Frydenberg’s budget, based on discredited “trickle down” economics, misses an opportunity to restructure our economy, weakened by seven years of Coalition mismanagement.
When Treasurer Frydenberg expressed his admiration for Thatcher and Reagan we found it hard to take him seriously.
But he meant it.
Most Treasurers’ budget speeches are padded with meaningless statements about the government’s supposed competence, followed by a selection of measures to provide the media with cut-and-paste content. Frydenberg’s speech had all that, but he also spelled out a trickle-down ideology, cobbled together from the Liberal Party platform and Reaganomics.
He says “eight out of every ten jobs in Australia are in the private sector. It is the engine of the Australian economy.” This valorisation of the private sector comes straight out of the Liberal Party’s statement of beliefs where we see written “businesses and individuals – not government – are the true creators of wealth and employment”.
By this philosophy the public sector is just a big unproductive overhead. If a government must go into deficit to stimulate the economy, that stimulation should be through the private sector. Give money to consumers to spend, and financial incentives for businesses to “unleash a wave of investment across the country” to quote from his statement.
It’s pure trickle down. Don’t provide better government services to people – public housing, child care, education, care for the aged – what we used to call the “social wage”. Just give them money. Don’t bother providing businesses with the public goods that help an economy thrive – transport infrastructure, a well-funded university sector. Just give them money.
Frydenberg made much of his “10 year infrastructure pipeline” but it’s piddling compared with Keating’s One Nation plan in 1992 which included a full one per cent of GDP in new infrastructure, in response to a much more mild recession. And it wasn’t spun out over ten years.
To get a glimpse into the Treasurer’s ideology we need to turn to Budget Paper #1, which contains the hard numbers. On Pages 11-10 and 11-11 we see the government’s estimates of taxation receipts. Taxation will fall in the short term, but by 2023-24, when the economy is supposed to be back to 3.0 per cent growth and unemployment is back down to 5.5 per cent (see Page 1.8 of this same document for this piece of creative fiction), Commonwealth taxes will be only 22 per cent of GDP – much lower than it was earlier in this century when they were around 24 per cent of GDP.
There is no acknowledgement that Australia’s level of taxation, and that the size of our public sector, are already nearly the smallest among all prosperous countries. Instead Frydenberg says “under the Coalition taxes will always be lower”, as if that’s a self-evident economic virtue. The case for “small government” does not have to be argued or justified, because government is just an unproductive parasite on the “true creators of wealth and employment”.
By such a philosophy the nurse in a public hospital does nothing useful, but could contribute to society on moving to a private hospital. A publicly-funded road is just a wasted piece of work, but if it is sold to Transurban and has a toll applied it becomes something useful. The croupier in the Crown Casino is a true creator of wealth and employment but the public-school teacher isn’t. And so on.
The Liberal Party’s ideology is as absurd as its communist counterpart, that saw no value in the private sector, and in the long run is no less destructive of prosperity. In our case it’s producing a lopsided economy, hobbled by an emaciated public sector.
A recession is a terrible event, but at least it gives a government the means to use its fiscal power to address the economy’s structural weaknesses, as the Hawke Government did in 1983. The Coalition, blind to the destructive legacy of its seven years of mismanagement, refuses to acknowledge our structural weaknesses and has prepared a budget that will do little more than distribute financial wealth to the already over-privileged.