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‘Supply Side’ Budget Stimulus – Government could have done more for ‘Battlers’ and Women

The 2020 Federal Budget projects a deficit of some $213 billion – a far cry from the previously projected surplus. An already sluggish economy – hit now by Covid-induced economic collapse – left no option but massive stimulus – lest the nation sink into a Depression.

In a way it is encouraging that the government has thrown away the book on neo-liberal orthodoxy to some extent. A contractionary budget would have been disastrous. A notable amount of the stimulus (about $6 billion) comprises wage subsidies aimed at the young – with the aim of supporting some 450,000 jobs. The plight of the older unemployed – thrown onto the Jobseeker scrapheap – is another question. In the largest single measure over $26 billion in tax breaks will be delivered to business to write off the value of new investment by June 2022. There will also be a $4.9 billion “loss carry-back scheme” enabling businesses “to claim refunds or offsets on taxes in previous years.” Importantly, the third round of tax cuts – aimed at high income earners – has not been brought forward – in a win for Labor and the Greens. But the business sweeteners are not consistently tied to job creation and job retention – so for all that money there are no guarantees for workers. According to ACTU President, Michelle O’Neil, the government also projects zero wage growth even if there is economic growth in the coming years.

In Aged Care, $1.6 billion will provide 23,000 home care packages. But this is below demand, and there are no big plans to reform residential care. Perhaps this will come with the final findings of the Aged Care Royal Commission and the next election: but the need is urgent and ought not be put off. In fact it is dubious the Conservatives will find the money for comprehensive Aged Care reform: Home Care and Residential packages to meet demand; with quotas for Aged Care Workers and registered nurses, a winding back of user pays, exercise and GP visits for all residents, and an emphasis on quality of life. It will be up to Labor and the Greens to put up a fight, though disappointingly Labor has known about these problems for over a decade, and is only making the right noises now with the focus provided by the Royal Commission. We are talking many billions of dollars annually to make a difference over the long term.

‘The Age’ reports that “about 11.5 million workers will get up to $2745 more in their pay packets this financial year.” Though the raising of the threshold of 32.5 per cent to $120,000 from $90,000 is arguably badly targeted. And support for pensioners and the unemployed is insufficient, with a total of $500 in payments to Aged Pensioners meant to bring relief and fuel spending. More for those on low incomes and welfare would have a greater stimulatory effect, and would contribute to fairness. On the other hand the low income tax offset will rise from $445 to $700 in a modest but welcome measure.

Importantly, of the new spending measures only $6.7 billion is going to the states for new infrastructure. Including other infrastructure measures the figure is closer to $10 billion extra over ten years. The government’s main emphasis is in providing support and incentives to ‘kickstart’ business as opposed to measures directly supporting consumption at the low and middle ends; although increased business confidence would support jobs. The Budget measures emphasise the ‘supply side’ but neglects the ‘demand side’ when it comes to low income earners, the unemployed and pensioners. The opportunity to permanently raise Jobseeker appears to have been neglected, and many jobs will be lost with the premature withdrawal of JobKeeper.

Of most concern, stimulus is not a ‘black hole’. Getting people spending and back to work is part of a ‘virtuous cycle’ which can restore growth and rejuvenate the government’s balance sheet. With record low interest rates the time has never been better for investment, and the Government could have done more here.

The economy’s pre-existing weaknesses have not helped; but a Labor Government could not have avoided a Covid recession. As Labor has argued it will be putting the case for ‘better bang for our buck’ in the stimulus. This should mean more emphasis on those on low incomes and welfare, and providing support where it will grow spending and investment in jobs most vigorously. Too many businesses will be pocketing these ‘sweeteners’ without necessarily creating jobs.

In response to the Budget, Anthony Albanese has committed to further child care subsidies and half a billion to refurbish public housing. We need wage subsidies for child care and early education workers as well however. And also subsidies for consumers of child care and early childhood education. Both as a matter of fairness (for child care and early education workers – and women workers more generally); to get more women working, and to attract talented educators into the field. Also with housing out of reach for so many people a big investment (into the billions) in public housing now could both stimulate the economy and promote affordability.

