Thursday, September 5, 2019

Today by Russell Marks


The economy? All going to plan
Morrison’s tax cuts couldn’t have been better designed to shrink the economy

Treasurer Josh Frydenberg. © Lukas Coch / AAP Image

This week’s economic growth figures are the first since the $158 billion Morrison–Albanese tax cuts were waved through parliament in July. That the GDP figures show – at 1.4 per cent – the worst annual growth since 2001 is unsurprising, as Prime Minister Scott Morrison said yesterday. Those tax cuts could hardly have been any better designed to shrink Australia’s economy.

Morrison claims that they were designed to stimulate growth through consumer spending, but if he’s sincere in this, he’s also misguided. With household debt astronomically high, tax cuts for middle-income earners are more likely to go into repayments. Householders’ debt hit emergency levels in 2018 (and was still close to 200 per cent of national income early this year), but tapered off a bit when it became clear they couldn’t simply rely on house prices continuing to skyrocket. Consumers slowed their spending and refocused on debt management, and they’ll likely continue to do so with their tax cuts. Perhaps deflating the debt bubble was the plan all along.

They won’t truly feel the pinch until interest rates rise, but households are no doubt glad of the relief. Wages have barely risen for seven years, and household savings are only marginally above the basement-bottom levels of 2018. The steady accumulation of private debt over the past 25 years has now reached a level that worries the Reserve Bank, so the prospects of taking on even more debt to benefit from emergency-low interest rates is not as appealing as it might be. We can’t spend our way out of a pending economic malaise like we did before the global financial crisis. And the interest rates don’t provide much of an incentive to save. Basically, we’re in a bind.

Without consumers able to come to the rescue, Australia’s economy is being kept afloat by company profits – which don’t trickle down to households – and, ironically for a government with faith in Hayekian neoliberalism, government spending. Tax cuts, however, are structural. They carve a large, irreversible chunk out of future government revenue, and therefore significantly curtail the capacity of governments – this government and future governments – to stimulate the economy with some targeted spending. Kevin Rudd’s government did just that in 2008–09, and we all recall the trouble he got into in the reactionary and tabloid media and among the neoliberal faithful. Those faithful now dominate the government benches, so there’s little chance a Morrison government will do anything sensible like go into (public) debt to fund a stimulus package. Demonstrating their faith in an extreme neoliberal orthodoxy requires them to maintain a (contractionary) budget surplus. Given the choice, it’s far more likely they’ll pull the country into recession.

And for the first time since the GFC, a recession looks genuinely on the cards. We may already be in one, if one takes a substantive definition of the word rather than the two-consecutive-quarters rule of thumb established by former commissioner of the US Bureau of Labor Statistics Julius Shiskin in an otherwise-forgotten New York Times op-ed in 1974. Yesterday was the first time Australia’s rate of GDP per capita fell below zero since those heady days of 2009.

Then, Australia avoided a recession through the application of sound economic policy. Now, there would be no way Morrison and Treasurer Josh Frydenberg could claim, as Paul Keating did, that a recession – should it eventuate – is one we “had to have”: it’s entirely avoidable. Future historians may well reflect that the oddest thing about it is that in May 2019, we voted for it.


“We will protect it. We don’t just want anybody walking in … It’s just a shame none of the elders are around to watch it unfold.”

It’s been 36 years since traditional owners first blockaded the Mutawintji National Park in western New South Wales. Mutawintji Board of Management member Elisabeth Hunter, just 19 when she participated in the blockade, reflects on the NSW government’s announcement this week that the area afforded conservation status will double.

“The problem with the people who have been swarming across the borders in Europe in very recent times is that you don’t get any impression that they come to join. You get the impression they come to change.”

Former prime minister Tony Abbott shares his views on migration at the Danube Institute in Budapest.

The truth about wages
The reality of the wage debate in Australia is that companies are geared to pay dividends rather than to invest in growth – and the treasurer’s intervention does nothing to change that.

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The number of high-definition, zoom-capable CCTV cameras – operated 24/7 by police – installed in the two main streets of the Northern Territory town of Katherine in June, taking the total number of cameras in the town (population 6300) to 42. Police announced this week that they’ll also be able to blast warnings and messages through loudspeakers to “scare” offenders in real time.

Former ministers Julie Bishop and Christopher Pyne today appeared via teleconference at a Senate Finance and Public Administration References Committee hearing. The former foreign affairs and defence ministers have been explaining how their current positions – on the board of Palladium and at consulting firm EY, respectively – don’t contravene clauses 2.25 and 8.6 of the Statement of Ministerial Standards.

The list
 

“Howard etched the groove and Morrison has settled comfortably into it. He is, he tells us, just a normal guy, paying off an average-sized mortgage on a typical three-bedroom family home, with two young kids and a supportive loving wife, Jenny ... He was brought up by loving, community-minded parents, and he and Jenny are doing the same for their girls, just like millions of other families in Australia’s sprawling suburbs. And he loves his local footy team to boot. Nothing to see here. Men who reach the top in politics are never just normal guys.”

“It was a sunny late autumn day under an epic Texan sky, an incongruous setting for songs set on the grubby nocturnal streets of Darlinghurst and St Kilda. But the kids of Texas Tech were enthusiastic, sitting there on the grass rocking to ‘Darling It Hurts’ and ‘Before Too Long’, and there was one moment when band and audience seemed to connect in perfect communion. It happened when the band fell silent and Kelly sang his tender song of lust, ‘You Can Put Your Shoes Under My Bed’, with just piano and vocal harmony backing.”

“How much kudos should Treasurer Josh Frydenberg be given for voicing concern about the rising tide of buybacks and special dividends in this country? Not much, in Deloitte Access Economics partner Nicki Hutley’s opinion, for a couple of reasons. First, because the treasurer is not proposing to do anything about it ... The second reason is that she sees the government being very late in recognising there is a problem.” 

Russell Marks

Russell Marks is a lawyer and an honorary research associate at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

 

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