What makes Malcolm Turnbull’s unqualified opposition to Kevin Rudd’s $42 billion package more than usually perverse is that almost everything in the package is undeniably good policy.
Refurbishing schools, insulating homes and updating moribund infrastructure would be worthwhile at any time, not just when the economy is in desperate need of stimulus. Indeed these are among the many things that should have been done in the boom years, when the government was awash with money.
Instead of course, Turnbull’s old mob decided that there were more votes to be gained in hand outs to the middle class and in tax cuts. Incredibly, Turnbull believes that tax cuts are also the answer to a looming recession. Obviously they are the answer to everything. Douglas Adams and Kevin Rudd, both of whom believe the answer is in fact 42, are clearly mistaken.
Turnbull does, however, have a minor problem of consistency. He purports to be concerned about the projected deficits, or as he prefers to call them, the crushing debts we will leave to our children. But at least Rudd’s lump sum payments, expensive as they may be, are one-off costs. Tax cuts are permanent; they are locked into the economic structure as a reduction of revenue year after year. They would make escaping the deficits far more difficult than anything Rudd has proposed.
But, Turnbull responds, he wouldn’t spend anything like as much as Rudd is suggesting — barely half that, in fact. Why? So he could come back for seconds and spend the rest later. Exactly how that would ease the crushing debt on our children is not explained.
It is hard to avoid the conclusion that Turnbull is merely posturing; that he does not really want to substitute a program of his own (indeed, apart from the chant of tax cuts he does not appear to have one) and he does not really want to stop Rudd’s from being implemented. Chris Evans, the government leader in the Senate, was quite right when he said that the Libs were wetting their pants at the idea that one of the independents might actually join them and vote the bills down.
Turnbull’s real hope is that Rudd’s package goes through and is seen to fail; that the recession grabs Australia as relentlessly as it will the rest of the world. He could then claim vindication: under his policies we would still have had the recession, but we would have saved all that money. And of course we would still have had run-down schools, decrepit infrastructure, and houses totally unsuited to the threat of climate change, not to mention a $950 hole in the household budgets of the needy, but that’s what we call responsible economic management.
However if, as most economists, the business community and Colin Barnett, the only Liberal premier, all believe, Rudd’s policies actually succeed to a worthwhile extent, Turnbull will be left looking very politically seedy. But then, he was looking pretty seedy before he came up with this courageous (as Sir Humphrey Appleby would certainly describe it) approach.
The doubters in his own party must now admit that he has taken a stand in firm opposition to the government, and this in itself is a welcome change. The question to be answered is whether it turns out to be the stand of a brilliant politician or the last twitch of an unreconstructed merchant banker.
And let’s not forget that it was mainly the merchant bankers who got us into this mess in the first place. Wouldn’t it be a bit naïve to trust one to get us out again?
On which happy note I’m taking off for a month in India a country which, with all its extremes and contradictions, I find strange and challenging. I shall get my personal stimulus there, without resort to Rudd’s package or to Swami Makya Chunda of the Snatchyahandbag Ashram.
Cosmic revelations for all (especially Kevin Rudd and Malcolm Turnbull) around March 18. Cheers.
rjg, the government intends to borrow money by issuing treasury bonds which may be purchased by Australians or foreigners, but as Australians have not been nett savers, the bonds will most likely be purchased by the Chinese, the Japanese and maybe the Arabs. The interest payments will be paid annually to the bond holders.
If you can’t trust Malcolm Turnbull to be PM because he has been a merchant banker, does that mean the Kiwis made the wrong choice in electing John Key (former merchant banker) as PM in New Zealand?
Oh!…… so that’s where I left them……..
Why is it the notion of pumping money into the econonomy to stimulate aggregate demand so difficult to understand. The Chinese sell a lot of stuff made with our coal and iron ore to the US. The US has been borrowing too long and is broke. So we won’t sell as much stuff to the Chinese, and the Japanese for that matter. Some of those the people who dig iron ore and coal will now be out of work. Should they sit around on the dole trying to get non existant jobs and therefore be totally unproductive or would it be better to have them doing something useful. Giving them tax cuts won’t work, they aren’t earning and somehow the majority of the Liberal’s tax cuts will go to the rich who will either squirrel it away or buy imported goods. Not much help to aggregate demand from that quarter.
So if the government prints some money and targets it at useful projects these people will be put to work, companies will make profits, the people will pay tax and low and behold we end up with something useful. When the US gets going again, those people who stopped digging iron ore and coal will have finished the insulation jobs, school upgrades etc and go back to doing what they make the most money out of; operating foreign made machines to dig stuff up to send to foreigners on foreign owned ships which we can then buy back off them.
It’s then all back to normal and we can have the surplus the conservatives are so wedded to.
The government has not borrowed the money it has simply printed some more to replace the lack of the banks loan multiplier effect. Can Mayne et al nominate who the lender is and who the interest payments are going to? No one. The concept of a loan in this situation when applied to a soverign economy is a nonsense.
The reason Turnbull want tax cuts is because the rich want to end up with a flat tax system to match their flat earth economics. No one, least of all Ken Henry is really in any doubt about this.
As much of the package as is likelly to get private resouces being invested (and creating a multiplier effect) is obviously heading in the right direction so it is a no-brainer than Malcolm Turnbull’s calculation is indeed that the dire state of the country next year will enable him to say “it hasn’t worked and we have this appalling load of debt which, again, it will be for a Liberal government to pay off”.