Oh spare me – “the bridge” is back.
No not the Nordic noir television series, but the federal government’s overworked and misleading metaphor for its crisis spending.
By Michael Pascoe.
“Australia now has a bridge to the other side,” Treasurer Josh Frydenberg told the National Press Club on Tuesday.
It will be a disaster for Australia if he actually believes that.
One more time: The government has not built an economic “bridge” – it has strung together a safety net and thrown some cushions around the bottom of the recession to catch people and businesses, or at least soften their fall.
What is urgently needed is ropes and ladders for those people and businesses to climb back up “to the other side”.
With the clock ticking down on the temporary safety net, the Treasurer gave the press club no indication he’s been looking at climbing gear. His was more a presentation of policy nostalgia and exhaustion.
Messrs Frydenberg and Morrison stole the “bridge” metaphor from the Reserve Bank Governor on March 19 when they pre-empted his media conference.
The RBA actually has built a monetary bridge, providing liquidity and extremely cheap money to carry the banking system over the abyss.
The federal government, after three attempts to come to terms with the scale of the crisis, is doling out $200 billion worth of nets and cushions. That is very important and absolutely vital.
But over the course of his speech and question and answer session, Mr Frydenberg gave only the smallest indication that he was interested in doing anything more than that, preferring to look much further ahead into the neoliberal playbook of “the market” fixing the economy and providing employment.
His speech ran through the history of the government’s ’rona response and lapsed into nostalgia.
“The budget was back in balance for the first time in 11 years and even with the global headwinds created by the trade tensions and the adverse economic impacts of the drought and fires, we were still on track to deliver Australia’s first budget surplus in 12 years,” he reminisced.
“In the words of the Reserve Bank governor Phil Lowe on 5 February, ‘Australia’s economic fundamentals remain very strong’.”
Oh Josh, let it go. It’s gone.
On February 5, Dr Lowe also said it was the RBA’s assessment that GDP growth for 2020 as a whole would be “largely unaffected” by the bushfires and coronavirus.
The RBA has moved on. The Treasurer needs to as well.
Australia’s longer-term economic fundamentals can be strong, if we employ some vision, but our fundamentals for the next couple of years are not flash.
Under present policies, unemployment will remain high and the tragedy of recessionary life will linger.
More govt spending? Think again
There were just two glimmers of hope over the press club lunch that the Treasurer had not frozen in the headlights of his $200 billion spend.
The first question from chair Sabra Lane was how flexible the government was prepared to be with further assistance.
“Obviously we will continue to do what is necessary,” he said, but then reiterated the spending already announced, building up to JobKeeper: “That money will be flowing out this week. I believe that that support, together with other programs, will be what is required to continue to help people through this crisis.”
Mission accomplished, thinks the Treasurer.
Specifically asked about the increase in the otherwise deficient Newstart/JobSeeker payment, no, the supplement was indeed temporary. The cushions will be taken back.
The Treasurer left the door ever so slightly ajar though when he spoke about the impact of the crisis on the services industry.
“We have to think about smoothing that transition for businesses going into that recovery phase,” he said.
But that was all – “we have to think about” it.
If the government is not planning and announcing employment creation initiatives now, they won’t be anywhere near ready when the safety nets are cut.
The usual neoliberal suspects
To the extent that the Treasurer did look forward, it was mainly to the distant comfort of policy reform with impact years away.
“As the Prime Minister has indicated, we’re not about to announce a shopping list of reforms,” he said.
“We are in a harvesting phase during which we will look at new and old reform proposals with fresh eyes.
“In sifting through these reform options, our focus will be on a practical solution to the most significant challenges which we will confront post the crisis:
“Reskilling those who may have lost their jobs, upskilling those in existing jobs to adopt to the enhanced digital and e-commerce environment, and equipping those entering the workforce for the first time, with the skills they need to get a job.
“New infrastructure projects, big and small, to ensure our $100 billion, 10-year pipeline is maintained.
“Regulatory reform to reduce the cost burden on business and the economy, enhance the flow of capital, and increase competition and build on existing initiatives, like the consumer data right.
“Tax and industrial relations reform as a means of increasing our competitiveness, cognisant of the fact that in the aftermath of this crisis there will be less aggregate demand, domestically and internationally, which will see heightened competition for goods and services across all markets.
“The values and the principles that have guided the Coalition reforms in the past must guide us again in the future. Encouraging personal responsibility, maximising personal choice, rewarding effort, and risk taking while ensuring a safety net which is underpinned by a sense of decency and fairness.
“Unleashing the power of dynamic, innovative and open markets must be central to the recovery, with the private sector leading job creation, not government.”
Rounding up the usual suspects, you might say.
It does not add up to a “bridge” but a drier version of the Business Council platform. But crucially it lacks the BCA’s mention of lowering carbon emissions and permanently increasing JobKeeper.
The Treasurer showed his mindset remained in relatively normal times, still not up with reality or what the economy will be like at the end of the year.
“Capital is mobile. Business is not very sentimental, and so we have to ensure we have the most competitive environment possible,” he said.
Capital is indeed mobile. It is also shaken and wary.
It will go first to where it can be confident of making a profit – where it can see demand.
It will be years before a few percentage points in the tax rate matters much.
First published at The New Daily, Wednesday 6 May 2020. See; https://thenewdaily.com.au/finance/finance-news/2020/05/05/frydenberg-speech-pascoe/