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January 24, 2022

Thus Spake Mungo: Bulls, bears and bullshit

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By Mungo MacCallum

A treasurer’s lot is not a happy one. His job description is, after all, to be contrarian.

Whatever the popular economic mood is, then he is against it. The bulls are roaring? They must be sedated. The bears are slumbering? Time to stimulate them.

If the country is booming, if wages and profits are soaring and unemployment down, there is a risk of rampant inflation, so the Treasurer needs to inject a note of caution, even of gloom. But if things are down, with spending and investment constrained and recession a possibility, then the Treasurer must be determinedly optimistic, predicting silver linings and good times just around the corner.

Hence Joe Hockey has spent the last few weeks exuding ebullience, however much it has forced him to grit his teeth in doing so. But in the last week his exuberance have got the better of him; as so often with the Abbott government, he has overdone it and drifted into self parody.

When the Reserve Bank once more cut interest rates, bringing them to almost unheard of lows, Hockey was cheering at the news. Bouncing into a press conference, he assured the punters that this was their opportunity: borrow, invest, spend, spend spend! There were green shoots sprouting, and now the fertiliser was being spread.

Immediately the stock market tanked, and Woolworths announced that it was laying off a raft of employees, and this was hardly a surprise. Next day, the Reserve Bank spelled it out: far from being good news, the interest rate cut was an attempt to stave off impending collapse: growth was declining and was predicted to get lower, and unemployment was rising and could get worse.

No green shoots there; Hockey’s fertiliser was revealed as unadulterated bullshit. And the offence was compounded by the inherent contradiction: while he was urging the already over-stretched borrowers to ramp up their own debts, the government was telling them that its own debts were a disaster and refusing to take advantage of what was, in international terms, effectively money in order to fix some of its own problems.

At the time of the last election – and how long ago that seems – Tony Abbott declared a desire to become known as the Infrastructure Prime Minister, opening up vistas of new projects throughout the wide brown land. In fact, what infrastructure that was going on has basically stalled; just about the only things that are actually being built are the ones the previous Labor government initiated. All Abbott has done is to reannounce some of the ideas proposed by Anthony Albanese, and even those have been confined to roads, mainly around the major cities which is, of course, where the votes are – short term political promises.

An ambitious agenda to persuade state governments to sell off their own infrastructure and replace it with sparkling new models has also come to very little: the jewel in the Liberal crown, Victoria, fell and the East-West connection trumpeted by Abbott before, during and after the last election was shelved on the reasonable grounds that it had never been subjected to a cost benefit analysis and what examination there had been had denounced it as an extravagant and uneconomic folly.

The only silver lining is New South Wales, where Mike Baird is pressing on with his plans to be financed through the thoroughly unpopular policy of flogging off the poles and wires of the some of the electricity grid. But that will not even be the subject of legislation until August, and if it gets through – which is likely but not certain – will then have to find buyers and contracts before planning begins. It will be many years from fruition – Abbott’s legacy, if he in fact claims it, will be politically posthumous at best.

The voters are not mugs; they know things after grim, and they hardly need the Reserve Bank to confirm the fact. The Bank itself is verging towards the desperate, playing what is probably its last rate cut card in the hope that finally consumer confidence may not return, the Sydney and Melbourne housing bubble finally comes under control and the stubborn Australian dollar declines to what it considers acceptable levels.

So far there has been absolutely no sign of any of these happening; which puts it all back on jovial Joe Hockey and his budget. It will not, cannot, turn the economy around; but that is not its aim. The hope is only that it will provide a bit of political breathing space, that the majority of those who are polled will decide that perhaps, just perhaps, the government is not really quite as hopeless and horrible that they have thought for more than a year, and that Abbott might indeed deserve another chance and that even Hockey, for all his buffoonery, can be tolerated – or, if not – that he can be decently uncoupled from his prime minister.

The alternative, the born-again sugar daddy Scott Morrison, has emerged as an almost acceptable alternative – and as a result, there is possible salvation not only for the government, but for Abbott himself. If there is to be another leadership crisis, which there almost certainly will be unless the government is declared a popular success, it will be in a very different context from the one that prevailed in February. Malcolm Turnbull, still unacceptable to many of his colleagues, has now been joined, if not surpassed, by both Morrison and Julie Bishop. The contenders are divided, and this is seriously good news for the incumbent.

Add in the steady but remorseless decline of Bill Shorten, looking more and more like a cardboard cutout of an alternative prime minister, and it has to be said that things are starting to look up. Talk of an early election, in spite of the worries about the economy becoming still more dire next year, are almost certainly a furphy; the government is still a long way to genuine recovery. But even if the Reserve Bank can find no green shoots, perhaps Abbott and his colleagues finally can. So pour on the fertiliser and never mind the smell. If the winds strengthens a bit, it just may go away before the punters go to the polls.

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  1. Mungo,
    A treasurer’s job description is to make money. The deficit is to blow out by $12.5 billion. Really!
    Well, let’s say the economy is a dog on a leash and the dog owner gives the dog some slack like Hockey is giving the deficit with a blowout, does the dog, the economy, take more lead than you expect? Yes,
    Therefore will the $12.5 billion blow out again? Could it go to $18 billion. Who expects we will be back into Surplus by 2020 in five years time? Once in debt it takes twice as much effort to get out of debt as to get into debt because we are paying interest on that debt. It takes time.


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