Finance Finance News Michael Pascoe: The neoliberals back in charge – let ‘market forces’ rip

Michael Pascoe: The neoliberals back in charge – let ‘market forces’ rip

The Coalition is reverting back to its neoliberal playbook. Photo: TND
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The euphemism of the week is that the Coalition wants “to let the economy adjust”.

Hold on tight.

It means the Morrison government will leave the problem of high unemployment to market forces – the fling with major Keynesian stimulus is over. Don’t expect any more serious economic support. The neoliberals are back in charge.

It means ignoring the Organisation for Economic Co-operation and Development warnings that Australia will need further stimulus after September and the recommendations of multiple economists that we should be investing in employment creation programs.

It means unemployment staying higher for longer, wages remaining flat at best, more businesses failing, more savings lost.

The “let the economy adjust” phrase came from the ABC’s David Speers on Insiders in conversation with the Coalition’s favoured stenographer, The Australian’s Simon Benson.

Following discussion about JobKeeper being pulled early from childcare workers:

Benson: As far as JobKeeper goes in other sectors, I think Peter Dutton raised this initially that they were open to other ideas, but the hard fact is that the internal politics of the Liberal Party, of the Coalition at the moment, is less, not more.

They are not for turning on this issue and I think that if Scott Morrison was persuaded for other reasons to explore continuation of those things, then he’d seriously have problems within his own party room.

Speers: So, is your expectation, they won’t take JobKeeper away from any more workers until when it is scheduled to finish at the end of September, but after that, there is not going to be an extension.  

There might be smaller support packages for some sectors, but even on that, you know, from what I’m hearing, it is don’t hold your breath for a big spend here. That dynamic you point to in the Coalition is to let the economy adjust.

Benson: Well, that’s right. I think you’re absolutely right. People should be under no illusion that the tap is going to be turned off.  

But by the same token I don’t think you’re going to see a similar situation you have with child care where they may draw back on JobKeeper. I think that child care was a special case in all this.  

But I doubt very much whether any of that is going to be extended and the same applies to JobSeeker.

Australia’s economy faces a massive shock. Source: OECD Economic Outlook 107 database; and OECD Short-Term Labour Market Statistics.

With the core of what remained of the “moderates” retiring at or before the last election, the doctrinaire right wing has never been stronger in the Coalition.

The neoliberal dogma of lower taxes, smaller government and letting market forces rip wasn’t to be suppressed for long by the COVID crisis.

As foreshadowed by Benson and Speers, we therefore are on course for the feared financial cliff in the December quarter as JobKeeper finishes, the JobSeeker supplement is axed, and the bank debt moratoria come to an end.

Yet more HomeBuilder criticism

There will be targeted fig leaves for some of the worst-hit industries, such as the HomeBuilder scheme, but it is not to be of the scale that would make a significant difference.

If HomeBuilder is setting the standard for specific industry assistance, the job creation impact will be slight.

The government ignored the broad chorus calling for housing construction stimulus to be aimed at extra social housing, whereby every dollar spent would represent stimulus, every job created an extra job.

Instead, much of the HomeBuilder spend will be a mere gift for housing and renovation projects that were likely to have happened anyway, adding up to not much more than a pull-forward of spending to meet the deadline.

Property advisory firm Charter Keck Cramer has joined the list of analysts finding it will be of limited benefit.

Among other things: “For the first time in a long time the stimulus may be coming at a time when the market may not actually need the new supply.

“A collapse in net overseas migration has reduced the demand for new dwellings. Encouraging demand for new dwellings instead of existing dwellings in this environment has the potential to reduce price pressures in the established market.”

Mr Morrison’s foreshadowed tax/red tape/training/industrial relations reforms – even the elements that could be beneficial – are years away from bearing fruit.

In the meantime, it’s to be market forces.

virus restrictions stadiums australia
Scott Morrison has no plan for rebuilding employment. Photo: AAP

The advice is clear for all to see

The Coalition’s preference for “letting the economy adjust” contrasts with the OECD’s specific recommendations last week.

Treasurer Josh Frydenberg and his media cheer squad were happy to highlight the OECD finding Australia was among the least-worst affected countries, but not the organisation’s advice on how to maintain that position:

“There is ample fiscal space to support the economic recovery as needed.

 “The scarring effects of unemployment – especially for young workers – should be alleviated through education and training, as well as enhancing job search programs.

 “Firms should continue to be supported, including through expanded loan guarantees, accompanied by expedited insolvency procedures.

 “The authorities should be considering further stimulus that may be needed once existing measures expire at the end of the third quarter 2020.

Such support should focus on improving resilience and social and physical infrastructure, including strengthening the social safety net and investing in energy efficiency and social housing.”

Sound advice, obvious recommendations – the sort of thinking that would shorten the real recession and the economic and social scarring that accompanies it.

It’s pretty much mainstream economics now.

Too bad it doesn’t fit the sort of neoliberal dogma championed by the Institute of Public Affairs – and those with the reported power in the Coalition party room.