Time for a Sequel to Jim Chalmer’s Monthly Essay: Capitalism after the Crises?

The AIM Network

2 years ago

By Denis Bright

In February 2023, Treasurer Jim Chalmers made a welcome and bipartisan commitment to the transition to a more humane form of Australian capitalism. For almost a decade after 2013, three LNP Prime Ministers from that era had tinkered with variations of neoliberalism until the COVID-19 crisis changed the mainstream agenda in Australian politics.

With recovery from the COVID-19 crisis underway, Treasurer Jim Chalmers promised new initiatives after 2022. The commitment is shared by every mainland state and territory which have chosen Labor Governments. Tasmania with its state minority liberal government is hardly a bastion of neoliberalism. Tasmania’s share of revenue from Grants, including GST revenue and Australian Government Payments for Specific Purposes, equates to 66.7 per cent of total general government sector revenue in 2023-24 of $8.422 billion (Tasmanian Budget Paper 2023-24).

The federal LNP is still in dissent from these limited national reform programmes. In Queensland, there is a new round of letterboxed cards through Australia Post to restore the old neoliberal priorities with a commitment to Phase Three tax cuts and the usual round of legalized tax avoidance strategies for investors. Seeking long-term national government, the economic reform programme of the Albanese government is very cautious in the context of these well-funded campaigns to restore old conservative values.

Future short-term increases in Australian government spending are currently well below the inflation rate but will increase in the future as the local and global economies show down at the end of the forward estimates. This will still allow for some attention to these key infrastructure, community development and environmental priorities covered in the Australian budget papers.

In a still very conservative Australian political environment, the federal LNP will resist every reform initiative taken by the Albanese Government, including commitments to more affordable public housing. Peter Dutton indeed holds the government responsible for interest rate increases by the RBA. This ignores the fact that interest rates have been rising across the global economy. In Britain and the US, interest rate increases protect key global currencies to attract capital flows to financial markets while justifying vendettas on non-military government spending. Slender Republican Party control of the US House of Representatives has forced the Biden administration to abandon most of its reform agenda to enable the debt ceiling to be raised with bipartisan support.

In Australia, the federal LNP insists on delivering Phase 3 tax concessions to middle- and upper-income Australians as noted by Paul Karp of The Guardian (16 May 2023):

The cost of stage-three income tax cuts has climbed to $313bn over a decade, with the benefits flowing disproportionately to high-income earners and men, according to new data.

New Parliamentary Budget Office costings, conducted for the Greens, has predicted a blowout in the cost of implementation. It has been released as the Albanese government insists it has no plans to revisit the controversial tax cuts.

The cost of stage three has risen from $254bn in October due to lower unemployment, higher incomes and inclusion of an additional year in 2033-34. The PBO found that the tax cuts will cost $20.4bn in their first year, 2024-25, rising every year to $42.9 bn in 2033-34.

Only a major global economic and investment downturn prior to the 2024 Australian budget would change the resolve of the Albanese government on this issue.

Addressing the infrastructure and community development deficiencies in Australia requires some alternative economic thinking covered in the Australian Treasurer’s Monthly article in February 2023. The retraining effects of interest rate increases through monetary policies from the RBA tends to affect small businesses which are more dependent on banks for new investment. The latest private sector capital investment data shows the strength of current business expansion which might foreshadow further RBA interest rate hikes (ABS 1 June 2023):

[textblock style=”3″]

Private New Capital Expenditure-March Quarter 2023 Key statistics

Total new capital expenditure rose by 2.4%
Buildings and structures rose by 1.3%
Equipment, plant and machinery rose by 3.7%
Estimate 2 for 2023-24 is $137.6b. This is 6.4% higher than Estimate 1 for 2023-24

[/textblock]

Larger firms, including multinational companies, are less dependent on RBA monetary policies as they have their own sources of finance which includes the diversion of revenue back into new investment as a tax minimization option. A recent article from the European Economic Association shows the trendlines in this type of major business investment in the global economy.

Australia clearly needs a more diversified and stronger financial sector to compete with the major financial hubs of global finance and tax havens like the Cayman Islands and Ireland to attract more ethical capital investment. The nuts and bolts needed for these changes requires investigation by responsible and competent financial planners.