Modern Monetary Theory supposes government can issue currency to ensure a ‘full employment guarantee.’ Such stimulus is part of the picture, but can be limited by inflation and currency devaluation. Though inflation seems unlikely in the current environment. Redistribution can’t be done properly and fairly without tax; but MMT has something to contribute to this debate. The government’s projections on unemployment are nowhere near ambitious enough.

If Labor was in government this kind of stimulus would be derided as an ‘irresponsible’ ‘cash splash’. Consensus that stimulus is part of the way forward in times of economic weakness is at least a good thing in itself. It sees Conservative arguments against the Rudd stimulus of the Global Financial Crisis (GFC) blown metaphorically out of the water. Labor governments of the future will be able to point to the current effective consensus on SOME form of stimulus to help justify their own efforts when governing in times of downturn or stagnation. Which will inevitably come as part of the capitalist cycle. But this government’s emphasis on the ‘supply side’ of the equation is nowhere near discriminatory enough.

This article was originally published on ALP Socialist Left Forum.

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14 comments

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  1. New England Cocky

    Uhm ….. if this is from an ”ÄLP Socialist Left Forum” then Ben Chifley will be rolling over in his grave and Bob Hawke will be choking on his beer!! Rather it appears to be a sycophantic apology for an uncommonly bad dose of corporate socialism that has completely ignored working families and others excluded from the earlier so-called COVID financial support.

    There is now no doubt what-so-ever that the COALition Liarbral Nazional$ misgovernment are unfit to occupy the Treasury benches and that the speculated early election for mid 2021 should occur sooner rather than later so that we may replace this self-serving rabble of ill-educated, corporate cronies with a political party that has the best interests of Australian voters at heart.

    Which political party is the best financial managers? CERTAINLY NOT THE COALition …..

  2. Dr Tristan Ewins

    NEC: Did you miss the passage where I wrote: “But the business sweeteners are not consistently tied to job creation and job retention – so for all that money there are no guarantees for workers. According to ACTU President, Michelle O’Neil, the government also projects zero wage growth even if there is economic growth in the coming years.”?

    What passage specifically do you deem “sycophantic”?

  3. Dr Tristan Ewins

    And also:

    “As Labor has argued it will be putting the case for ‘better bang for our buck’ in the stimulus. This should mean more emphasis on those on low incomes and welfare”

    I don’t know what you’re basing your comment on.

  4. New England Cocky

    Tristan, consider the complete strategy from Day One. Australia had the Rudd Henry response to the GFC, ”go hard, go early, go families”, that proved to be a world leading strategy protecting Australian families from the economic effects of that US bank induced calamity. It was so good that the Murdoch Media-ocracy had to misrepresent facts repeatedly, more correctly, unapologetic blatant lies is a better description.

    The Scummo COVID-19 response was ”Í’m going the the football, we’ll get around to it perhaps, how much can we send to our political donors?”

    Now consider the overall $1 TRILLION national debt created at enormous expense to future generations, which is exactly the COALition argument for suppressing unemployment benefits … but it OK for corporate mates, because they know how to manage things ….. to give themselves a big bonus or share buy-back …..

    Perhaps it is my family background but your article does little to objectively evaluate the worst Australian government policy since Federation in 1901. Perhaps you have been lucky enough to eat every day, unlike many of the abandoned Australian voters failed by the Liarbral Nazional$ misgovernment. Perhaps you have missed out on the joys of choosing between purchasing medicine and paying rent because there is inadequate social housing that could have been rectified at the present very low borrowing rates. Or perhaps your education was paid for with funds withheld from state schools for decades because private schools needed to build a third Olympic standard swimming pool and pay the Principal over $500,000 per year salary for generally mediocre academic results.

  5. Dr Tristan Ewins

    NEC: I added the following at the end to make it clear where I stand: “But this government’s emphasis on the ‘supply side’ of the equation is nowhere near discriminatory enough.” I make it very clear that emphasis on the demand side is what is needed ; and especially those on low incomes.

    I’m unemployed and the only way I cope and survive is because my mother left me her house.

