By Ugly and Joe Montero
Yesterday, Treasurer Josh Frydenberg set the scene for a massive cut in government spending. The cornerstone of his presentation was the deficit blowout of $184 billion. The essence is that the money must come from somewhere.
The manner of presentation exposed the extent of the government’s worry about the public reaction. Much of it was vague. Intentions were hinted at, instead of being boldly put.
This does not hide that the underlying central purpose of his address was to massage the public, into accepting the inevitability of pain. The message was, support provided for the pandemic must come to an end, and that there must be sacrifice.
An expected sharp rise in unemployment was mentioned and the official admitted 709, 000 lost jobs presented. No surprise here. He spoke of the damage to the economy was as well. No surprise here either.
Frydenberg talked about the challenges ahead. This is the script. Expect a barrage of propaganda, given more time by delaying the already delayed budget till October.
Yes. The situation is difficult. The government found itself in debt to the tune of $677 billion by the end of June. This is tipped to reach $852 billion during the course of the new financial year.
Scary as it looks, there is also a measure of creative accountancy in this. From here on, a part of it will be covered by future revenues. But despite this, the net picture remains serious.
Tax receipts fell $31.7 billion in 2019-20 and are expected to fall by $63.9 billion this financial year. The growing gap between government expenditure and revenues must be addressed.
There is another side. The government was forced to step in, due to the failure of the market to deal with the pandemic, on top of the previous failure to deal with the weakening economy.
It doesn’t stop here. Everything suggests that the post pandemic era will see a continuing failure of the market to resolve the crisis. It’s not only the diffiulties in kick starting again. Frydenberg conceded the likelihood of further damage from new Covid-19 outbreaks, and the underlying weakness of the economy is still there.
Government intervention is necessary. Extraordinary times demand a national plan for recovery. But there isn’t one. Only the same mantra that individuals out of work must be pushed back into work.
The implications are that income support will be harder to get and the level much lower than it is now.
Contracting government involvement and support for those suffering the brunt of the damage, can only work in the opposite direction to that needed and damage the economy.
Instead of this, Australia needs a recovery brought about through a combination of government intervention and the active participation of the population. It must have the following elements.
- Public controls over finance, to ensure that it is directed towards appropriate economic reconstruction and growth. The establishment of a new public bank to finance key requirements would help.
- Building of a manufacturing industry providing stable and permanent jobs. This involves specific projects to build for identified needs and provide improved infrastructure.
- Ensuring sufficient government revenues through taxation reform, which focuses on ensuring that all contribute fairly, there is an end to the massive corporate tax evasion industry, and that the taxation system is progressive.
- support that ensures every Australian has a living income. For two reasons. To raise the level of demand in the economy and to encourage positive participation. We have to be in this together.
This is a great opportunity to invest in the building of a new social economy, where communities come together to build ways to meet their needs. A social economy is the best way to provide an engine for generating involvement and unleashing initiative.
None of this is going to be championed at the government level. Only when the majority of the population is determined to make it happen, will it come about.