In Queensland, Ankita Panjratan of Hawker Britton has co-ordinated a team of business analysts to offer advice of the best priorities for the delivery of new infrastructure for forthcoming events such as the 2032 SEQ Olympic and Paralympic Games of 2032. Nationally, government relations strategists could work on fine-tuning capital investment flows from the private sector in the Future Fund and various state/territory investment funds to by-pass dependence on government funding and distortions to superannuation investment which might downgrade retirement incomes for members.

There are very few models of well-funded public investment and sovereign wealth funds. The Norwegian Pension Fund uses royalties from its energy sector for new ethical capital investment. The Dubai Investment Fund (DIF) is more adventurous and is open to private sector investment but in a far less than democratic political environment.

The Dubai Investment Fund (DIF), an asset management company headquartered in Dubai, is broadening its international presence by entering the markets of three additional nations. New Zealand, the Czech Republic, and Cyprus… The investment fund will establish a foothold in these countries for the first time by setting up offices in a move to reach out to more companies and gain more market access.

The endeavours of real estate, tourism, banking, and artificial intelligence will be the primary focuses of the Czech Republic and Cyprus offices. New projects in environmental, social, and governance issues, as well as green energy and healthcare, will be the primary focus of the office in New Zealand.

The company plans to make investments in solar power plants and revolutionary biomedical initiatives in New Zealand. These innovative biomedical initiatives will investigate a number of methods for merging artificial intelligence with contemporary medical developments.

Using the vast resources available to the Australian Government through its access to Treasury and Financial Departments as well as independent assessments by progressive think-tanks and financial consultants, the Albanese Government can surely work on a sequel to the Treasurer’s Monthly article from February 2023 to ensure that our own deviations into alternative economics are financially responsibly and suited to Australian challenges.

In NSW, the Generations Fund was seeded by capital investment from the LNP’s state privatization agendas. This included the sale of the NSW Government’s financial interest in the WestConnex Motorway to Sydney Transport Partners (STP) as summarized by NSW Treasury:

The NSW Government on 20 September 2021 announced the sale of its remaining 49 per cent interest in WestConnex to Sydney Transport Partners (STP) for a total of $11.1 billion in gross proceeds. The Government has now received $20.4 billion in gross proceeds from the sale of the motorway project after STP purchased 51 per cent of the project in 2018.

Net proceeds from the 49 per cent interest sale have been deposited in the NSW Generations Fund (NGF) – the State’s sovereign wealth fund – before being used to retire an equivalent amount of debt over the next two years.

WestConnex is Australia’s largest toll road project and when complete will enable motorists to travel over 50 kilometres from Penrith to the city without hitting a single traffic light. The estimated construction cost to complete WestConnex is $16.8 billion with the final section due to open in late 2023.

This sale is part of the Government’s prudent, long-term strategy to bolster the State’s finances, while also supporting the NSW economy by investing in job creating projects that will drive the COVID economic recovery.

The NSW Liberal Government had literally run out of assets to privatise in the future and planned more public borrowings to expand its Generations Fund. The AFR through Samantha Hutchinson’s article (19 June 2023) shows that the incoming Minns Government has intervened to halt these financial adventures under a rising interest rate regimes.

Meanwhile, the forthcoming revenue losses from the delivery of Phase Three Tax Concessions and the financial burdens of AUKUS defence deals with multinational defence providers in Britain and the USA do not auger well for the plight of homeless people who sleep out in shacks, tents and motor vehicles in every major Australian city.

Such Hooverville settlements were a feature of the US Depression era in the 1930s when the Republican Party turned its back on the poor and marginalized sectors of the American Dream.

Journalist Dorothy Day (1897-1980) publicized the extent of poverty and alienation in a land of plenty before public opinion by the excesses of Cold War militarism. Several You Tube documentaries are available to cover Dorothy Day’s commitments including Dorothy Day: A Rebel in Paradise.

Jim Chalmer’s is to be commended for his efforts to promote a more humane social market as an alternative to mainstream global capitalism through the Monthy article from February 2023. Let’s hear more of the follow-up sequels before the ideal is lost to short-term political opportunism to achieve that prized long-term national Labor government.

[textblock style=”6″]

Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.