Finance Finance News Michael Pascoe: Twenty per cent underutilisation? ’Tis but a scratch …
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Michael Pascoe: Twenty per cent underutilisation? ’Tis but a scratch …

The Reserve Bank's expectations of transport infrastructure spending are not being met. Photo: TND
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Locked in neoliberal armour, Prime Minister Scott Morrison is playing Monty Python’s Black Knight, in total denial about the Australian labour force being dismembered.

The worst “official” unemployment rate since 1993 and an actual unemployment rate of 11.3 per cent?

“’Tis but a scratch.”

A record underutilisation rate (unemployment plus underemployment) of 20.2 per cent?

“I’ve had worse.”

All the jobs growth of the past three years lost and the lowest participation rate in 19 years?

“Just a flesh wound.”

Doubling the pre-crisis growth rate of the past two years and sustaining that for five years to get the economy back on track?

“I’m invincible!”

Of course the Prime Minister didn’t actually bat away the tragedy so obviously – and that’s what the unemployment numbers represent, human tragedy.

He made appropriate noises about the statistics, “heartbreaking”, “these are dark times”.

But most of his media conference was standard Morrison-speak.

And what really matters – what the government is prepared to do about 2.6 million Australians either unemployed or underemployed – mostly remains theoretical and beyond the forecastable horizon.

Mr Morrison said being back on track in five years’ time “requires the JobMaker plan of reforms to skills, of investments in infrastructure, deregulating our economy, making sure that our energy system and particularly we get the gas for a gas-fired recovery which supports manufacturing, our defence manufacturing, and defence industry policies, all of this are a part of our JobMaker plan”.

Or as the Black Knight put it: “Come back here and take what’s coming to you! I’ll bite your legs off!”

Even Thursday’s sobering figures weren’t enough to shake Mr Morrison awake from the neoliberal dream of market forces, deregulation and fossil fuel solving the recession’s problems.

Scott Morrison has downplayed the likelihood of extending coronavirus support beyond September.

Beyond a relative pittance of dubious effectiveness for new housing and some extra money for infrastructure, Mr Morrison demonstrated in his Monday Press Club performance and Thursday’s media conference that the government is concentrating on supply-side solutions for a demand-side crisis.

It’s almost as if the Morrison government takes Australian Financial Review editorials seriously – it is a human frailty to value opinions that agree with your own.

Few folk bother to read newspaper editorials, let alone those of the increasingly doctrinaire AFR, but Tuesday’s was an extraordinary effort, selectively quoting the OECD and verballing the Reserve Bank governor.

“Fast-tracking the return to prosperity means the government must deliver on its promise of a broader supply-side deregulation agenda to shake up the culture of over-regulation that Reserve Bank governor Philip Lowe says has shackled the dynamism and entrepreneurial spirit of the economy over the past two decades,” ranted the Fin.

I have followed what the RBA says fairly closely for some decades. Dr Lowe has never said that. None of his predecessors has. It is simply not true.

It would have been closer to the truth, or at least within the bounds of creative licence, if the editorial had claimed Dr Lowe had said the second-rate Australian CEOs and boards lauded in the AFR’s pages were a bunch of gutless wonders lacking the imagination and talent to have a crack at investing in this great country.

Dr Lowe has raised the problem of Australian management and boards stubbornly demanding extraordinarily high hurdle rates of return before being prepared to invest a dollar.

He made that point well before interest rates fell to where they were before COVID hit, let alone where they now are.

His predecessor, Glenn Stevens, was prone to wondering whatever happened to the “animal spirits” after the GFC.

The RBA sent out its beaters to find them in the economic jungle. They returned empty-handed but with numerous theories, many pointing to management’s fear of risk taking.

philip lowe jobkeeper
RBA governor Philip Lowe says there are more job losses to come from the COVID-19 fallout.

The reality is that the Australian economy has been shackled by nothing.

It has done well through good and challenging times until the past couple of years when the capital strike has come home to roost – when years of sub-par wages growth has had its inevitable impact on consumption.

And the capital strike has nothing to do with tax rates and regulation.

Australia’s management class, as most typically represented by the Business Council of Australia, has been happy to minimise risk to protect its collective backside.

No executive has been sacked for not making an investment that would have turned out to be hugely profitable if it had been made.

It’s the ones who have a crack and might end up with a loss who run the risk of being flicked – and that’s a strong incentive to do nothing when being paid millions, to let cost cutting and share buybacks lift the share price and CEO remuneration.

There’s no point relying on such timid animal spirits to resolve the immediate need for job creation, for increasing investment and consumption.

Management’s main interest in labour at present is cutting costs.

Non-resources private sector investment was going nowhere before the crisis and is now in reverse.

Blind Freddy, but not the dogmatic neoliberals, can see that when the private sector won’t invest, the public sector has a duty to do so in a recession.

But that’s not the Morrison solution.

Treasurer Josh Frydenberg (right) reacts alongside Prime Minister Scott Morrison (left) during Question Time in the House of Representatives
The Morrison government is refusing to see the public sector has a duty to invest. Photo: Getty

It would perhaps help if the government was capable of being honest about the state of the economy before this crisis hit.

“Our economy was strengthening, stable and sound,” Mr Morrison claimed yet again on Thursday.

Bollocks. The private sector was missing in action, retail was in recession and we were reliant on population growth and state government investment to stay positive.

Mr Morrison has set a lofty goal of 4 per cent GDP growth for years to get back on track.

That is nearly double what we were doing for the two years before COVID struck, when our trade performance was going gangbusters and we were untroubled by the brewing US-China cold war.

Coming off the bottom of the crash, initial GDP numbers will be good, but without a public sector investment and job creation policy beyond September, the rebound won’t last long.

On Thursday Mr Morrison again promised he had a plan, as he did before he had a plan early in this crisis: “We have got a plan and we are implementing that plan and it is a strong plan. It’s a plan that runs for the next five years.”

Ah, the good ol’ five-year plan favoured by communist regimes. Too bad it’s a plan that has nothing to provide investment certainty.

The obviously good bit – improving education and training – takes time. It’s time 1.4 million unemployed Australians can ill afford.

The industrial relations/‘‘red tape”/tax reform bits are ephemeral and, given their promoters, more likely to be ideological than practical, more likely to favour capital than the common wealth.

There are policies that could drive and sustain investment.

A revenue-neutral carbon tax, for example, would provide the missing certainty required for energy investment – but the Coalition is incapable of even considering it.

In the short term, direct investment in extra social housing would help prevent the looming construction dive.

Ditching the federal government’s wages suppression policy would help increase demand, as would a humane JobSeeker allowance after the COVID supplement ends in September.

But none of that features in Scott Morrison’s plan, “a strong plan”.

I’m surprised he didn’t call it tremendous.

Or as the Black Knight said: “I move for no man!”