The Federal #Budget2020 has definitely forgotten to carry a few 1’s along the way…
There is a lot of criticism out there. Financially secure Liberals are unhappy about the sea of public money piling up around the working class. Media hacks (who didn’t read it) are absolutely certain that women were short changed. Labor commentators are stuck between demanding cash for their pet topics while simultaneously giving Josh a hard time about the trillion-ish dollar debt. (Labor upset about debt. Try not to laugh.) And then we have the businesses owners, who are simply depressed because they can recognise unhelpful bullshit at a hundred paces.
This is all noise, of course. Every time a budget slithers out of government, only a few economists are bored enough to actually read it. These poor bastards lop off the head and translate the waffle into a couple of talking points which are then repeated at length by the rest of the news cycle. Within hours it has become a game of economic Chinese Whispers.
So, what is actually wrong with the budget?
Frydenberg makes a huge assumption that the pool of existing businesses who have survived the Covid crisis are somehow immortal. This false hope is used to underpin his recovery figures, which are then extrapolated into pretty graphs that might as well be drawn in crayon. Anyone separated from the climate-controlled enclosure of the public purse knows full well that the economic train has a long way left to crash. Even if Covid vanished tomorrow and Australia returned to business as usual, margins are well below profit and the banks are preparing to call in loans that have been shadowing our nation.
As government assistance withdraws from the market, international borders remain closed, and a vaccine unlikely for months – businesses are going to fold in an extinction level event. This outcome is predicted to be so serious that Chapter 11 bankruptcy legislation was rushed through – probably when an escapee from the Reserve Bank showed up looking rather rattled in Scott Morrison’s office. At that point, someone in government must have realised that they were about to permanently wipe out the productive seam of Australia’s entrepreneurs, who are collapsing through no fault of their own.
Frydenberg is in a dilemma. He wants people to throw their remaining assets into starting up new business to salvage his spreadsheet, but who is going to risk their savings now that they know the government can pounce at any moment and destroy their life’s work? Not many. In the halls of Australia’s retail giants, many are preparing to cut their losses and give up on this country, and who could blame them?
Second major problem… The budget is full of unintended consequences. Allow me to give you a typical example. The government knows that it has an issue with too many people sitting on the expensive JobSeeker welfare scheme. Naturally, they want to incentivise businesses to hire them.
Governments aren’t particularly bright, so they picked up a wad of cash and decided to throw it at businesses who hire JobSeekers under the new ‘JobMaker Hiring Credit’. There is plenty of fine print involved meaning that it is only really useful for larger companies who are doing well, not struggling small businesses, but more to the point, it actively disadvantages prospective employees who have managed to make it this far without dipping into the government’s pocket. If an employer has the choice of hiring two people and one results in them getting paid by the government and the other doesn’t, they’re going to pick the government hand out regardless of how skilled the employees in question are. In essence, the government is now competing with an individual’s merit while tossing a bit of casual ageism in for good measure.
There has been plenty of fair criticism pointing out that John Howard had similar youth-employment policies during his tenure as Prime Minister. However, playing around in the job market during a booming economy cannot inflict anywhere near the damage of tilting employment away from Australians during a financial crisis. Remember, free food doesn’t cause a stampede unless the people are starving.
A better idea would have been to pressure the states to give up Payroll Tax (already a broken promise left over from GST reform), get rid of Paul Keating’s Fringe Benefit Tax, and significantly reduce Company Tax. All of these taxes punish businesses for hiring people and being productive – which is a ludicrous thing to keep in your economy if you’re trying to salvage as many businesses as possible and avert an employment crisis.
Frydenberg, like all of his predecessors, will not pursue this because it requires admitting that these particular taxes have always been counter-productive and anti-business. They exist purely to collect revenue at the cost of the average person trying to make a go of the Australian dream.
The last glaring issue in this budget comes in the form of detail. There are a lot of grand gestures and statements of cash being thrown into key industries which have been trending in the press. Take the 1.3 billion for the Modern Manufacturing Initiative. Sounds great, eh? Who doesn’t love a bit of manufacturing when the public are keen to claw back market share from China. Unfortunately, when you dig a little further you find that it is more of a vague thought bubble than a tangible lifeline with no information available until 2021. With an election due in 2022, one would be forgiven for thinking that this money will be folded back into a whole new set of election promises – around and around – never actually manifesting in a glorious manufacturing industry.
US President Donald Trump knows how to salvage an economy, but no one in Australian politics is paying much attention. If there is one thing that Australians can take away from Frydenberg’s budget, it is that Capitalism has made Australia fabulously wealthy and free over its short life. When the government was forced to engage in Socialism by health-mandated-fear, it sent itself broke overnight.
This budget is not our salvation.
By ellymelly – If you enjoy my work, consider shouting me a coffee over on Ko-Fi