Scott Morrison might be trying to scare us with his latest warnings of a $1 trillion gross debt within a decade, or he might be trying to avoid being the fall guy for a failed economic plan. Either way, he is doomed.
Eerily reminiscent of some of Joe Hockey’s worst efforts, Morrison’s comments at the Bloomberg function in Sydney on Thursday were amateurish at best and just like Joe Hockey, he betrayed an appalling lack of macroeconomic sense. He suggested that if his budget savings were not passed by the senate, Australia may face a recession.
How absurd! If the senate passes the stalled budget saving bills and that action curbs the spending power of middle and low income workers, as it will, the losers will be small business and local suppliers and that will lead to a recession.
People stop spending when they have less money to manage. Morrison’s economic plan is encouraging people to stop spending. Morrison is actually helping to create a recession rather than avoid one.
The passing of those bills will lead to less public spending. Less public spending sends the wrong message to the private sector who know it will reduce their productive output when facing the inevitable lower sales volumes. That will result in higher unemployment, lower participation rates and negative growth.
The productive capacity of the nation rendered idle, increases.
Just who is advising Morrison? He then goes on to complain that too many people don’t pay tax, but made no mention of corporate tax avoidance. “It’s the taxed and the taxed-nots.” Does he not know that the “taxed-nots” are the corporate sector, to the conservative estimate of $50 billion annually?
The problem Morrison has right now is that he is out of his depth. When people are out of their depth they rely on others (so called experts) to explain things to them. Then the speech writers have to translate that into information the common folk understand. We should call it the “Joe Hockey Syndrome”.
Morrison’s speech to the Bloomberg function was a train wreck. It made no economic sense whatsoever. Recession! Future burden on our grandchildren? Too many people not paying tax? Just who is this man listening to? It was only a year ago he was telling us there was no revenue problem.
So what is the problem? Is it insufficient revenue, or excessive spending, or both? Actually it’s neither. It’s a balancing problem. We should be spending as much as is needed proportionate to the existing capacity of the nation. It’s not rocket science.
As Bill Mitchell explains, “… the desirable deficit outcome at any point in time (is) a function of the state of non-government spending and the utilisation of the productive capacity of the economy.”
Conservative governments are a captive of the household economy syndrome. Their bible tells them debt is bad. No amount of reasoning will dissuade them.
Worse still, they seem incapable of grasping that they don’t need to borrow at all. Why would a currency issuer need to borrow?
Either through ignorance or compliance with the wealthiest in the land and beyond, they cannot see past striving for a surplus. As if a surplus represented the Holy Grail.
That philosophy will cause a recession as sure as the Titanic hit an iceberg. If Morrison cannot see that, he should step down.