You might not think it, but yesterday’s economic statement from Treasurer Josh Frydenberg brims with optimism. Its forecasts assume we have the pandemic under control. The bad news in the statement is a result of what has already happened.
As we knew, the economy is in recession. Unemployment is forecast to rise around 9.25% in the December quarter. However employment then begins to recover following easing of restrictions. The assumption is we won’t need restrictions for the latter part of this year and into the next.
Reflecting this confidence, travel bans will be lifted. From January 1 migrants and visitors will be allowed, with a two-week quarantine. Numbers will be lower than in past years, but the statement forecasts some 31,000 arrivals.
Mining investment is also forecast to grow. This is optimism of a different kind: assuming China, our biggest trading partner, is not sufficiently annoyed with us to harm the minerals trade.
At present, that’s a reasonable assumption. However, if US-China relations continue to deteriorate and Australia sides with the US, we can expect heavy economic retaliation, which might extend to minerals.
Sure, that would hurt Chinese firms as well — but China is a one party, centrally controlled state so might want to take action against Australia anyway.
Despite the current state of the jobs market, wages are assumed to grow this year and next (albeit at a lower rate than in past years). When people are desperate for any kind of employment, whatever the pay, that’s an optimistic forecast.
The other major sign of optimism is the description of COVID-19 as a “once in a century shock”. We can but hope. There is an alternative: this pandemic is only the start of many more. The statement does not contemplate that possibility.
There’s nothing wrong with optimism. The health of our economy relies on business and consumer confidence. A pessimistic statement would become a self-fulfilling prophecy of economic gloom. We expect optimism in a statement like this.
But there are dark clouds, and the statement does not ignore them.
It is admirably open about the global risks if control measures in the rest of the world fail. We are still part of a global economy, which faces considerable uncertainty if other countries fail to contain the pandemic.
It also discusses what would happen under a second wave scenario. The reimposition of widespread restrictions across Australia would cost the economy $2 billion a week.
The statement assumes, however, that Victoria will contain its current outbreak.
If Victoria fails, or if the outbreak crosses the border and spreads widely in NSW, then this economic statement becomes chip wrapper. It would need to be rethought from the basic assumptions up.
There is no argument to be made that, if there is a resurgence of COVID-19 across other states, the policies of suppression should be abandoned. Loss of life and ongoing health problems need to be countered.
Nevertheless, movement restrictions and social isolation do enormous economic damage. This means government has to step in to repair it.
The good news is we can afford to do so.
Australia has a relatively low level of debt to GDP compared with other countries. If the pandemic situation worsens we can and should spend even more to stay afloat.
With interest rates at their lowest levels in living memory, funding the spending is not a problem.
It will still be through traditional debt funding. In an implicit rejection of modern monetary theory the Reserve Bank governor gave a speech on Tuesday declaring “there is no free lunch. The tab always has to be paid and it is paid out of taxes and government revenues in one form or another”.
Thus, we will have a historically high deficit and increased debt. That’s not what matters economically. What does matter is that the government has sensible measures in place, especially to help people retain employment.
Hmm. “There’s nothing wrong with optimism… We expect optimism in a statement like this”. Really? Pollyanna or Dr Pangloss?
Nice to know that Them’s Wot Know Best are firmly agin MMT.
The axiom “science advances one funeral at a time” applies in spades (or JCBs) to the Dismal “science” though I doubt that anything less than obliteration of the several generations churned out by the Chicago/Austrian skools will suffice to rid us of these useless drones.
The outbreak in Victoria was warned about and foreseen and the advice given by the Medical Officers and the ACTU was ignored.
The word “cheap” comes to mind! I had to explain to my grandson the use of the words: cheap and cost effective and inexpensive were not interchangeable.
Obviously this government has gone down the “Cheap” path without acknowledging that frequently “Nasty” is one of the word that follows.
It was excruciating to watch the current treasurer and pampered boy child of two stateless people, who were welcomed into Australia as refugees, explaining that his focus is only on Australian citizens when providing financial help in an economy on its knees due to a pandemic.
All the other people in Australia, providing services that Australians can’t or won’t for the miserable Labour Hire firm rates offered or those that work one job to the next in what is called the gig economy, were dismissed as not “really our concern”.
This sort of rationalization is “Cheap and Nasty”.
These vulnerable people ecstatic at getting a job, as the quarantine guards hired by an range of Indian owned Labour Hire firms to work in the hotels in Melbourne. These are also the cleaners and Assistants in Nursing (AIN’s) who are casual and contract workers in nursing homes and the truck drivers, delivery man and cleaners.
The success of privatizing and incorporating nursing homes with a federal government funding model, have been so successful that we have a Royal Commission currently suspended into the whole nursing home mess. Another “Cheap and Nasty decision process one suspects”.
Well, now the exploited and the vulnerable who were not considered to be Australia’s problem are our concern.
If the virus is to be slowed and suppressed, then these people need to have access to Job Seeker and Job Keeper as well as, sick leave and or pandemic leave payments so that they can stay at home until they are well, without their children or aged relatives starving or being at risk of homelessness.
Sweden has already shown us that the migrant communities and aged population have borne the brunt of their insane experiment. While Morrison was delaying closing our borders, allowing the Ruby Princess to be given a health clearance from Border Farce and toying with the idea of going down the path Trump has taken, the modeling was done.
The the Pandemic declaration brought out the states of emergency and Morrison slammed up against a law created after the Spanish Flu of 1919.
We would have buried over 12,500 people so far.
Simple, really, don’t you think?
Not if you are from an indulged childhood, wealthy community or have social connections which string back to the First Fleet.
Somehow the notion that not all Australian residents are created equal, has become part of the fabric of our dear leaders beliefs.
This then allows our cosy and lazy politicians to undertake the rationalization, that somehow these people, who are required to pay tax and the NDIS Levy and Health Insurance and as such are contributors to the well being of our society, don’t really count!
The failure of our political class to follow simple instructions such as 1. Advertise in other languages;
2. Ensure that the quarantine hotels were adequately supervised and 3. Treat each of our most vulnerable residents of Australia as you would have wanted your family treated if they had had to run for their lives, as my grandfather did!
The most short sighted part of this whole thing is, the younger people who contract this monster are not being told about the disabilities it is going to cause if they survive. Everything from heart valve damage to chronic and permanent lung damage, brain disorders, chronic fatigue and damaged kidneys requiring dialysis or transplantation.
By our negligence we are stealing about 15 years of our young Covid19 patient’s lives and somehow this government doesn’t think in necessary to explain this!
Time for scottie from marketing and joshie boy to stop comparing the raw data of our current deficit with our WW11 one.
This is another of those really stupid comments of a “Record” because our record population of 25,000,000 will always have a “record anything”.
Whereas the population of Australia in 1947 was a tad over 7,500,000 and so, IF our current deficit was a tad over 3 times as much as it is now, we would be in the same boat as we were then.
In conclusion all this comes down to is that the National Cabinet should start taking decisions that are forward thinking and in the national interest, rather than the cheap and nasty quick fixes.
Why did the federal government not purchase the 747’s from QANTAS and convert them into water bombing planes?? Or is someone of the opinion that we won’t have bushfires in the future??
I suspect that scottie from marketing reads about as much as Trump does. Garnaut Report anyone??
Very well said, ratty.
It is unfortunate that the general public has neither the wit nor the inclination to demand logic and rationality from its governments.