How would YOU revive the economy?

Ask those milling around at a Saturday afternoon barbeque, footy blaring in the background, and VB in ample supply, how they would revive our economy and you’ll get an assortment of responses.

Some will look blank; clearly the economy is not front-of-mind for them. Some will have little idea of what our economy is, and no idea of how it’s faring. Among the few who do have a notion of how our economy functions, some will question whether it needs revival at all. But some, aware of its parlous state, will suggest a variety of remedies, albeit adorned by the specious ‘know-how’ that so many rank amateurs profess. Some though might speak freely, uncontaminated by ideology or entrenched bias, and offer pearls of wisdom.

Here is your chance to offer your pearls.

In medicine, and indeed in any discipline whose prime purpose is to solve problems, a starting point is the diagnosis. The nature of the problem often points to the remedy. So what is the problem with Australia’s economy?

We don’t have to look far to find what’s wrong. Speak out, posted on The Political Sword on March 2, included this list: “…a stuttering economy now facing a fading surplus, rising unemployment and underemployment, a shamefully low Newstart allowance, chronic wage stagnation, poor productivity, and lagging R&D investment.”

This list is not new. As far back as August 2019 Paddy Manning wrote an article in The Guardian: The no-growth future: has Australia’s economy finally run out of luck? Take a quick glance through it – the diagnosis was obvious even then:

Slow economic growth – per capita growth in rapid decline
Slow job growth rate – increasing unemployment and underemployment.
Inflation and unremitting escalation in the cost of living.
Alarming growth of household debt.
Diminishing housing affordability.
Increasing income and wealth inequality, poverty, homelessness.
Loss of consumer and business confidence
Heavy dependency on natural resources for national income.
Also take a look here and here. Greg Jericho gives his usual erudite analysis in We need more than confidence to improve the sad state of affairs the economy is in.

Subsequently our economy has suffered from prolonged drought, widespread fires and floods, and now the coronavirus pandemic, COVID19, that is spreading from the rest of the world throughout Australia, bringing with it not just health problems, but the threat of widespread economic disruption, and now the spectre of a recession, a word LNP ministers cannot bear to utter, lest their much-flaunted reputation of being superior economic managers become tainted, even destroyed. Yet a technical recession seems possible, even likely. It is the Coalition’s greatest fear.

Since this piece is for YOU to suggest remedies, you may wish to add to the list of problems with our economy, to extend your diagnosis before you venture into suggesting remedies.

What are the options available to the government as it formulates its response, which it now says must be ‘targeted, modest and scalable’.

Of course the LNP, having comprehensively lambasted the stimulus initiated by Labor at the time of the GFC that kept our nation out of recession, now hoisted with its own petard, fears that it will receive similar ridicule should it introduce a package in any way resembling Labor’s. Frydenberg continues to utter his favourite mantra: ‘The economy remains sound and resilient’, as if that means that nothing much needs to be done.

It doesn’t take a Rhodes Scholar to suggest plausible remedies. Every economics commentator has had a go.

The one I’ve heard though, over and again, is: increase the Newstart allowance. A cogent argument for doing so is detailed here:  

Suggested increases range from $75 to $100 per week. The economists at Deloitte Access Economics estimate that increasing Newstart by a meagre $75 per week (ANU modelling suggests $100 would be optimal) would boost GDP by $4 billion and create an additional 12,000 jobs by 2021. They show that the benefits disproportionately flow to regional and remote communities (given that's where most Newstart recipients live) and would boost wages, corporate profits and government coffers through the increase in demand in the economy.

But will the LNP government dare to take this step? Their natural inclination would be not to increase it, because such a move would contradict their entrenched belief that people on Newstart are bludgers, ought to be in a job, and giving them a higher rate would simply be pandering to their ‘slothfulness’. The operate out of George Lakoff’s ‘Strict Father’ model which postulates that children should obey their parents, work hard, get a job, and be self-supporting. This model frames any debate they initiate about supportive programs such as Newstart. This TPS piece explains how.

Other suggestions include bringing forward promised tax cuts, and increasing depreciation allowances to business, especially small business. The Government’s Economic Stimulus Package lists:
  • Supporting business investment
  • Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs
  • Targeted support for the most severely affected sectors, regions and communities;
  • Household stimulus payments that will benefit the wider economy.
Notice of the extent and nature of these stimulus payments is restricted by the LNP’s wariness about introducing anything that might resemble the Rudd/Swan package. Having criticized ‘pink batts’ and ‘school halls’ so trenchantly, they are scared stiff of similar criticisms, of being hoisted once more by their own petard.

Even the mention of increasing Newstart is shrouded by uncertainty. Would any increase apply, as hinted, to those who have recently lost their jobs, but not to those already on it? Any increase would seriously threaten Frydenberg’s politically sacred but fictitious ‘Back in the black; back on track’ surplus? What a dilemma!

Anyway, it’s time now for you to suggest how YOU would save the economy. Please feel free to express your views about the diagnosis as well as the remedies in the Comments section.

Readers will enjoy reading your suggestions. Your views are as valid as any our government has offered.

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