A closer examination of Anthony Albanese's Budget reply speech reveals that it lacks any substance behind his words, writes Professor John Quiggin.
THE BUDGET brought down by Treasurer Josh Frydenberg on Tuesday ought to have been an easy target for Labor. The Liberals have spent more than a decade denouncing Labor’s use of Keynesian fiscal policy to save Australia from the consequences of the Global Financial Crisis and the debt and deficits that have ensued. Ever since regaining office in 2013, they have promised a return to budget surplus, even announcing in April 2019 that the Budget was “back in the black”.
When the pandemic hit, the Government briefly tried to pretend that its response, unlike that of Labor, would be limited and responsible. But as the magnitude of the crisis became evident, the limits were rightly cast aside.
The fiscal stimulus introduced in response to the COVID-19 pandemic ensured that the promised 2019-20 surplus turned into a massive deficit, followed by another in the current 2020-21 financial year. With the worst economic effects of the pandemic behind us and the JobKeeper and JobSeeker programs wound down, the Government might have been expected to have returned to the pre-pandemic policy of budget “repair”.
Instead, Frydenberg’s Budget marked an effective admission that Labor had got it right in 2008 and that any return to surplus should be deferred until the economy had returned to full employment. Labor should have jumped on this admission and sought to cement a commitment to the use of active Keynesian fiscal policy to stabilise the economy.
Instead, Shadow Treasurer Jim Chalmers repeatedly denounced the “trillion-dollar debt burden” arising from the Government’s policies and promised a rapid pivot to “budget repair” as soon as economic circumstances permitted. “Budget repair” is a euphemism for the austerity policies that have wreaked havoc globally since the GFC.
The Budget was just as vulnerable on its tax and expenditure priorities. Half a billion dollars was thrown in to support the fantasy that a combination of gas and carbon sequestration represents a viable way of decarbonising the economy. There was nothing for realistic approaches like electric vehicles and renewable energy.
At a time of grave skill shortages, the Budget cut funding for universities, already hit by the exclusion of international students. Tax cuts for high-income earners, disgracefully legislated years in advance, are now appearing in the forward estimates, crippling the Government’s abilities to meet social needs in the future. The miserable $40 increase offered to the unemployed when JobKeeper expired was unchanged.
Anthony Albanese’s Budget reply speech hit the right notes in rhetorical terms. He spoke of the need to build back better, to support advanced manufacturing, high-value industries and a world-class services sector and to make Australia a renewable energy power.
But when it came to substance, there was next to nothing. The transition to clean energy needed to build back better will require billions in new investment. But in response to Frydenberg’s grossly misdirected spending of $500 million, Albanese offered only $100 million to be spent on clean energy apprenticeships.
Rather than fix university funding, Albanese promised 2,000 grants to help recent graduates start small businesses. In explanation, he said that the universities weren’t doing enough to commercialise research, the kind of philistinism we’ve come to expect from LNP ministers like Dan Tehan. The proposal itself turned out to have been a repackaging of one put forward by Bill Shorten in 2015, so minor at the time that nearly everyone had forgotten it.
The big-ticket item, or so it seemed, was $10 billion for social housing. But on closer examination, the proposed expenditure on the Housing Australia Future Fund is a big fat zero. Rather, the plan involves a complex piece of neoliberal financial jiggery-pokery.
The idea is that the existing National Housing Finance and Investment Corporation would borrow the $10 billion and invest it with the Future Fund. On the highly optimistic assumption that the Future Fund would continue to generate double-digit returns, the proceeds of this investment would be used to fund new housing. All of this would be off-budget, thereby helping to stave off the bogey of public debt.
As with the clean energy policy, nearly all the jobs to be created here will be in stereotypically male “hard hat” occupations. Albanese’s response to the widespread demand for a Budget focused on women is that some of the houses to be constructed will be set aside for women escaping domestic violence. This isn’t much of an advance on the Morrison Government's defence of its last Budget, that women would benefit by driving on the roads to be constructed.
In view of the electoral failure of Bill Shorten’s ambitious program in 2019, it would have been unrealistic to expect radical proposals from Albanese this time. But our current crisis demands more than the handful of small-bore policy initiatives we got on Thursday night.
John Quiggin is Professor of Economics at the University of Queensland. His new book, The Economic Consequences of the Pandemic, will be published by Yale University Press in late 2021.
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