MacroEdgo On The Australian Budget

If I could draw a cartoon to depict the Treasurer as he presented his budget, I would draw a balding man sitting at a table with two whisks of hair pulled from each side to form a large, taught cross on the top of his head, all fingers and toes crossed tightly, and multiple 6-sided dice atop the budget document with all of them having the coronavirus on 5 sides and only 1 with a syringe symbolising a safe and effective vaccine.

I see this Australian federal budget as an enormous gamble with our future.

Everything is on (and for) business to lead the recovery which requires no further, perhaps wider, phases of significant community transmission by the mass administration of an effective vaccine delivered soon, or highly effective suppression (because even though not admitted by Morrison, elimination is out the window because it would delay Victorian re-opening) which global experience suggests is unlikely.

Globally, an issue with the proliferation of cheap\free financing to businesses widely discussed by money managers – fund managers and financial analysts – has been the zombification of businesses through the ending of creative destruction where unsustainable businesses are able to continue, thus soaking up resources which would more productively be put to use in innovative businesses of the future.

The tax breaks to business will exacerbate that.

I have a close contact in the residential building industry. He told me that he was surprised his business was eligible for Jobkeeper, etc, and that his business has been literally raking it in. On top of that, each month since July they have set successive records for incoming business (been in operation for 20+years), no doubt because the Government assured the banks ahead of time that they would loosen the responsible lending regulations to ensure they kept shovelling out finance to the property-addicted.

(Just remember who is the back-stop for the banks and thus the housing bubble! )

Clearly these measures are blunt, much of it will be wasted, we won’t have an economy fit for our future, and we are likely to borrow much more again when all that becomes clear or even earlier with further waves of the pandemic.

This Government has repeatedly shown that it has no idea of how to manage an economy of the future. They only want to manage our economy back to the past.

Where is the Government infrastructure spend to make long term investments in our productive capacity and environmental sustainability?

On 11 February in my “Coronavirus Update” I said the following:

Any stimulus to create activity will need to be activity that does not require people to come together.

Nine months later into this pandemic and the Morrison Government still fails to grasp the reality of a global pandemic, and has wasted an enormous amount of time and human capital by focusing only on attempting to take us back to the way things were instead of setting the people free to innovate a brighter future.

I find no succour in this Government’s willingness to borrow more against my family’s future if this plan fails on the back of a devastating pandemic. And I am reminded that the second wave of the 1918 flu in Australia was devastating, and fear that we are setting up for history to repeat (note I do not consider the cases in April\May this year to represent a genuine first wave as there was minimal community transmission).

Morrison and Frydenberg have continually thrown jibes at people who understood early the consequences of pandemic and who continue to argue for the primacy of protecting human life – they say that we want to wish the virus away.

On the contrary, this budget proves it is they who have continually refused to come to terms with the human reality of pandemic, and thus have only one strategy to which they repeatedly return – minimise interventions aiming to impede the pandemic spread, and when other state leaders impose them, mount political pressure to have them eased as soon as possible.

This budget attaches every last bit of their political capital to not undergoing lockdown again, and that makes these politicians dangerous.

It should now be obvious to all that for their budget strategy to have any chance of success, then it is absolutely imperative that Victoria must act on the side of caution when re-opening to ensure the outbreak is fully stamped out. Yet they have continually mounted political pressure for it to be brought forward.

The Morrison Government strategy underpinning the budget assumptions also highlights the need to genuinely give attention to a broader set of risks on how new clusters could be initiated – as discussed at MacroEdgo – such as with processed meat contaminated by infected workers (take particular note of the current Chadstone cluster) and from reservoirs of infected animals as this virus infects many more species than just us homo sapiens. 

Note that both of these pathways may represent a risk for a number of years into the future even if our international biosecurity measures are perfect from now on (e.g. it is possible that people may be infected by handling meat contaminated with virus that has been frozen for a significant period).

I am tired of the press, even from the left, granting this Government a pass apparently based on “a good effort”. 

That is ironic given the ideology that these conservatives sprout.

This budget adds to the Morrison Government’s failures. They are clueless and place political ideology ahead of the national interest, and this budget attaches their political fortunes entirely to opening up for business so that they will become as desperate and dangerous as other populist conservatives if or when events run away from them.

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© Copyright Brett Edgerton 2020

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