What will it take to get this do-nothing government to show some economic leadership?
Maybe, after two thoroughly rotten sets of economic data this week, and Scott Morrison’s “please stop talking about my government’s corruption” coronavirus pandemic announcement yesterday, the penny is dropping that something serious in the way of fiscal stimulus is desperately needed for an economy that is not so much punch-drunk as out on its feet.
Wednesday’s data for construction work in the December quarter was the first blow. It showed total construction fell 3% in seasonally adjusted terms, and was down 7.4% over 2019. Residential construction was worst: down 4.6% in the quarter, and 12.8% in the year — over one-eighth. Non-residential building fell by 3.4%; the crucial engineering category — that’s private and public infrastructure — was down 0.5% and 6.8%. Whither the infrastructure boom?
Yesterday brought worse news: private investment fell 2.8% in the December quarter, a multiple of the fall that had been expected by economists. The fall was led by declines in the mining and building sectors, frustrating hopes for a long-awaited pick up in spending. During the December quarter, business investment totalled just $28.5 billion and followed a downwardly revised 0.4% fall in the September quarter.
That is, the investment slump about which the Reserve Bank has been publicly fretting dramatically worsened in the three months to December, accelerating in the lead-up to Christmas.
Remember this is before the emergence of coronavirus, which the government seems to want to blame for what is expected to be a significant economic slowdown. This was when the investment environment, in the words of the Reserve Bank, featured “accommodative funding conditions for large businesses”.
Keep that in mind going forward as the government insists everything was fine until the Chinese ruined everything with their virus.
The only rays of light were spending on equipment and plant, which rose 0.8% (that will help the GDP for the December quarter, due next week) and the mining sector, where there’s an increase in spending intentions this year as well as next year.
Otherwise, the investment numbers are so rotten, in dollar terms they’re back to where they were in 2017.
The difference is, back then, the Turnbull government had just pumped $37 billion worth of deficit spending into the economy for 2016-17 and was putting another $20 billion in for 2017-18, including major new spending in health and education, which ended up propelling the big jobs surge that marked Turnbull’s time as PM. When private investment is around $30 billion a quarter, that makes a major difference to economic activity — a whole extra quarter, in effect.
Now the government is still, officially, aiming for surplus (in fact, it says it has already delivered it…), which would be a contraction.
But after outright dismissing any fiscal stimulus in Wednesday’s coronavirus media conference, Morrison changed his tone slightly yesterday, with a heavily caveated statement: “If we are to take any actions here and that is still subject to advice from Treasury, which has not confirmed their advice, that any such measures would only be effective if they were targeted, modest and scalable. And we are quite aware of where the virus is impacting in particular sectors more than others.”
Get that? Treasury might advise the government, and that advice might be to take action, and the government might take that advice, but any action would be modest and aimed at specific sectors.
We know the kind of sectors the government is good at targeting: electorates it wants to win, and its fossil fuel donors. Instead of a stimulus program, we could end up with yet more porkbarrelling and handouts to mates. Maybe Trevor St Baker should draw up a list of coal-fired “stimulus projects”.
Too harsh? The central bank and senior business figures have been calling for fiscal stimulus for well over a year amid growing evidence of an economic slowdown caused by the government’s wage stagnation policy and a productivity crisis it has tried to ignore. Even the likes of John Howard and Barnaby Joyce joined business in urging the government to lift the Newstart allowance.
But it stoutly resisted, and even mocked, all such calls. Whether driven by a small government ideology, its fiscal ego or because it was simply lazy, isn’t clear. The risk of such pigheadedness was always that either stagnation would persist and deepen, or an external shock would hit the economy when it was at a weak point.
Well, now both have happened, and the government is still umming and ahhing and looking to blame a virus. It has been criminally negligent in its economic management and it continues to be.
At least something good’s come of the Coronavirus – a distraction from the growing pile of evidence of ineptitude and innate “born to rule corruption” of the Morrison government?
I wonder how big Scotty From Marketing’s barrel of “Distractions for All Occasions” is? And how many are left : how many “rainy days” ahead they are with them?
You might think there was plenty of scope for investment in renewable energy infrastructure, but then you wouldn’t be in this government. Frydenberg doesn’t seem to have an independent view – he just goes along with what the boss says – hence the disappearance of the NEG. So long as Scotty FM keeps kowtowing to the Nationals and the Kelly/Abetz/Dutton faction in his own party, he will keep screwing the economy by his inaction.
There are 3 very large solar farms ready to go .
The Australian Energy…. Organization says they are too much for the grid.
