JOHN MENADUE: ‘Plan for a strong new economy’Jun 29, 2016
As a voter in the prime minister’s electorate of Wentworth, I have received two letterbox drops from Malcolm Turnbull on a 5-point plan for economic growth and jobs.
This 5 point plan is the centre piece of Malcolm Turnbull’s national campaign. It is a very flimsy plan which the media has not seriously examined.
The following are edited extracts from an earlier post I made on the plan.
Nowhere in this ‘plan for jobs and growth’ is the repair of the budget mentioned or proposed. Yet we are facing a large budget deficit for the ninth year in a row. Both the budget deficit and net government debt are much worse than when the Abbott Government took office. At the last election we were told that we had a ‘budget emergency’.
Yet we are told time and time again that conservatives are better economic managers. It is just not true. Only today in the SMH Ross Gittins said, ‘The public’s conviction that the Coalition is the better manager of the economy seems to roll on regardless of the evidence.. In truth it is not supported by the record..’
Let’s consider the 5-point plan.
- ‘An innovation and science program bringing Australian ideas to market. This means greater investment and more jobs and opportunities for young people.’
There have been a lot of beguiling words about ‘innovation, disruption and agility’ but there hasn’t been much substance .CSIRO has had its budget dramatically cut with no remediation in sight. Probably the most important key to innovation must be a fast broadband for internet. But the NBN which was Malcolm Turnbull’s major responsibility for two and a half years will be slow, delayed and expensive. It will not be as he used to say ‘faster, cheaper and sooner’.
- ‘A new defence industry plan that will secure an advanced defence manufacturing industry in Australia. This will create thousands of new high tech, high paying jobs.’
The strategy and costs of the government’s new defence proposals are hard to justify. The $50 billion spend on submarines is to build twelve large, long-range conventional submarines that will be able to operate in the South China Sea by the mid to late 2030s! They will need to contest those waters with Chinese nuclear submarines. This will be a very dangerous undertaking for our submariners. Furthermore, many strategic advisers in Australia believe it is a major mistake for us to be drawn into a contest in distant waters between the US and China. We should stay out of that contest. We could make no difference to the outcome. We should restrict our new submarines to the approaches to Australia at much less cost. We could purchase for example six high quality conventional submarines off the shelf and delivered at least ten years earlier and without needing a Collins class upgrade. The saving would be over $45 billion.
In this blog on 29 April, John Stanford and Mike Keating said
‘The implications for industry policy constitute a particularly egregious element in the [submarine] procurement decision. … We need to remember that the Abbott government showed the door to the car industry. The end of the ‘age of entitlement’ meant that around $500 m. a year, not high by international standards, was too much to pay to support a high technology (car) industry that, directly and indirectly, employed around 200,000 people. Now the government is keen to support a (shipbuilding) industry with a cost disability, according to the Rand Corporation, of up to 40%. Given the likely moderate local value-added in an industry where all sophisticated hardware is imported, the effective rate of protection (assistance to value added) will be much higher than this. Indeed a leaked paper from Defence suggested an effective rate of protection of 500% would be required to build the submarines in Adelaide. Even at the height of the Fraser government’s protection excesses … the effective rate reached only 143% for the car industry. … On the Prime Minister’s figures, 2,800 jobs will be created directly and indirectly, a far cry from the 200,000 jobs that are related to the car industry. Some early estimates suggest we are looking at a cost of around $4 m. for every job created.
Most of the highly skilled technical work will be in Cherbourg, France and not in Adelaide.
The proposed submarine deal with the French is of very doubtful strategic value and it will come at enormous cost. This is not what we expect of governments that profess to believe in ‘free markets’. This is a boon doggle on a grand scale, a very grand scale.
The ‘deal’ is designed to last only till July 2.After the election it will unravel and be substantially revised. It is unsustainable. It is a nonsense. South Australians are going to be very, very disappointed by the outcome.
- ‘Export trade deals that will generate more than 19,000 new export opportunities. They will create many more jobs for our urban and regional families.’
In this blog on 10 September 2015, Peter Dixon and Maureen Rimmer, both professors at the Centre for Policy Studies at Victoria University, said ‘The Centre for International Economics estimates the gain in economic welfare from the three North Asian Free Trade Agreements will be 0.4%.’ This study also found that as a result of the three FTAs, Australian jobs would increase by 5,435 over the next 20 years. We know from experience that the FTA with the US actually resulted in a reduction in our overall trade. In its 2010 report, the Productivity Commission said that ‘The increase in national income from preferential agreements is likely to be modest.’
The benefits of FTA’s have been grossly exaggerated
- ‘New tax incentives which will include tax cuts for more small businesses. More than two million businesses can benefit to deliver more growth and jobs.’
This is the centre piece of the governments ‘ten year enterprise tax plan’ However Malcolm Turnbull does not tell us of tax cuts in future years for large businesses. In fact these tax cuts are estimated to cost about $16 billion a year when fully implemented. This is more than the entire budget support for universities and TAFE combined. The Grattan Institute reported that ‘the overall effect of these tax cuts will be small in terms of jobs and growth.’ Mike Keating, in this blog said ‘What we do know is that whenever the company tax rate has been changed, it has never made a perceptible difference in investment, either here in Australia or anywhere else.’ The Melbourne Forum said that ‘a company tax cut is not in the national interest’ .It added that ‘the company tax cut amounted to a transfer of government revenue to foreign investors.’ Ross Gittins, in the SMH on 7 May this year said ‘There is no evidence to support Treasurer Morrison’s claim that the budget will do great things for jobs and growth. This conclusion is supported by the budget’s forecast that the economy will grow no faster in the coming financial year than it’s expected to grow this year.’ There is little evidence that the trickle-down theory of Reganomics will produce jobs and growth, but it does increase inequality. That growing inequality is promoted in Australia through concessions like negative gearing. It is significant that Malcolm Turnbull’s electorate of Wentworth negatively gears more than any other electorate in Australia. The ten top electorates that most exploit negative gearing are all Liberal Party electorates. With the new curbs on tax avoidance in superannuation more wealthy investors will turn to negative gearing and contribute to more young and first home buyers being forced out of the market.
- ‘A strong new economy with more than 200,000 jobs expected to be created in 2016-17.’
But surely a strong new economy must be based on a transition from a fossil fuel-based economy to an economy based on renewable energy. The future of conventional energy is very much in doubt. But in the current budget millions of dollars in fossil fuel subsidies will continue. Worst of all there is no mention let alone policy to transit to a clean energy economy. The climate skeptics in Malcolm Turnbull’s government have won the day again. Senior economists at universities in Australia have said in The Conversation that ‘The budget does not help transition the economy’. According to the ABS non mining capital investment is down over 15 % in the year to March 2016.
When Malcolm ousted Tony Abbott he promised us a sophisticated and adult conversation on important issues. He spoke of a different type of leadership that explains our challenges and opportunities.
Malcolm Turnbull’s five point plan does not do that. It is a flimsy cobbling together of slogans and errors.