On the eve the government’s much-delayed financial statement, it’s time for some basic questions about Australia’s response.
The uncomfortable truth is that we are still in the economic equivalent of ‘‘the phoney war’’ between September 1939 and May 1940. Our real problem is not now but the fourth quarter of this year, and next year, by when temporary measures will have washed through, while globally the real economy will still be wrecked. But there’s no sign yet of a long-term economic strategy, centred on infrastructure, to rebuild business confidence to start investing and re-employing people.
So while Scott Morrison may look pleased with himself (after months of largely uncritical media, a Parliament that barely meets and a delayed budget) it’s time for some intellectual honesty in what passes for our public policy debate. So here are seven questions for Scotty to answer.
First, the big one. It’s well past time to come fully clean on the two dreaded words of Australian politics: debt and deficit. How on earth can Morrison’s Liberal Party and its coalition partner, the Murdoch party, justify their decade-long assault on public expenditure and investment in response to an existential financial and economic crisis?
Within nine months of taking office, we had to deal with a global financial crisis that threatened our banks, while avoiding mass unemployment. We avoided economic and social disaster by … borrowing. In total, we expended $88 billion, taking our federal net debt to 13 per cent of GDP by 2014 – while still sustaining our AAA credit rating.
Four months into the current crisis, Morrison has so far allocated $259 billion, resulting in a debt-to-GDP ratio of about 50 per cent and rising. We haven’t avoided recession – partly because Morrison had to be dragged kicking and screaming late to the stimulus table. He ignored Reserve Bank and Treasury advice to act earlier because it contradicted the Liberals’ political mantra of getting ‘‘back in black’’.
On debt and deficit, this emperor has no clothes. Indeed, the gargantuan nature of this stimulus strategy has destroyed the entire edifice of Liberal ideology and politics. No wonder Scotty from Marketing now talks of us being ‘‘beyond ideology’’: he no longer has one. He’s adopted social democracy instead, including the belated rediscovery that the agency of the state is essential in the economy, public health and broadband. Where would we be on online delivery of health, education and business Zoom services in the absence of our NBN, despite the Liberals botching its final form?
So Morrison and the Murdoch party should just admit their dishonest debt-anddeficit campaign was bullshit all along – a political myth manufactured to advance the proposition that Labor governments couldn’t manage the economy.
Then there’s Morrison’s claim that his mother-of-all-stimulus-strategies, unlike ours, is purring like a well-oiled machine without a wasted dollar. What about the monumental waste of paying $19,500 to young people who were previously working only part-time for less than half that amount? All part of a $130 billion program that suddenly became $70 billion after a little accounting error (imagine the howls of ‘‘incompetence’’ had we done that).
And let’s not forget the eerie silence surrounding the $40 billion ‘‘loans program’’ to businesses. If that’s administered with anything like the finesse we’ve seen with the $100 million sports rorts affair, heaven help the Auditor-General. Then there’s Stuart ‘‘Robodebt’’ Robert and the rolling administrative debacle that is Centrelink. Public administration across the board is just rolling along tickety-boo.
Third, the $30 billion snatch-and-grab raid (so far) on superannuation balances is the most financially irresponsible assault on savings since Federation. Paul Keating built a $3.1 trillion national treasure. I added to it by lifting the super guarantee from 9 per cent to 12 per cent, which the Liberals are seeking to wreck. The long-term damage this will do to the fiscal balance (age pensions), the balance of payments and our credit rating is sheer economic vandalism.
Fourth, industry policy. Yes to bailouts for regional media, despite Murdoch using COVID-19 to kill more than 100 local and regional papers nationwide. But no JobKeeper for the universities, one of our biggest export industries. Why? Ideology! The Liberals hate universities because they worry educated people become lefties. It’s like the Liberals killing off Australian car manufacturing because they hated unions, despite the fact our industry was among the least subsidised in the world.
Fifth, Morrison proclaimed an automatic ‘‘snapback’’ of his capital-S stimulus strategy after six months to avoid the ‘‘mistakes’’ of my government in allowing ours to taper out over two years. Looks like Scotty has been mugged by reality again. Global recessions have a habit of ignoring domestic political fiction.
Sixth, infrastructure. For God’s sake, we should be using near-zero interest rates to deploy infrastructure bonds and invest in our economic future. Extend the national transmission grid to accommodate industrial-scale solar. Admit the fundamental error of abandoning fibre for copper broadband and complete the NBN as planned. The future global economy will become more digital, not less. Use Infrastructure Australia (not the Nationals) to advise on the cost benefit of each.
Finally, there is trade – usually 43 per cent of our GDP. Global trade is collapsing because of the pandemic and Trumpian protectionism. Yet nothing from the government on forging a global free-trade coalition. Yes, the China relationship is hard. But the government’s failure to prosecute an effective China strategy is now compounding our economic crisis. And, outrageously, the US is moving in on our barley and beef markets. Trade policy is a rolled-gold mess.
So far Morrison’s government, unlike mine, has had unprecedented bipartisan support from the opposition. But public trust is hanging by a thread. It’s time for Morrison to get real with these challenges, not just spin us a line. Ultimately, the economy does not lie.
Kevin Rudd was the 26th prime minister of Australia.
First published in the Australian Financial Review on 21 July 2020.