The coronavirus stimulus program is Labor's in disguise, as it should be
- Written by John Quiggin, Professor, School of Economics, The University of Queensland
The spread of the coronavirus has brought us all face to face with the remorseless logic of exponential growth. A handful of cases has turned into dozens, then hundreds, then thousands.
If current attempts at containment fail, we can expect many millions of cases around the world.
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The government’s economic policy response reflects this dawning reality. The exponential growth of the virus has been matched by growth in the magnitude and scope of the required response.
While the virus was developing in China, and even in the midst of the bushfire crisis, the government was insisting that its wafer-thin surplus would be delivered as promised.
Denial for a while…
Even after it became evident that the budget would be in deficit and the economy close to recession (at least in terms of the widely-used “two quarters of negative growth” criterion), the government’s primary concern was to avoid validating the Rudd government’s response to the global financial crisis.
Estimates of a package of A$2 to $5 billion were leaked, with a strong emphasis on a modest and targeted response, confined to specific sectors such as tourism. The universities, seen as tribal enemies by many in the government, got no sympathy.
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Rather than being treated an export earner in trouble, universities were blamed for relying too much on the Chinese market. The idea of boosting Newstart and other welfare payments was dismissed out of hand.
As the package developed, the power of the “go hard, go early, go household” logic that drove the 2008 response of Prime Minister Kevin Rudd and Treasury Secretary Ken Henry became evident.
…then a focus on what might work
The figure being bandied about rose to $10 billion, and the government’s attempts at product differentiation became ever feebler.
This stimulus, it was claimed, would rely on existing programs (an attempt to keep faith with the spurious attacks on Rudd programs like the school-hall focused Building the Education Revolution).
It would be wound down as soon as the crisis was over (something Rudd’s treasurer Wayne Swan spent years trying and failing to do).
Now we have the announcement of a nearly $18 billion package which is virtually a repeat of Labor’s response to the global financial crisis.
The central elements are a cash handout aimed at sustaining consumer demand, and broad measures to stimulate investment.