Peter Whiting.

With the Federal Budget to be brought down on 6 October, the economic impact of the pandemic and the appropriate fiscal response are attracting serious commentary. Always high on the list of responses is change to income tax; others argue for delay of increases in the superannuation levy, increases in investment incentives, and support for small businesses. And infrastructure spending is championed as an ideal response by others. It is difficult for ordinary citizens (and governments) to determine the best way forward. There is a real risk that rent-seekers and their advocates will have too much influence shaping responses.

Economists are worried about the depth of this pandemic-led recession, and their public advice to the Treasurer is that the government will need to spend unprecedented sums to sustain recovery. Without such an extraordinary effort by all governments, we risk a long slow recovery, with unemployment stubbornly high.

The Budget speech will presumably emphasise the need to facilitate markets in leading Australia to recovery. While undoubtedly this is an essential aspect, we should also expect to hear about reform in community policies. There need not per se be any inherent clash between markets and the communities in which they operate.

In this newsletter, we address key social issues and possible responses. We focus on homelessness, wealth and income inequality, and the environment. The Budget will propose ‘eye-watering’ expenditures to put Australia back on track. Let’s hope in this unique moment that we do not replicate policy responses which have failed many in our society, but let’s seize the moment to initiate much needed reforms.

Bruce Duncan anticipates an important document to be released on 4 October, just ahead of the Budget. Pope Francis’s new encyclical, Fratelli Tutti (All Brothers & Sisters), will outline his vision of a just, peaceful, and sustainable world. Judging from his recent address to the UN General Assembly, the Pope will challenge special interests which have dominated economic and social policies of western governments. Expect some strong reactions.

As Claire Victory indicates, many people are experiencing increasing social distress in this recession. The title of her article captures the thought well: Many Australians are in for a difficult time in the months, & possibly years, ahead. She reports that the recent publication of the Poverty & Inequality Partnership found that the highest 20 percent of households has six times the income of the lowest 20 percent. The average wealth of the highest 20 percent grew almost twice as fast as the middle 20 percent, and over 10 times faster than the lowest 20 percent. 

With the Covid economic impact causing the biggest job losses in the low-paid industries in which many women and young people work, the Federal Government will need to generate jobs and preserve an adequate income floor to prevent increased inequality and adverse outcomes like homelessness.

Michael Keating considers the budget and what is needed to produce the best outcomes. He discusses the need to continue both JobKeeper and JobSeeker, and notes that, if JobSeeker reverts to the previous level, additional people will fall into poverty. Though acknowledging that infrastructure spending has a part to play, he highlights serious problems with this sort of stimulus. He argues that there is a strong case for directing expenditures into services squeezed and under-funded by government in recent years, especially aged-care and mental health. He cites recent research which suggests that the boost to employment per dollar spent in care industries is up to five times greater than a dollar spent on construction.

In a jointly authored article on the housing system Hal Pawson and others argue that the heavily capitalised housing sector will weigh down economic recovery. They argue that our housing market has produced the triple crises of increased homelessness, growing queues for social housing, and pervasive affordability pressures. A substantial commitment to social housing, while not a sufficient response to this serious policy failure, would alleviate some of its harsh outcomes.

On the issue of homelessness, Vivienne Skinner and Phillippa Carnemolla argue that, if the true economic and social costs of homelessness were understood, the case for overcoming it would be so compelling that governments would move very rapidly. Beyond the human tragedy, the costs to society are dispersed through so many government agencies and facilities that they are not understood. For these authors, the case for housing the homeless is compelling, even financially.

The Prime Minister has indicated that his government favours a gas-led recovery, and his Minister, Angus Taylor, has revealed a ‘technology roadmap’ offering little support for renewable energy. Mark Diesendorf regards this approach as fundamentally flawed. Some observers hoped that the government would invest in a green-led recovery, but this now seems unlikely. Diesendorf takes some hope from the Million Jobs Plan, which envisages investment in zero-emissions technologies which aim to create more than a million jobs over five years.

In September, the Federal Government announced a $1.9 billion commitment to develop clean technology in industry, agriculture, and transport. Frank Jotzo acknowledges this expenditure as a step in the right direction, but argues it is only a small step in driving Australia towards a low emissions economy. Technology alone is not enough to cut Australian emissions deeply and quickly. Other policies and investment will be required.

The Budget’s policies and programs are already determined, but public acceptance is important to a government looking to re-election. We should apply a critical lens to the Budget’s contents. The authors published in this SPC newsletter give us some tools for developing such a lens.

Photo A happy family. Chris Price. flickr cc.

29 September 2020.

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