There are also three very large solar farms that have been restricted to 50% of capacity, again for the inability of the grid to cope. The grid is the key to the required transition in energy supply and all that has been implemented as policy is to arrange for its privatisation. If you are a multinational who have just raised the funding to purchase a 90 year lease on a State grid you aren’t going to be inclined to fork out multi millions of additional dollars to restructure the hard infra structure you have just shelled out for. Your interest is going to be to service your loans and extract what you can from any residual. Electricity supply should be transitioning from the old Base Load plus variable to the balancing of a range of variable supply via the Grid. Solar, Wind, Hydro, Battery, pumped storage and in the short term natural gas all have their place in the new supply matrix.
This government has over-achieved in arrogance, incompetence, inertia, social division, nastiness and cruelty. At least it will be remembered for something.
The lack of will to raise Newstart, to my mind, is a reflection of wider voter sentiment on welfare. Even if the government was full of believer in the welfare state and setting a better minimum standard of living for all Australians, it would first have to make the case to the Australian electorate before doing anything. When there’s no appetite for making the case, I can’t see any way forward with the proposal.
If Labor can’t get through a raise for fear of how it would damage them politically, what chance does the Coalition have?
The lack of will to raise Newstart is in line with the government’s preference to punish poor and disadvantaged people. The public is in favour of it. When have Labor had the opportunity to try to get a raise through?
They were in power from 2007-2013. They got a lot of things through parliament in that time.
Indeed, including convincing the electorate that inter generational dole bludgers, welfare cheats and promiscuous irresponsible single mothers makeup the majority of Centrelink recipients. No way the Coalition can take all that back, now. The oldies who vote for them lap it up, including the oldies who aren’t quite old enough to go on the Aged Pension and are stuck on Newstart. Boggles the mind, that.
The Unemployed Workers Union and others have made great inroads in changing public opinion. Support for raising the rate is increasing.
Firstly, this government is just as intent upon creating a cheap and nastier copy of the US as Howard was and substantially supported in the belief system by participation in a Prosperity Cult.
We have the enormous numbers of different worker visas, all designed to allow exploitation on an industrial scale and no oversight available from either unions or WorkFair Australia and as non citizens they have limited understanding of our almost neutered industrial system and SFA chances of getting other employment within the month usually granted by the immigration department.
Just imagine what it is going to be like once the Visa system is privatized? I can see so many avenues for corruption and again we will have Peter Dutton, still blind in his right eye as far as terrorism is concerned claiming it is all in hand.
The latest companies to out themselves to WorkFair Australia would be both Coles and Woolies, OH just a software glitch, the explanation runs.
They were looking down the barrel of a class action in the Federal Court starting the day after they self-reported. Yes, I can see that it was a mistake. There had been substantial confidential offers to the lead litigants, who refused them, because it was like a bribe one of them was reported to have said.
So, no, I would consider that this country has been wedged, slid towards the completely dog eat dog system of the US, but, I think if you scratch most Australians, you will still find decency and a fair go mentality.
The non documented immigrants of the US, are almost a slave class, that is beloved of the wealthy in the US, because they are part of the system which ensures the smooth running of the wealthy’s lives and help perpetrates and maintains the situation that at whatever strata of society you are born in you have a 95% of remaining in that strata, a 1% chance of a rise and a 4% chance of falling.
Interestingly it’s the inflow non documented immigrants, beloved of the wealthy, that Trump is trying to stop in order to protect blue collar jobs and wages in the US. So it would seem that Trump is trying to make the US less “dog eat dog” by removing competition from a slave class, wouldn’t you agree?
“I think if you scratch most Australians, you will still find decency and a fair go mentality.”
I would agree with that, though that sentiment doesn’t mean much until it translates into political action. The “fair go” mentality translated into meaningful action on rolling back work choices, getting a banking royal commission, and now increasing calls to deal with wage theft / worker exploitation, but I don’t see that same enthusiasm to push for a more practical and less punitive welfare system.
Both our State and Federal National Party mp’s are promoting an increase in Newstart and our local Murdoch paper has just instigated a citizen vote, Do you support an increase in Newstart Yes/No.
My conclusion is that an increase in Newstart is on the way as part of a stimulus package for the economy.
The trouble with a cash stimulus from this government is it will probably be directed to the greedy not the needy, what’s the bet they give tax cuts to business instead of a rise to Newstart which would give an instant hit to the sagging economy whereas a tax cut takes more revenue from a government short of it for a once off hit that will achieve as much as the last tax cut, ZERO. THIS IS THE TYPE OF CONSERVATIVE IDEOLOGICALLY MAD GOVERNMENT THAT CAUSED THE LAST DEPRESSION AND EVERY RECESSION SINCE, we desperately need a Rudd stimulus package to kickstart the economy right now.
Form. Of course it will go to the greedy. Simple economics :- “The needy can’t donate part of those tax-payer funded funds back to the Coalition.”
The needy, on the other off-hand, need such funding more, themselves – to spend on survival.
Speaking of donations, it is of interest to look at how much the big accounting firms get paid for public work and then look at the donations, on both a state and federal level.