Josh Frydenberg should have saved himself the inconvenience of a few hours in isolation and issued yesterday’s “ministerial statement on the economy” as a media release.
It added little to his rather uninformative speech last week, except for some economic forecasts that boldly went all the way to the end of June, a mere six weeks away.
There were no fiscal forecasts, just an update to the end of March, showing a $10 billion rise in the deficit up to that point.
No one was expecting the equivalent of budget forecasts. Everyone knows how uncertain things are around the lifting of lockdown restrictions. But last week the Reserve Bank (RBA) readily discussed three scenarios with its own forecasts beyond June, providing a stark contrast to the treasurer’s timidity.
One can only assume that if Frydenberg had ventured beyond June, it would have prompted real questions about exactly what the government plans to do to support the economy late this year and in 2021.
Even under the RBA’s most optimistic scenario, unemployment is still above 6% until late 2021. GDP remains well behind the level forecast in February.
The numbers are much worse under the most pessimistic scenario.
Yesterday’s National Australia Bank’s (NAB) April survey of Australian business endorsed the idea of a slow recovery.
NAB’s group economist Alan Oster said: “We see a recovery in growth late this year, but even though it could be a solid bounce the level of output is not expected to be recovered to pre-COVID levels until early 2022. We expect unemployment to match this pattern, falling in 2021 but remaining above 7%. This all points to required ongoing policy support for some time.”
NAB’s business confidence survey rose 19 points in April to -46 points, i.e. better, but still a very weak reading. But the business conditions survey which fell by 12 points to -34 points. These are figures much worse than those recorded during the early 1990s recession.
It’s the psychological impact of the pandemic and the lockdown that is now the most uncertain aspect of the trajectory of recovery, both for business and consumers. “We also worry the hit to confidence will have some ongoing impacts to hiring and capex which could see a drag on growth for some time,” Oster said.
Frydenberg noted — albeit confining himself to the June quarter — that “household savings are expected to increase as a result of the restrictions that have been imposed and an understandably cautious approach by households to discretionary spending.”
That won’t stop on June 30. The impact on consumer confidence will persist for months, perhaps years, to come.
If Frydenberg is reluctant to talk about the future, the issue of consumer spending is also a touchy area in relation to the recent past.
Although Scott Morrison has now abandoned his silly “snapback” prediction for the economy, there was always the question of what, exactly, the economy was going to “snap back” to. The pre-pandemic economy was characterised by the Great Morrison Stagnation: falling economic growth, unemployment firmly fixed above 5%, wage stagnation, household spending curtailed, productivity going backwards.
Implicit in Frydenberg’s remark about households is a similar question: even if consumers eventually overcome their pandemic caution, will they simply revert to the behaviour that characterised the Great Morrison Stagnation?
So profound was household reluctance to spend that those tax cuts last year that the government and the press gallery insisted were a major triumph and substantial stimulus in fact led to reduced spending.
No matter how little Frydenberg wants to talk about it, the problem of how the government will respond to persistently high unemployment into 2022 — when the next election is due — won’t go away.
The NAB’s conclusion is that “more action from policy makers will be required — particularly on the fiscal front to assist business with a return to normal”.
While the government is talking about “harvesting” economic reform ideas, floating the discredited big business agenda of company tax cuts and a return to WorkChoices and flagging that it is still aiming to cut off crisis support programs like JobKeeper in September, the stubborn fact is that more stimulus is going to be needed, unless the government gets lucky with a jobs surge well beyond that predicted even under the RBA’s best-case scenario.
That makes Frydenberg’s speeches last week and yesterday particularly pointless. They’re exercises in avoiding the real issue.
Any wonder he had a coughing attack – even he couldn’t swallow his own waffle.
David Pope’s cartoon in today’s Canberra Times (sorry paywall) says it best. https://www.canberratimes.com.au/story/6004430/david-popes-view-we-interrupt-this-economic-update/?cs=14390
Perhaps it is time for a serious discussion about jobs. Scomo recently claimed that any job is an essential job, but clearly that is not true. There are many jobs, especially in the financial markets, that are parasitic on the real economy, and exacerbate growing inequality. We need, I think, to ask what jobs are essential to maintain and improve our quality of life, and what are not. Neoliberals will rail against these sorts of questions, as they claim that like every other aspect of our life, it should be left to the market.
