Matters of Public Importance - The Economy - Tuesday 17 September 2019

17 September 2019

The Morrison government are absolutely failing to get the economy moving by bringing forward infrastructure spending. We know that they are failing to hear the concerns of the Reserve Bank, state governments and many Australians, who are calling out for investment in infrastructure not just for the sake of these worthy projects but because we urgently need the stimulus to our economy. We know how effective infrastructure investment can be in the creation of jobs.

It's all very well for this government to talk about being all about growth and jobs when, actually, in these economic times, when we are calling out for increased investment in infrastructure to deliver just that, they are completely missing in action. They should be bringing forward funding for infrastructure to boost the economy, to drive down unemployment and to boost wages. All economic critiques and narratives show that, with wages down and with unemployment high in states like WA, what we really need to see is an increase in infrastructure investment to change that cycle inside our economy right now.

This government want to leave all the heavy lifting to the Reserve Bank and a reliance on monetary policy. Sadly, even the Reserve Bank themselves have had to say that this is not enough. The government are missing in action. Monetary policy cannot be relied on solely to boost the economy. We are getting to the end of where monetary policy can go in terms of having the stimulatory effect that we need. We have an all-time low official interest rate of just one per cent. The RBA governor, Philip Lowe, technically has just 0.25 percentage points of reductions left before we enter the territory of negative interest rates. We have an unemployment rate that is now at 5.2 per cent. Previously, that might have been considered close to full employment, but it's very clear that the Reserve Bank thinking has changed—4.5 per cent is more likely, and at this level, wages and prices are more likely to increase, pushing back inflation.

To reach those kinds of outcomes we would need an extra 200,000 jobs created within Australia. This is why the Reserve Bank governor has called on the government to boost the economy. In fact, he has said:

One option is fiscal support, including through spending on infrastructure.

We all know that the Reserve Bank are incredibly cautious in the way they express these things. So when they come out and say that one option is fiscal support, including through spending on infrastructure, they can't direct the government about what to do. But it's very clear: that is what they are asking the government to do. They can't politicise your actions but we here can and should, because you are failing to listen to the Reserve Bank of Australia, who are crying out for more action from this government!

But you're not investing in infrastructure; you're pushing major job-creating infrastructure projects back into the never-never. Only 30 per cent of new infrastructure funding announced in the budget will be available in the next four years, and given the current economic position the government can and should be bringing forward more infrastructure spending. Why won't you prioritise projects like those in the state of WA—projects like METRONET, which would slash congestion and boost jobs? Why won't you prioritise the ring roads in regional Queensland—in Townsville and Mackay? Why won't you prioritise the western rail in Sydney and the Bridgewater Bridge in Tasmania? These are projects that will create jobs where they are needed most.

We have seen, sadly, unemployment steadily rising from 4.9 per cent earlier this year to 5.2 per cent now, while GDP growth has fallen to just two per cent. This is the weakest it's been since the immediate aftermath of the global financial crisis some 10 years ago. We cannot leave the Reserve Bank to do all of the heavy lifting on their own. They are crying out for help in the only way that they can appropriately express this call. We need to back them in, and we are backing them in by supporting the calls for more infrastructure spending. On that note, I couldn't see a clearer reason for bringing forward stage 2 of the government's tax plan. That would also have the required effect on the economy.

Labor wanted to boost the economy. We wanted to get the tax cuts into the hands of more workers sooner and to get it flowing through the economy, but you would not work with Labor. So while Australia has enjoyed 29 years of continued GDP growth, we now find that Australia is in the situation where we have had the second-lowest growth since the 1991 recession. The only time it has been lower was in the 2002-03 financial year. It is time for the Prime Minister to push ahead with infrastructure spending, but instead, and I'm quoting Richard Denniss from the Australia Institute here, 'The Prime Minister remains more concerned with the symbolism of a surplus than cyclical fiscal policy.' That is of great concern to our nation because, without proper cyclical fiscal policy, you will further undermine the economy, and what we will see is further rises in unemployment and further deterioration of our economic position when you are failing to take the fiscal actions that you should.

It's your job to keep people employed. We need wages to grow and we need money flowing through our economy now. You've pinned all your hopes on tax cuts and said to wait for the results in September, but the Financial Review today reported that $1.7 billion in credit card repayments were made in a month, and there has been an increase in mortgage repayments. Now, that's all well and good, and it's great and absolutely terrific that tax cuts help people make savings, but that is not the problem in our economy right now. You can't rely on tax cuts to inject more money into the economy when, clearly, people are saving that money. If you start spending money on infrastructure, it's guaranteed that money will start going straight into the economy where it's needed—straight into the economy to boost jobs and straight into the economy to lift wages and drive down unemployment.

An exclusive analysis of credit card repayments showed that people are paying down debt, not spending, with repayments increasing by 17.5 per cent in July. So, frankly, your strategy is not working. The Chief Economist at Ernst and Young Oceania, Jo Masters, said the economy has lost significant momentum in the past year. Given the climate globally, with the US-China trade war and the unpredictable situation with Brexit in the UK and Europe, we must be real about things that can and must be done domestically to boost the economy. We have got the Masters Builders Association saying that engineering and construction activity has not been this weak since the global financial crisis.

In closing, we need a government that is prepared to invest in infrastructure. We need a government that doesn't put on the table anti-union bills that undermine wage growth in this country. We need a government that is prepared to boost our economy by increasing the rate of Newstart.


Photo credit Photo by Rishiraj Singh Parmar from Pexels.