The Hobart Mercury - January 9, 2016
I’m not a monarchist but I do like the Queen. Especially when she asks pertinent questions as she did in 2009 when visiting the London School of Economics. Referring to the Global Financial Crisis she asked her learned hosts: “Why did no one see it coming?”
From all reports her hosts were literally lost for words and asked the question be placed on notice.
A few months passed before the written answer explained “there had been a failure of the collective imagination of many bright people,
both in this country and internationally, to understand the risks to the system as a whole”.
Here we are six years later and the collective imagination of bright minds and clever policy people is yet to agree on what happened,
let alone plot a way forward.
Federal Treasurer Scott Morrison assures us the goal, being a return to surplus, is like a family holiday outing ... we know our destination,
it’s just we’re not quite sure how long the journey will take. Really?
It’s an unhelpful analogy. Which family goes on holidays not knowing how long it will take to get there?
One minute we are told everything’s on the table; next Treasurer Morrison tells us we don’t have a revenue problem.
Our state Treasurer Peter Gutwein then chipped in, pouring cold water over GST reform on his way to a COAG meeting.
“It is our view that governments of all persuasions should focus first and foremost on reining in expenditures, as we have done,” he said.
It’s a little early for our government to be boasting of its achievements. The modest improvement to date is largely due to a GST windfall,
restricting capital expenditure and plundering government businesses, none of which is, or should be, a permanent feature.
Hydro Tasmania is no longer a cash cow. TasNetworks after restructuring is the only source of short to medium-term working capital for the Government,
but it too is maxed out. Its borrowings are close to the maximum prudent level which is set every five years after a fresh determination as to what
prices it can charge its customers.
The GST base is gradually narrowing. It’s nowhere near as bad as the old sales tax it replaced but it only covers 47 per cent of consumption.
I was uncertain about the GST when it was introduced but because we have a good tax-transfer system it was easy to compensate those negatively impacted. Compensation for potential losers should be an integral part of any debate related to the GST rate being increased or the base broadened.
It’s too early to be resting on our laurels. I hope the Queen doesn’t catch us unawares on her next visit with: “Why did no one prepare a Plan B?”
Our lethargic pick-up during the six years since the GFC suggests to me we might not make it to our destination, to borrow Treasurer Morrison’s analogy.
Getting back to trend growth and all will be OK is starting to look like a false hope.
The economy is spluttering because there is inadequate demand. Cutting spending might be a solution for a household but if all governments do it,
the result is a downward spiral.
Why do we persist with such notions?
We live in an economy which incentivises passive wealth creation rather than productive activities. We have a superannuation system worth $2 trillion,
that’s 2000 billion dollars, where players swap existing assets among themselves rather than look for new investment projects.
We are a rich society with spare capacity and idle resources, yet we are languishing. The idea that reining in government expenditure alone will solve
problems represents a failure of the imagination.
We need new ways of doing things. The much vaunted review of Federation has raised barely a ripple of interest.
Hopefully a new leader committed to innovation might push forward on this front.
I am acutely aware that Tasmania is but a small part of the Federation. But that shouldn’t preclude us from proposing changes.
Instead we have a vacuum of new ideas reinforced with a commitment to fight tooth and nail should anyone dare suggest something that may adversely
affect us rather than look for opportunities that may present and mitigation measures to address a negative impact.
Such a recipe for political survival is likely to be at odds with Tasmania’s best interests.
The past few years have seen sovereign governments around the world pump huge amounts of money into their respective economies via central banks.
This hasn’t happened here. It used to be regarded by mainstream economists as taboo.
The Federal Reserve in the US pumped $US85 billion per month for a couple of years trying to revive its economy.
The feared inflationary effects didn’t materialise. In fact deflation has been the policy concern.
A mere fraction of that amount at the national level here in Australia filtered down to state and local governments would provide an enormous boost,
allowing states to restore their flagging infrastructure spending and to take pressure off other areas. Tasmania’s infrastructure problems are shared
by other states. While we have the borrowing capacity we don’t have the ability to service loans or the willingness to raise a little more revenue
from the benefits that may flow from increased infrastructure spending.
If we can reform the way we do infrastructure we could then change the way we operate in other areas.
We need new ideas, an acknowledgment of the need for change and a willingness to help facilitate that change.
Hopefully 2016 will bear witness to a little more collective imagination.
Ruth Forrest is the independent Member for Murchison in Tasmania’s Legislative Council.