Keynes and Bertrand Russell each wrote seemingly cogent essays in the 1930s arguing that we should need to work less rather than more; Keynes ( Economic policies for our grandchildren) suggested that as a consequence of technological advances we should need only to work 15 hour weeks to meet our needs. Russell (In praise of idleness) advanced a similar proposition. Indeed, he claimed
“We have no attempt at economic justice, so that a large proportion of the total produce goes to a small minority of the population, many of whom do no work at all.”
Today, perhaps the spoils do not go primarily to the idle, but to those who are driven by greed.
The neoliberal establishment have embraced the protestant work ethic, I believe, to meet their own ends. If we are all to share the benefits of technical advances we are required to have a job, and to work hard. Anyone not doing so is a bludger.
“There are many jobs, especially in the financial markets, that are parasitic on the real economy, and exacerbate growing inequality.”
Exactly. Many jobs not required.
And many of them are absurdly overpaid.
Reminds me of a cartoon in the New Yorker many years ago. An applicant for a job in a financial firm was asked what salary he expected. “There was no need” , he replied, “I’ll just skim what I need”.
I remember in high school in the 1980’s we had a subject called leisure. The idea was that in the future, due to technology and automation, we would all share in the benefit and only work a few hours a week and therefore we needed to be educated on how to spend all of our free time !
So what happened ? Most of the spoils from technology, from automation and from globalisation got sucked up by the corporations, the 5 percenters took 90%. Most of us waste our lives as good consumers walking the mortgage treadmill paying interest to banks to put an average roof over our heads. Trickle down ? Bullshit it’s suck-up. And it turns out the system we are all slaving for is destroying the very planet we live on.
I’m going to post a response in 2 parts because it has entered the moderation black hole.
I remember in high school in the 1980’s we had a subject called leisure. The idea was that in the future, due to technology and automation, we would all share in the benefit and only work a few hours a week and therefore we needed to be educated on how to spend all of our free time !
Part 2 !
So what happened ? Most of the spoils from technology, from automation and from globalisation got sucked up by the corporations, the 5 percenters took 90%. Most of us waste our lives as good consumers walking the mortgage treadmill paying interest to banks to put an average roof over our heads. Trickle down ? B.S it’s suck-up. And it turns out the system we are all slaving for is destroying the very planet we live on.
More and more of us are getting that promised increased “leisure time” (see : “stagnation/underemployment” at employer/government donor discretion and advantage). It’s just that most those of us that are just don’t get enough money to live anywhere but on the edge; while the pittance they get is begrudged by those with plenty and want more – money, power and influence.
Just as fewer of us, by proportion, are getting more leisure time and too much to spend.
Viva a Neoliberal ‘Egalitarian Oz’.
Yes, it is more than unfortunate that workers in many of the truly essential jobs are at risk. An aged care worker, for example, or someone working in an essential service industry (not all service industries are essential) has little option to socially isolate. On the other hand, a currency trader or a hedge fund manager can sit at home comfortably in front of a screen and ply their trade.
JF better get a doctors Certificate if he has 2 days off or no sick leave!!!!!!!
This crisis is the perfect ‘get out of jail’ card for economic mismanagement – if we come back to a semblance of normalcy, it’ll look like a win, and if not there’s forces at play far beyond the control of the people in charge. (If you ignore the reliance on China and how that can be negatively affected by what the politicians say.)
The great stagnation of our economy is how our economy is intended to work. We could pretend otherwise, but at this stage what’s the point? It’s the excuse for cuts transferring more of the GDP into the shareholder class. And it’ll remain that way afterwards because this is the economic structure we keep voting for.
This government has been pointless since 2013. I’m not very hopeful they will make use of the opportunities right in front of them to make Australia a better and stronger country, those opportunities that have been there for a while, but now there’s even more of a reason (including a “spending excuse!”) to grab them, but seeing they are already floating their usual remedies which provably don’t work (tax cuts, deregulation), I just can’t see it happening.