Meanwhile ... more sensible evaluation of the Stimulus package ...
Morrison's coronavirus stimulus package shows sober, expert advice can still prevail
The Coalition has spent 10 years characterising cash handouts as budget-wrecking communism. This collective epiphany is interesting
If you’ve been watching closely you’ll know the official version of what Australia needs to do to stave off a recession triggered by the coronavirus has travelled quite a distance in a very short period of time.
The Morrison government started with we don’t need stimulus, then moved to countenancing a modest boost, before touching down on Thursday with a significant pump prime north of $17bn – a bunch of measures that looks a lot like the first stimulus the Rudd government unleashed during the global financial crisis.
Over that same period (which, to be clear, is only a couple of weeks) the government has also travelled from having a surplus in May, yeah baby, to “we’ll get back to you on when that will happen”.
So let’s start with the obvious.
Everybody is learning here, calibrating and recalibrating, in full public view, and the truth is there is so much uncertainty associated with this pandemic that forecasting the future feels more like astrology than economics – particularly with the White House warbler weaving incoherently all over the place, dragging febrile global markets along with him.
With due respect to all the unknowns, this much can be said.
At first blush the design of this economic stimulus package looks entirely sensible.
The engine room of the intervention – cash payments worth $4.76bn – will be targeted at more than 6 million Australians with a high marginal propensity to consume.
A bit of recent history. When the Morrison government gave people income tax cuts, they didn’t spend their windfall, they saved it. So targeting one-off payments at people who lack the luxury of saving does seem the best way of sending cautious consumers to the shops to deliver the desired economic benefit.
That strategy worked during the global financial crisis, and it is reasonable, in the broad, for Treasury to assume it can work again.
My only question would be whether $750 is the magic number; whether that is enough money to coax people to get out and spend for Australia at a time when people are fretful enough to be stampeding into supermarkets and getting into punch-ups over toilet paper.
Because if we cut to the chase, the success of this package requires two things: speed of delivery and confidence in the community.
It requires people and businesses to go out and spend their government handouts, not retreat to their bunkers like doomsday preppers.
The problem for Scott Morrison and Josh Frydenberg is a circular one. As a government you can try to engender national confidence by projecting steadiness, by working up a plan and telegraphing it with as much competence as you can muster. But you are also hostage to events largely beyond your control.
The government is hostage to people worried about whether they, or their loved ones, are going to succumb to an illness, which is a visceral fear; hostage to how and when this illness will spread, and the practical consequences of the pandemic (health systems stretched, schools and shops and businesses closing); hostage to whatever market-moving madness comes out of Donald Trump’s mouth on any given day (which must be one of the adrenaline-thumping unknowns of all).
In closing, a couple more things can be noted.
The first is that the government has managed to land this package, and the show hasn’t exploded – even though this is the Coalition, funding cash handouts to benefit recipients. This is behaviour that in more ideological quarters of the government could be considered highly suspect, even if the overarching objective is to keep people employed and the country out of recession.
Just remember the Coalition has spent much of the last 10 years characterising fiscal stimulus, including cash payments, as budget-wrecking communism, so assuming the current discipline holds, this collective epiphany is genuinely interesting.
It suggests that sober, expert advice and pragmatic thinking can sometimes prevail over the brimming feelings of the overconfident ignoramuses who loom large in public life and make it their business to be as destructive as possible.
I was beginning to wonder whether hoping for sense was a waste of energy, and this stimulus package suggests to me that the technocrats, both in the political and bureaucratic class, are still in the fight.
I don’t know about you but I find this reassuring.
The second thing to note is that the government has been sensible enough to reserve the right to do more in the event it needs to do more. It has given itself scope to go again at budget time in May if it judges a second round of stimulus is required.
This is good scope to have, because right now, we need all options on the table.
https://www.theguardian.com/business/2020/mar/12/morrisons-coronavirus-stimulus-...
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