As usual, Monty Python got it right: always look on the bright side of life.
The global credit crisis has its upside, and it isn’t only the schadenfreude of being able to smile smugly at the economic rationalists over our lattes and chardonnays, and say to them: “We always told you so.”
Of course, overall the American-triggered melt-down is bad news for all of us, and it’s silly to pretend otherwise. Most Australians will experience a drop in their standard of living (or at least a slowdown in the rate of improvement) and governments will not escape unscathed either: the feds are already predicting a $3 billion fall in revenue due to a decline in capital gains tax alone, and there will be plenty more (or less) where that came from.
But hard times mean hard remedies, and quite suddenly the Treasury gnomes have gone all Keynesian. The bonuses from the boom years, those not squandered on election bribes and pork barrelling during the Howard years, have previously been locked away in budget surpluses and other untouchable nest eggs like the futures fund. Now, to stimulate the economy and help maintain business and consumer confidence, they are to be released in a welter of public spending in the long-neglected area of infrastructure.
The Rudd government has always had big ambitions for infrastructure, but has felt itself constrained by economic rectitude and the need to fight inflation. Suddenly the rules have changed: public spending is good, and we shall all benefit as a result. There are problems, of course: big projects by definition need time to get moving, and we are starting more or less from scratch. True, when Rudd called the Premiers together in Perth last week to discuss possibilities he was knocked down in the rush; there is no shortage of ideas for spending a lazy billion or two. But there must be just the hint of a suspicion that not all the states’ ideas are good ones.
The opposition Treasury spokesperson Julie Bishop has already warned solemnly that the influx of funds must only be used for economically viable projects: it should not be diverted to solving political problems. Well yes, and she should know; Bishop was after all a member of the Howard government which among other things built the monumentally unprofitable Alice Springs to Darwin railway to win a few swinging seats and spent uncounted billions over the years in propping up its marginals.
But we can be sure Rudd is not talking about building race tracks for country towns or sports ovals in suburbia. His vision will be wider than that, and in one sense the times will suit him: the onset of climate change cries out for big ideas. It is time for massive solar arrays in the deserts, for wind farms and geo-thermal installations. It is time for massive works to save the Murray-Darling and investment in re-cycling to avert water crises in the cities.
And it is time, above all, to restore the rail networks and substantially reduce our dependence on gas-guzzling private transport, especially for freight. The truckies argue that they are the cheaper option, because they don’t depend on the massive capital investment of rail; they just use the existing roads, so require no public subsidy. But this is not true. It’s the trucks that make the existing roads so expensive. Heavy vehicles do some 96 per cent of the damage. If the roads were just for cars, the construction cost would be far less and the maintenance cost minimal.
The taxpayers subsidise the trucking industry to at least the same extent they would rail, and receive none of the benefits. The dominance of road transport has much more to do with the political clout of the trucking industry than with any kind of efficiency. What a country like Australia needs is something like the Canadian model: an integrated system where trains do all the long hauls and containers can be moved directly from bogies to prime movers for local delivery. If Rudd is serious about real infrastructure reform, there’s a beauty to start on.
The political and economic circumstances have suddenly emerged: the collapse of 2008 could be the start of the real public boom we have needed for so long. All it takes is will and imagination. Go Kevin.
Is the term “intellectual conservative” yet another Australian oxymoron? After reading the verdicts of our local experts on the American vice-presidential debate you’d have to wonder.
In ideological terms, of course, they are staunch Republicans, which is their democratic right. But to make the jump that simply because Sarah Palin is conservative, she is entirely suited to become heir-apparent to the most powerful job in the world needs some justification.
Our pundits, of course, agree that Palin did not lose last week’s debate. The excitable Janet Albrechtsen even maintains that she won. But their grounds for the judgment are entirely negative. Palin didn’t make any major screw-ups. She didn’t confuse Australia with Austria or, still worse, Alaska with Nebraska. She stuck to the script and did not fall off the stage. What a triumph.
But she did nothing at all to dispel the idea that she is utterly ignorant of science, history, geography, government, almost everything else outside Alaskan primary school level. She may be or may not be inherently bright; she certainly shows signs of political rat cunning. But she happily admits to knowing nothing much about anything and in some important matters — evolution and climate change – is determined to keep it that way. She openly despises knowledge and has very little of it.
Is this really the quality such luminaries as Albrechtsen, Gerard Henderson, Greg Sheridan and their admirers want in the President of the United States of America? Well, maybe; after all they have all backed George Bush. Conservatives they certainly are. Intellectuals? Well, d’oh.
Money in things like future funds and surpluses looks like a terrific thing with which to build infrstructure including very fast trains, port upgrades, the “clean carbon” infrastructure and the many other clamate cahnge mitigations we are sure to need, but there is a very big but. This stuff is only paper. It only has value if there are things related to infra sturcture that can be bought with it. Large Infrastructure projects require some very important physical inputs, engineering design and project management, draftspeople, project cost accountants and of course heeps and heeps of skilled tradepeople. We have been importing around 200,000 people a year to prop up the service economy and we can’t even house them because of the shortages of skilled labour. You don’t need rocket scientists to build a dometic dwelling and out buiding idustry protagonists certainly are not, but fast trains, smart power stations and carbon mitigation systems need some real brain power and spcialised skills. We don’t have them. Globally we are not alone in this. The average unemployed Merchant Banker and derivatives trader probably can be taught to weld, but most of them did the soft subjects such as accounting or Law and won’t ever make it as engineers and technologists. Engineering is a game where nature makes the rules and unfortunately no amount of negotiating, spindoctoring or outright lying will get them changed. It’s quite ironic when I recall a previous Crikey columnist stating that the Carbon Trading System will never get done on time because of a shortage of Lawyers and Accountants when the real issue is the sortage of people who can actually do something about the physical problems. But as Fisher ex of ABARE said if you pay enough even roosters will lay eggs. They may even make better engineers than the Lawers, Accountants and Economists.
Yeh Mungo. I always thought Keating’s biggest mistake was in not allowing the tax break wanted by the Very Fast Train (VFT) consortium. A VFT from Brisbane to Melbourne with an off-shoot into Sydney and via Canberra which was designed for goods as well as passengers would go a long way to reducing the high comnsumption of petroleum products of this country, reducing our carbon footprint and be more economic. Perhaps the Ruddster should take another look at that option.
Oh yes Mungo – let’s blow the 2008 surplus away on projects better than the Alice to Darwin Rail. LIKE WHAT??? You rightly refer to some in the water/climate change arena, but we all know that is all light years away. The only short-term idea with any sense is to buy out all the irrigators, and that ain’t gonna happen.
Any short-term expenditure on roads, rail, hospitals, schools and whatever else the States have failed to maintain over the last decade or two will unquestionably fuel inflation – the exact reason why Swan salted this money away in these funds.
A delicate balance. Talk about bulls in china shops. It’s scary.
Ronald Brownstein in the LA Times (a left wing newspaper) in 1999,
http://articles.latimes.com/1999/may/31/news/mn-42807
“All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.”
The seeds of the present crisis are in Bush’s failure to regulate like Costello did here. More importantly they are in Carter’s and Clinton’s proactive legislative changes as referenced above.
D’oh McCallum …..