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Wednesday, 17 June 2020

Time for the Aussie government to borrow and invest big

Ross Gittins has a good article in today's SMH outlining the reasons why the right wing Morrison government should be not looking to 'cut the deficit' (usual Liberal mantra) as the post Covid-19 economic recovery starts to tentatively materialize later this year. With the government able to effectively borrow at 0% real interest rate, they should restart the old 'government bonds' program (that issued 10 or 20 year bonds) with an interest rate of, say, 1.0%. A lot of super funds and pensioners would probably take these up, given the bank interest rates on savings being around 0%. That wouldn't raise a lot of money, but the government could also set up a few government-back statutory infrastructure bodies that could borrow globally at close to 1% for the long term, and then invest all this borrowed money in major projects that are a) sensible and add to long-term national productivity and/or development, b) relatively labor intensive, and c) have a decent 'multiplier effect'. There a experts that could (and probably already have) provide the government with a list of projects, but a few that spring to mind and such as - constructing defense assets such as destroyers, submarines, and possibly even an aircraft carrier (we used to have one) - building a large-scale solar electricity 'farm' (or farms) in outback regional Australia, with associated storage battery farms and connection to existing transmission lines - building adequate amounts of social housing, preferably with a bias towards regional towns to aid with decentralization - upgrading Woomera to support satellite launches using the commercial launch vehicles becoming available, and to add some 'bricks and mortar' to the recently created Australian Space Agency (with a budget allocation last year of just $9.8 million it could probably fund one episode of 'The Orville' - hardly a serious initiate for the 'clever country'). Anyhow, there are probably a lot of better ideas on how the government could spend a few billion dollars of cheaply borrowed money to help grow the Australian economy, address our contribution to global warming, develop local technology business, and provide skilled jobs. Hopefully the delayed budget later this year might actually include some large public spending initiatives. We'll see.

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