  6. Dr Tristan Ewins

    Also at the end I’m effectively saying the deficit in this Budget effectively vindicates the Rudd stimulus: even though there are big qualitative differences ; and as you identify Rudd’s emphasis on family consumption was a better strategy.

  7. leefe

    ” … the government has thrown away the book on neo-liberal orthodoxy to some extent.”

    No, they haven’t, they’ve just used a bit of smoke and mirrors and the usual MSM sycophancy to slightly disguise it. Your own words make that plain:

    ” … for all that money there are no guarantees for workers.”
    ” … no big plans to reform residential care.”
    ” … only $6.7 billion is going to the states for new infrastructure… The government’s main emphasis is in providing support and incentives to ‘kickstart’ business … ”
    ” … measures emphasise the ‘supply side’ but neglects the ‘demand side’ when it comes to low income earners, the unemployed and pensioners. The opportunity to permanently raise Jobseeker appears to have been neglected.”

  8. Dr Tristan Ewins

    leefe: Yes but during the Depression for instance the Government response promoted economic contraction. The sense in which they’re going against the neo-liberal orthodoxy is that they’re running a big deficit. That said they’re doing it mainly in the wrong ways. As you observe in your quotes from the article.

  9. MrFlibble4747

    Where I worked this comment on comment back and forth situation would be called “being locked in violent agreement.”

  10. king1394

    I wonder why childcare is always seen as an expense of women’s work, and paid for quite usually by the woman from her wage. When couples are working, the male / father is just as dependent on affordable quality childcare for the wellbeing of his children. Perhaps men need to start recognising childcare as a personal cost of working as well.

  11. Terence Mills

    I’ve heard the prime minister and treasurer say in recent days that businesses, with the ability to write off capital expenditure against their taxable income, will be out there buying trucks and utes and thus boosting our economy.

    What I haven’t heard them say is that they regret hounding the auto industry out of Australia to various points in Asia where governments are more receptive and supportive of manufacturing industries.

    So the money that will be spent on trucks, Utes and other machinery which could have gone into factories, jobs and apprenticeships in Australia will go offshore to those countries who actually make these products.

    Go figure !

  12. New England Cocky

    @king1394: Funny that ….. if men had babies then childcare would likely be a 100% government expense for the essential good of the nation and tampons would be free issue from every pharmacy and supermarket. Corporate Australia worked a con over the government when childcare was introduced and has avoided any recognition of this ”hidden” expense of casualising the workforce.

    @Terence Mills: Funny how when you follow outdated nineteenth century social economic theorising you frequently get the incorrect solution. Much better to union bash and leave 200,000 workers on unemployment benefits than see the opportunity to recover $30 billion tax revenues (without the payment of New start). Still, RAbbott was never one to let the facts get in the way of a well established indifference to anything requiring thought and critical analysis.

    I mean … why would any Liarbral supporting corporate executive expend this government largess increasing profit making capacity when every good Liarbral recognises that an executive all expenses paid family holiday in Hawaii is worth more than a few bushfire lives or a share buyback to keep the money in the family.

    @Tristan Ewins: You chose your parents well and they obviously worked hard, planned well and encouraged your work ethic. Good to have you join us in the trenches fighting to remove the worst Australian misgovernment since Federation. See you at the pre-poll booths!!

  13. ajogrady

    The sole purpose of the L/NP’s budget or winning government is to funnel taxpayers monies into the pockets of their criminally corrupt donors so as to keep the L/NP in power that enables the L/NP to then award them corruptly attained lucrative government contracts or stimulus packages that benefit L/NP donors. It’s not rocket science but it does seem to evade those that count. That is voters

  14. Wam

    Had a giggle when you threw up labor and the loonies but.

    How ironic that federal gov gets praised for the labor tactics that were trashed every day by the media and the Andrews labor gov gets trashed every day for liberal tactics of using private companies(indue must be trashed albo)
    ps
    Still Covid has given federal a lift and federal is doing their best to use it to defeat Anna.

    pps King 1394
    These people believe the father’s involvement in child care is the tax deductions.
    pps
    Fried gets to talk on morning shows about stimulus success and swan got asked if he had stopped wasting cash

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