EDITORIAL TUESDAY 03.02.09.
Some idea of just how long the Global Financial Crisis can be expected to be having an impact on our economy and on our lives is given by the announcement today of what the Federal Government has decided to call the Nation Building and Jobs Plan. Costing $42 billion, this new round of economic stimulus is intended to be much more far-reaching than the $10 billion Economic Security Plan implemented last year. It delivers a combination of cash bonuses, business incentives, and infrastructure investment which will leave the budget in the red for at least the next four years.
It doesn’t take too much imagination to see that this means tough times for the economy for much the same period of time. It should be a wake up call for those who have been holding out hope for a turning point to be reached sometime soon, followed by a quick recovery. Even when the corner is turned, and there’s no guarantee that it will be anytime soon, it will be a long haul getting back up to the sort of levels of prosperity that many were taking for granted. Indeed, the government has said that there will be a deficit for “at least” four years, obviously leaving the possibility open for it to last even longer.
Now just because the Federal Budget is in deficit doesn’t mean it’s all bad news. Obviously, the whole reason for taking the budget into deficit is to reduce the severity of the impact on the economy at the same time as building the needed productive capacity for when the recovery does begin. In providing support for low income earners the risk of real hardship is reduced, and as a recovery begins, whether it is next year or the year after, opportunities will once again begin to open up. The whole process will take time, and nobody should expect any kind of quick fix.
Ironically, for many people in middle Australia, the downturn is bringing benefits. Interest rates are down, easing the cost of home ownership. Prices are down, easing the cost of living. The Government is handing out money to people who would not have otherwise expected it. In many ways, if you have a secure job, you may even have a bizarre sense of being better off. At the same time, those who are not in secure employment are certainly at risk of being worse off, which is why government support is so crucial.
The Nation Building and Jobs Plan provides for a series of five cash bonus payments of $950 for working Australians earning less than $100 000, single income families, farmers and farm dependent businesses, a back to school bonus and a training and learning bonus. Those bonuses account for $12.7 billion that will be delivered directly into the hands of Australians and thence into the economy. This is the sort of shock treatment that can help to keep the economy ticking over in the short term, but the real meat is in the infrastructure expenditure on schools, housing and roads providing both jobs now and a lasting legacy of improved infrastructure.
Whether we are close to a turning point or we still have a long way to go to find the bottom, the plan announced today is only one more step along the way to recovery. It has been described as a “mini budget”, and paves the way for further measures to be introduced as needed. The real budget in May will include the already scheduled tax cuts which will provide a sustained ongoing boost to consumer spending power.
We may not be out of the woods yet, but at least we can see the way forward.