Tuesday’s budget is on everybody’s mind, looming on the increasingly stormy economic horizon like a category five cyclone, gathering pace as it hurtles towards the coast.
It will make landfall on October 6, just days after both JobKeeper and JobSeeker are slashed.
Concurrently, hundreds and thousands of deferred mortgage payments fall due — approximately 10% of all mortgages — plus rental relief and eviction moratoriums will end. Scores of employees continue to lose their jobs and countless businesses remain closed, or seriously impaired. Many low-paid and casual workers — particularly young people — have already drained their superannuation, trying to find a way to pay the rent. Some people worked three casual insecure jobs and have lost all of them. Aged care and health services are in chaos.
Homeless shelters and food banks report massive increases in demand. The drain on mental health services and social support hotlines is unprecedented.
Centrelink queues stretch around the block, borders are closed and people continue to lose their lives and livelihoods to COVID-19. No one knows when the storm will reach the high water mark, or how many individuals or businesses will go under along the way.
There is no argument now that Australia is in a deep recession, although the federal government avoided naming it for as long as it could.
More than just two quarters of negative growth, it is the economic equivalent of driving through floodwaters and getting swept off the bridge half way.
It is still bucketing down: this hardly seems the time to start poking holes in the sandbags.
Structural damage
While everyone waits for the worst budget ever to hit, two key elements of the economic levy bank have been quietly removed.
In March, the government relaxed insolvency laws for six months allowing businesses to continue to trade while insolvent. This allows a business that is going under to continue to rack up debt with suppliers and contractors who may not know they are dealing with a business which is insolvent.
Yes, desperate times do indeed call for desperate measures, and the logic is it gives otherwise OK businesses more of a fighting chance to weather the COVID storm. But, trading while insolvent?
It allows businesses that were already going bad before COVID-19 to make things worse for everyone else. It puts even more businesses (who may be neither insolvent nor likely to be) and their employees at risk.
Perhaps a bigger risk is the possibility that businesses, wary of invisible insolvency, will stop providing credit to each other, just as the banks did in the global financial crisis.
It is hard to understand this strategy when all the government had to do, instead, was stay the course with JobKeeper and JobSeeker at the higher rate.
It’s a given the deficit is going to be river deep, mountain high anyway.
The government is already getting away with blaming COVID-19 for it. So, why take such a massive additional risk five minutes from midnight?
Reckless lending
The other thing the Coalition did, not only defies even COVID-19 logic, but is outright unconscionable. It relaxed the lending laws, again allowing the banks to lend money to people who they know can’t afford it.
Reckless and predatory lending practices is precisely what caused the GFC and what the National Consumer Credit Protection Act 2009 (NCCP Act) was brought in to prevent.
Yet again, the damage and heartbreak will be pushed back onto the individual borrower, allowing banks to dodge yet more responsibility for community and economic carnage.
Was it just a coincidence that it was announced straight after Westpac did a $1.3 billion deal with AUSTRAC over child exploitation transactions?
So far, the government’s fiscal contortions have had one key outcome: shifting as much debt and deficit as possible from its spreadsheet onto individual households.
It is hard to avoid the impression — erroneous or not — that it is just trying to keep the numbers below the benchmarks for a depression. Just like it did with the recession.
Recession and depression
With an increasingly casual and gig based workforce it was already difficult to make a living. Housing and utility costs are increasingly unsustainable for many. Now, many people are doing it even tougher, as seen on the ABC’s Four Corners report on September 28, and those disadvantaged before the recession are among the hardest hit as set out in the Australian Council of Social Service Poverty and Inequality Report 2020.
The Reserve Bank definition of a recession is two consecutive quarters of negative growth, which, as the ABC’s Alan Kohler points out, could have been called back in 2016 had the RBA not revised certain GDP figures.
A recession also includes greater unemployment, greater government spending and the collapse of consumption, retail spending and small business income.
The RBA defines GDP (Gross Domestic Product) as the total monetary or market value of all finished goods and services the country produces.
A depression is a recession lasting three or more years, or any recession leading to a decrease in GDP of 10% or more.
Given the current ratio of just about every economic indicator there is, it is going to take another one of Scott Morrison’s taxpayer funded “miracles” to stave off a depression.
Only this one will cost a whole lot more than the $100 million sports rorts affair.
Gaslighting the electorate
The gas and mining sector were declared an “essential service” and, unlike most sectors right now, are currently rolling in dough and the government still gave it $29 billion in subsidies.
Given that Santos has just been given approval for a gas field in the Narrabri that 98% of people impacted didn’t want, it seems the “gas-led recovery” was underway well before the recession we weren’t supposed to be having.
Now, it is all Prime Minister Scott Morrison and Energy and Emissions Reduction Minister Angus Taylor can talk about.
They are clearly going ahead with it, regardless of the consequences to the rest of us. The corrupt influence of gas lobby donations on both major parties is well documented, but that’s not the full picture.
What price the life of the planet?
The RBA says gas is worth $200 billion to Australia’s GDP and rising and one-third of it is coal seam gas.
That’s 12% of GDP. That’s right, 12% — roughly the difference between a recession and a depression.
It’s a perfect storm of LNP ideology — “green is bad, greed is good” — economic circumstance and ministerial vested interests.
When Tuesday's budget is handed down, most people will be looking for whatever life buoys Treasury throws from the Titanic. Right now a lot of people are just figuring out how to feed their children and not become homeless.