See if budget creates a future, and beware of dirty tricks!

Oct 6, 2020

Close observers of Tuesday’s federal Budget will no doubt have their eyes out for evidence of the usual political chicanery towards political donors, lobbyists and friendly interests, as well as mates, cronies and relatives of senior members of government, this time in the alleged cause of stimulating demand and picking winners in the post-Covid economy.

That eye is more necessary than ever before, if only because government has become more shameless, with less and less respect for evidence, proper process and transparency. But it is not the main game. This time about, indeed, there is a risk more serious than of government shovelling money towards its friends and cronies. It is that it will be doing too little, too conservatively, and with too little imagination and open mind, with the result that economic and social recovery will be delayed. Those who will suffer most from this timidity will be disproportionately the usual suspects: low-paid workers, casual workers and people in part-time work, pensioners and welfare beneficiaries — including the young, the aged, the disabled, indigenous Australians and many temporary workers, including overseas students. But the fabled little capitalist in “small business” — the people that the coalition pretends it is all about — will probably suffer more than most as well.

There will be a record deficit. And if the government is reducing the level of benefits going to people and businesses which have been dislocated by the coronavirus pandemic, there will a good deal of extra money going towards economic activity, particularly in areas favoured by government winner-picking. This will, presumably, be in the way of small grants, subsidies, tax breaks, loans and a myriad of ways designed to persuade businesses to invest, to increase aggregate demand, to increase business and consumer confidence, and, quickly it is to be hoped, to sop up existing underemployment and to create new employment. Never before in Australia history will so much public money have been spent in trying to kick-start the Australian economy again, to create growth and jobs, and to take us again firmly back on a path to growth. Never before will so much have been offered to those willing to have a go.

In this sense, those who express disappointment and some disgust will be under immediate counter-attack. What we will be seeing will not be the work of a party immediately focused on debt and deficits, on containing public expenditure, or greatly over-worried about limits beyond which responsible governments cannot go. This is a government which has faced unprecedented circumstances, and which has responded with measures that might once have seemed ideological anathema. The precepts of Milton Friedman and his political acolytes Margaret Thatcher, Ronald Reagan and Augusto Pinochet have been cast aside for a return to an interventionist Keynesianism on a scale that might have amazed Keynes himself. Neoliberal tenets of free markets as the best allocators of resources in an economy, about achieving minimal levels of government intervention so as to maximise the opportunities for prosperity have been put on hold.

A party which pretended to disdain protectionism, and industry policies designed to give an inside sheltered run to the government’s pet industries has moved into market intervention. We may end up with five-year plans, perhaps even five-year plans.  Some coalition mischief-makers have become given to suggesting that the premier of Victoria, Daniel Andrews, has become some sort of power-mad communist dictator, but in truth Liberal premiers, and even Liberal prime ministers and ministers have become increasingly addicted to government by fiat, government behind closed doors, government with cronies and vested interests sitting at the table as fellow-decision makers, and a marked increase of use of the coercive power of the states. Political parties have not forgotten their ideologies, their convictions, or their predilections for the interests of their friends. But there were never so few constraints on the exercise of power, or on the use of power and incumbency to keep one’s side in power.

It is worth stressing this, because a survey of what the government of Scott Morrison and Treasurer Josh Frydenberg will not be announcing on Tuesday night is as instructive as an enumeration of what it will be doing. It will not have made the choices that it has because these are necessarily the most efficient ways of creating jobs, increasing production, fostering demand or creating that sort of business confidence that inspires entrepreneurs to borrow and invest in new equipment, or consumer confidence that promotes spending, travel, and increased use of services.

This government was creative — as were similar governments all around the world —  in devising schemes of pretending that jobs were still in existence, or in helping the newly unemployed to keep their heads above water. But it was obvious from the start that this sudden generosity with public money for people and businesses in trouble would be extended only to the coalition’s friends — not towards sectors they had come to think of as enemies. Thus, the squeeze went heavily on to universities — whose revenues were hard hit by the loss of foreign students thanks to the suspension of foreign travel. Now they are to face additional costs from changes to funding arrangements for undergraduate courses, and, probably, the suspension of international cooperative arrangements with other public universities. Several years before, governments were urging such arrangements upon universities.  To underline the government’s point, university staff who lost their jobs as a direct result of economic changes caused by the pandemic were refused access to schemes opened to others, including clergy. Also excluded were a good many people employed in the arts, in entertainment, and the ABC. By contrast, commercial media organisations, including News.Com, have received direct subsidies.

The tourism, accommodation, airlines and hospitality sectors have been severely affected by lockdowns and closed borders (more so from the closure of international borders than from the state border wars). Help for those sectors has been patchy, apart from massive tranches of cash paid to the big businesses. Help for the quintessential small businesses has been less generous. Payments directed at the futures of workers caught in these problems has not been as conspicuous or focused as for people out of work in other areas, now including some fields of manufacturing, as well as construction, home-building and the ever-burgeoning national security industry.

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