OPINION

Morrison still defending the indefensible

Clear View: The Morrison Government has been sticking with the slogan that our "economy is strong", despite mounting evidence to the contrary.
Clear View: The Morrison Government has been sticking with the slogan that our "economy is strong", despite mounting evidence to the contrary.

The drought and the bushfires will weaken our economic growth prospects even more, at a time when our economy has already experienced weak growth for the past couple of years.

The major constraints on our growth are weak consumer and business confidence, flat wages, record household debt, nearly 2 million either unemployed or unable to get as much work as they wish, reluctant bank lending, and a host of cost of living pressures, including housing, power, childcare, health and medical insurance and so on.

Even though the Reserve Bank has cut interest rates to historic lows, and the Government has delivered sizeable tax cuts, consumers have generally saved and/or paid down their debts, rather than spend, and business has been very cautious to invest.

Not only do these two national disasters impact directly, and negatively, on our growth, they also take much of the focus of our governments and policy authorities, even though they are under mounting pressure to admit the weakness of our economy, and to consider some stimulatory measures.

Indeed, the Morrison Government has been sticking with its election slogan that our "Economy is Strong", and remain committed to "Making it Stronger", even though they are simultaneously obsessed with achieving a Budget surplus which, in itself, is contractionary.

However, the Government has been pushed recently on a number of fronts to loosen the purse strings - most importantly to offer financial and recovery support to those affected by the drought and fires, and in response to the Aged Care Royal Commission.

While the recovery processes may be expected to be eventually positive for growth, market economists are predicting up to a 0.5% cut in the growth rate from the bush fires. Our growth rate for the last year was a mere 1.7%, and the RBA was predicting 2.5%, and Treasury 2.2%, for next year, pre-fires.

However, to be clear, it is very difficult to predict our likely growth rates in coming years. The mix of global economic challenges and risks is unprecedented - with no historical experience on which to draw.

Moreover, economic factors are unfolding in a very unpredictable and global, risky, geo-political climate, with extremely volatile global leadership, especially Trump who moves markets from one tweet to the next, often in conflict with each other.

One of the present economic conundrums is why the stock markets have been so strong in recent years, while economies have been very weak.

Part of the answer is that while low interest rates haven't really stimulated much economic activity, the stockmarket has been about the only place to get a real return on investment for many individuals and institutions. But, can it last without another global financial crisis?

Unfortunately, we have had very little genuine reform over the last 2-3 decades, as both major parties played short-term politics rather than solve problems and meet challenges, so that the issues were just "kicked down the road".

Those in government have relied on populous slogans, and tried to remain "small targets" in their electioneering, rather than take the time and the risks attempting to prosecute a case for reform. So, the big reform challenges remain unresolved - indigenous recognition in the Constitution; our Federation; climate change; tax and transfers; productivity; and China, to name just the most important.

Disturbingly, unlike some of their predecessors, present leaders can't even see the opportunity that a crisis can bring.

For example, even in the midst of two national disasters, both significantly as a result of climate, Morrison has become increasingly entrenched in attempting to defend the indefensible when it comes to his Government's inadequate, irresponsible, and dishonest response to the climate challenge.

While the electorate certainly wants to see those who have lost or suffered in these bushfires and the drought supported, and assisted in their recovery, they also want to see our governments preparing better for future crises.

Disturbingly, unlike some of their predecessors, present leaders can't even see the opportunity that a crisis can bring.

Climate change means that future droughts and bushfires will last longer, and get more frequent and intense. The policies exist for them to do just that - it needs leadership.

Moreover, a significant climate action plan will deliver new industries, thousands of new jobs, and significant economic growth. It is a national disgrace that we don't yet have an effective National Disaster Strategy and Climate Action Plan.

John Hewson is a professor of Public Policy, ANU, and a former Liberal opposition leader.