I take it back. The Morrison government is definitely spending to avoid the technical definition of a recession this financial year.
Beyond that, though, Scott Morrison seems to have a lot of faith in miracles, believing COVID-19 and its economic impact will disappear miraculously quickly.
A very brave belief, Prime Minister.
That belief (or hope) means there’s extremely little on offer from the government if the crisis lingers beyond June 30.
If it does, expect further retreat from the Liberal Party rhetoric of the past decade about wasteful government spending.
The good points in Thursday’s economic rescue package – and there were good points – were somewhat clouded by fibbing about the numbers and the inevitable tiresome attempts to claim Liberal Party emergency fiscal policy was nothing like Labor Party emergency fiscal policy.
Part of that differentiation attempt was stressing that the help was strictly limited – $11 billion by June 30, another $6.6 billion spread over the next financial year, government accounting chump change beyond that.
That falls a long way short of a “whatever it takes” message to instil confidence, especially from a government that is low on trust to begin with from its various scandals.
The Australian stockmarket’s immediate reaction was a little disappointment, a reaction that quickly turned into something much worse as Donald Trump blew another hole in global trade by locking the door against continental Europe for 30 days.
Rebuilding trust in the government also isn’t helped by Mr Morrison trying to fiddle the figures, trying to claim his package is worth $5.3 billion more than it is.
Treasury’s announcement provides a nice table covering the next four financial years and is summarised by: “This $17.6 billion package represents fiscal support across the forward estimates of 0.9 per cent of annual GDP.”
Scott Morrison preferred to ignore the clawback of depreciation in further years to spin the number up to $22.9 billion.
“Now this is, as I said, 1.2 per cent of GDP,” the Prime Minister said.
“To give you some comparison, when the initial stimulus was done for the GFC many years ago, those payments equated to some 0.88 per cent of GDP in that package, which was, as you know, supported by the Coalition and that used similar measures – payments through the payment system.
“That was 0.88 per cent of GDP. The difference with this package is about $3 out of $4 of what’s going into this is actually going into business cash flow. It’s going into keeping people in work.”
To clarify the obvious even using Mr Morrison’s preferred $22.9 billion figure, it is about 1.2 per cent of this year’s GDP.
But it’s a much smaller percentage of the three years’ worth of GDP he has to spread it across to get to the bigger figure, while ignoring the fourth.
#ScottyfromMarketing can’t help bending the truth even when he’s supposed to be building trust.
Treasury’s 0.9 per cent measure is so close to the 0.88 per cent mentioned by Mr Morrison for Labor’s initial spend as to not be coincidental.
Labor’s initial big GFC spend – the $900 cheques for eight million people – achieved its immediate goal of keeping people spending.
Mr Morrison is aiming lower on that front, $750 for 6.5 million people starting next month. It totals $4.76 billion and will certainly help.
Then there’s the $7.965 billion budgeted to support small-to-medium businesses that have employees.
Of that total, $1.265 billion is an incentive to keep on apprentices into the new financial year.
That’s nice for businesses that have employees and for apprentices.
But most of that money – $5.9 billion – is being paid to business this financial year with no further strings attached.
Take the money in the June quarter and let those casuals go anyway thereafter.
On the investment incentive side, there’s the increased threshold for instant asset write-offs and accelerated depreciation which cost the budget in the next two years but then save money after that, being a pull-forward of depreciation.
This is very much the sort of policy the economy could have done with over the past couple of years when investment has been flat or worse.
Now, it’s relying on businesses to have the confidence to invest at a time of global uncertainty.
(Increasing the instant write-off limit from $30,000 to $150,000 might be called the HiLux incentive – the nation’s depressed caryards will take all the help they can get.)
And finally, there is $1 billion for “financial support to help regions and communities most affected by the coronavirus to recover” over the next financial year.
An economic experiment
This is where questions about execution get raised, given the quality of the government’s bushfire recovery spending so far, as well as whether these grants will end up suffering an element of political rorting, like at least $8.1 billion worth of programs before the federal election.
There also are questions about the government’s ability to execute on the new Jobseeker payment as well, given Centrelink’s abysmal “Robodebt” history and current workload.
It’s one thing to say waiting times will be waived for the equivalent of Newstart payments for sick or self-isolating casual workers.
It’s another to be able to deliver it when existing programs are struggling.
The big question, though, is whether paying money to businesses ends up being more efficient than stimulating demand through households.
Mr Morrison’s government is conducting an economic and social experiment to find out.
In the meantime, missing out from the business stimulus is the army of sole traders. There’s no tax relief for them and less potential customer stimulus.
What happens after June 30 if the world is still slowing?
Given the way a coronavirus tends to like winter, our health crisis is quite likely to be worse in the September quarter than in the June quarter that Mr Morrison is desperate to save from turning negative.
Get set for another shot in the May budget – unless there’s a miracle.
P.S. Spare me any suggestion the government’s belated adjustment of deeming rates is any sort of stimulus or favour for pensioners.
With interest rates this low and the stockmarket scaring people, the deeming system should be scrapped altogether.