The lasting legacy of Hockey’s economic ignorance

The Sunday Age reports that: The small business package central to Tony Abbott’s final budget does not seem to have delivered the promised turbocharge to Australia’s economy. The so-called “Tony’s Tradies” package, which is set to cost the budget $5.5 billion over four years, was designed to provide a platform for the Abbott government’s re-election plans.

Economist Saul Eslake says the best one can say about the package is it may have contributed to a boost in retail sales and car sales in the month or two after the budget, but that boost has not been sustained. ABS data show a sharp jump in sales of electrical and electronic goods in the month after the budget – sales had grown by just 0.2 per cent in April and May, before jumping 2.9 per cent in June – before falling again in July by 2.9 per cent.

As recently as last week, we had Finance Minister Mathias Cormann extolling the virtues of the scheme.

COMMISSION OF AUDIT PRESSER

Clearly hadn’t done his homework. He is the Finance Minister for heaven’s sake. It is expected to be on top of the facts.

But this highlights a very real problem with our democracy. We have time serving politicians who have entrenched their power position in their parties being given appointments are central to the efficient operation of the Australian economy. So we tend to get a lot of duds.  Wayne Swan wasn’t much of a Treasurer either.

When Joe Hockey was Treasurer we had someone who obviously had no idea about how to do his job.

JoeHockey-619-386

Now Hockey is our US Ambassador a job for which he is equally and imminently unqualified.

It was quite clear that we were not going to get an economic recovery led by small business expenditure that was stimulated by a tax concession.

See my The lawnmower-led recovery.  In my conclusion to this blog, I said: Make no mistake, this budget is not about “having a go”. It’s a cynical political manoeuvre  by an increasingly unpopular government whose options for re-election are rapidly diminishing.

The failure of this particular policy highlights central problem with the government’s approach to economic management. This policy was based on providing tax concessions to a sector of the community in the hope that that would stimulate economic growth. The rhetoric around the defence of negative gearing is that this tax concession provides a stimulus to economic growth by supporting the people who want to “get ahead.”  if this assumption is true, and I suspect it is not, it is being done on the basis of a subsidy from other taxpayers. This is not the way to stimulate the economy.

While the government and Prime Minister Malcolm Turnbull, in particular, talk about the need for the economy to be “agile”, their only contribution is to provide tax concessions.

484713-malcolm-turnbull

This is effectively providing subsidies, funded by one part of the community, to another. It didn’t work in Joe Hockey’s budget but no one in the government appears to understand this. The worrying thing is that this bloke may not be any better than Hockey.

Domino man

 

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