March 21st 2020


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Articles from this issue:

COVER STORY Murray River full; reservoirs low; farms for sale ...

ILLICIT DRUGS Cannabis marketed to children in Colorado

CANBERRA OBSERVED Budget surplus a goner but low interest rates a treasurer's dream

NATIONAL AFFAIRS 'Black Summer' bushfire inquiries: What must be done

GENDER POLITICS Young people deserve better than being rushed into transitioning

FOREIGN AFFAIRS Myth-busting China's 'soft power'

CLIMATE CHANGE Where's the evidence for man-made global warming?

NATIONAL AFFAIRS Cardinal Pell's appeal heard in the High Court

ON CAMPUS Young Liberals politics heats up after death of Wilson Gavin

OBITUARY Farewell to the indomitable John Barich

POLITICS AND SOCIETY Beyond the Great Divide

ASIA China's waterways bring prosperity ... and sorrow

LIFE ISSUES Age does not dim the memory of such loss

HUMOUR Men and women and others of Australia ...

MUSIC Evaluations of good, better, best can collapse into musical chairs

CINEMA Motherless Brooklyn: Gazing into the heart of the city

BOOK REVIEW How language is being degraded for political purposes

BOOK REVIEW Not very fresh options for a capitalism in which capital is worthless

LETTERS

POETRY

NEW ZEALAND: Victorian Road Map smooths way of NZ anti-life clique to abortion 'reform'

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CANBERRA OBSERVED
Budget surplus a goner but low interest rates a treasurer's dream


by NW Contributor

News Weekly, March 21, 2020

The Morrison Government will face its toughest test yet over the coming months in working at ways to avoid a sharp downturn in the Australian economy and keep employment up until the covid19 danger passes.

But, depending on how bad the downturn is, the real opportunity may be using the economic turbulence to borrow massively to invest in big long-term projects, not just short-term stimulus.

The recent turmoil in the markets is causing serious and prolonged concern for the Government, Treasury and the Reserve Bank, as investors, from the sophisticated high-net-worth individuals to the thrifty retirees, try to determine the extent of the damage of covid19 to the international economy.

The truth is, nobody knows whether the pandemic will be a short-lived economic blip or whether it will cause a severe recession worldwide, driving up unemployment and leading to households spending less.

But, in Australia, it is certain that there will be be downturns in the tourism, foreign students and the resources sectors – three of the big drivers of the Australian economy.

The housing market, which was recently coming back into favour after more interest rate cuts, could be hit eventually too.

Signs of actual damage to the world’s economy through disruption of supply chains, to a collapse in demand for oil and energy, are also feeding into the concerns.

The long-fought for Liberal-Nationals budget surplus is definitely gone, despite six years of hard work in paring back spending after Labor’s profligacy.

Labor will try to make political capital out of the Government’s failure to bring the budget back into the black, but it would be absurd to continue a form of mild economic austerity in the face of the recently changed international circumstances.

Instead, Treasurer Josh Frydenberg is pushing forward on measures to provide stimulus to the Australian economy, and keep workers in jobs (and paying taxes) instead of on welfare.

It is an enormously challenging balancing act, but Prime Minister Scott Morrison and Mr Frydenberg have promised more will be done should it be needed.

There will be stimulus now, and possibly in the May Budget as well.

Long-time economic commentator Terry McCrann has been suggesting a different idea over recent months that involves the Federal Government borrowing $1 trillion in 30-year debt while interest rates are at record lows.

Writing in The Weekend Australian newspaper, McCrann has been consistent about this idea for some time, but it now has even greater appeal since the covid19 dislocation and even lower interest rates.

McCrann argues that, with unprecedented low interest rates, the Government would actually make money by borrowing, repaying the current $600 billion debt which has shorter 10-year maturities, and handing the remaining $400 billion over to the highly successful Future Fund to invest on its behalf.

McCrann says the “ludicrously low interest rates” present an opportunity “to seize not just a once-in-a-generation but indeed a once-in-a-never-before opportunity to lock in a lot, and I mean a lot, of low-interest debt for a very long time”.

This idea would certainly provide the Federal Government with options to spend on large infrastructure projects, not just looking at the next few years but at the next few decades.

Australia already has a lot of work happening in terms of roads and rail projects, but borrowing hundreds of billions of dollars would take things in an entirely new direction.

Mr Morrison has been struggling over recent months to regain his equilibrium but, oddly, the economic and health crises present him with an opportunity to show he is in charge.

He was out in front of the covid19 response – well ahead of many other countries – and so far Australian authorities have done a good job in containing the virus.

The associated fear is what is causing the real damage to date – people travelling less, staying at home more and spending less money.

It is imperative that the Prime Minister and the Treasurer do their level best to turn that sentiment around.




























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