oh holy one, what is your preferred alternate solution that doesn’t involve the economy basically crashing into a blackhole then if Government was to adopt austerity….

    But after all, your cosy in your little hovel, so stuff the rest hey? Seems to sum up your view of the world.

    Capital Retro Capital Retro 10:15 am 28 Jul 20

    The economy has been on the edge of that black hole ever since the first Rudd government overreacted to the GFC and created debts that still remain unpaid. Successive governments have been unable to stem the borrowing and they have “kicked the can down the road”. The current coronavirus pandemic has crystallized the debt exposure. The Abbott/Hockey government was the only one that attempted to stem the borrowing and repay the debt when they declared the “debt crisis”. The general population reacted by even refusing to even support a $5 co-payment for medical free medical services so, the general population are going to get what is coming to them whether they like it or not when our creditors call in the debts.

    My solution to the problem is a massive austerity program. It won’t be good news for some with interest rates almost zero thanks to the inept RBA cossetting borrowers with massive low interest rate home loans that will never be repaid either.

    You refer to me being “cosy in my little hovel”. Well, I do own it and I have no debt. I also do not rely on the government for much else (CSHC etc.) and I am prepared to forego those concessions if Australia is to recover from the parlous situation we are in.

    What are you prepared to do to save the situation?

    By the way, have you started protesting outside the Chinese Embassy about them ignoring the perils of burning fossil fuels? No, I didn’t think so.

Capital Retro Capital Retro 11:09 am 27 Jul 20

I don’t agree that it is a time for more investment, it is a time for consolidation. In fact, this will happen as the standard of living in Australia rapidly declines.

Has anyone got an ideas on how we are going to repay the debts we already have?

Stephen Saunders Stephen Saunders 8:20 am 27 Jul 20

Cue Josh Frydenberg, with the economics of the 1950s “the more children that we have across the country, together with our migration” and the 1970s “Thatcher and Reagan … were so successful”.

Wish he read a bit less Hayek, a bit more Piketty.

    Capital Retro Capital Retro 11:10 am 27 Jul 20

    We had cheap and reliable energy in the 1950s. Those days are gone.

    JS9 JS9 12:06 pm 27 Jul 20

    It was only ‘cheap’ electricity if you ignore the wide ranging and hugely costly negative externalities associated with power needs being met through the burning of fossil fuels. I’m not even necessarily referring to the climate change aspect of it – just the direct health costs associated with using such sources of fuel for electricity are huge.

    Capital Retro Capital Retro 2:58 pm 27 Jul 20

    China is ignoring it – even now they are still building hundreds of coal fired power stations.

    And that couldn’t be contributing to any direct health problems in China for if it was surely the World Health Organization would intervene, wouldn’t they?

chewy14 chewy14 7:49 am 27 Jul 20

Hmmm,
Article talks about “nation building”, then the 3 apparently obvious areas in the ACT listed are:

“In the ACT, public and social housing, light rail and the national cultural institutions are obvious areas.”

Really?

Nation building infrastructure projects would be those that either directly pay for themselves with significantly positive cost benefit ratios, or projects that open up secondary and tertiary benefits through creating space for potential innovation.

It’s a shame then that the author’s list is so limited and reads more like a ideologically tainted dream rather than anything to do with “nation building”. The NBN would probably be the only one to qualify, through the ability to create space to open up new markets.

But as they say, why let a national crisis get in the way of some ideological barrow pushing.

    JS9 JS9 12:09 pm 27 Jul 20

    The problem is Chewy is all sides play that game almost exclusively now. You are right in that very little of true value seems to have been listed by the author. But then on the other side, you have the stupidity of openly talking about tax cuts for the wealthiest in society, at a time when the last thing the overall Budgetary position needs is a substantial hit to revenues.

    Its face palms all around on both sides of politics 🙁

    chewy14 chewy14 1:31 pm 27 Jul 20

    JS9,

    I agree with that, we need a more holistic position that better balances competing interests.

    The problem with regards to income tax cuts, is not the cuts themselves. It’s that they wouldn’t be combined with other revenue measures to shift the taxation mix.

    Our country relies too highly on personal income taxes as a proportion of total taxation. We should be dropping income taxes but it should be combined with a reduction in some available taxation concessions and deductions that serve no reasonable policy purpose. Things like the franking credit rebate or negative gearing of existing houses for example don’t make much sense and achieve very little for the economy overall.

    Consumption and broad based land taxes are other obvious areas where the government should be looking to increase taxation to offset any reduction in income taxation.

    And there are a number of large nation building infrastructure projects that would provide real long term economic benefits, just not many of them listed in this article.

    JS9 JS9 1:57 pm 27 Jul 20

    Yep you’ve hit the nail on the head. Rather then pandering to their ‘voting bloc’ which is exactly what the tax cuts being talked about are focused on, we need a broader discussion of the tax system. Simplification should be the first thing on the list – as you say there are some easy wins to begin with around tax concessions and deductions. Cut some of those loopholes out, and suddenly tax reform could be delivered in a revenue neutral manner.

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