Treasurer Morrison labelled this week's surprisingly low September-quarter GDP number as a "wake-up call". What he didn't say is that it's a call that's been ringing for three years. Nobody in the government bothered to answer it.
Three years is how long mining investment has been tumbling towards the September quarter's inevitable conclusion. For those three years, the government has primarily relied on low interest rates to provide an alternative growth engine. It has turned out that the main contribution of low interest rates has been to encourage higher housing prices, which in turn has helped maintain consumer spending through the wealth effect.
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Barnaby tops a bad week for politics
Political interference and politicians' pet projects too often result in mega-projects that don't pay. Michael Pascoe comments.
No, it has never been a sustainable solution. A very valuable transition mechanism that has done a great job, yes, but you can't rely on always increasing the number of dwelling units being built and renovated. Growth through housing expansion is coming to an end.
It's by no means too late to answer that wake-up call, for the government to get serious about providing sustainable fiscal stimulus. We're not about to fall into recession this quarter – but our economic horizon is shrinking.
What the national accounts underlined was the extent of the federal government's lost opportunity to increase investment in infrastructure ahead of the well-telegraphed end of the resources construction boom.
To borrow a Keatingism, every galah in the pet shop has been saying the government should borrow more to invest in the nation's future. Opportunity knocked, but the coalition was not at home, clinging instead to a threadbare ideology of smaller government and bigger corporate tax cuts. The Republican Tea Party writ small.
It's the nation's lost opportunity that our politicians either can't grasp or explain the idea of "good" and "bad" debt after decades of simplistic demonising of any government debt. The stable, confidence-building infrastructure investment pipeline the Reserve Bank has been recommending isn't there, however much the federal government tries to exaggerate its capital program - a program that remains below Australia's long-term average as a percentage of GDP.
But I suppose it would be foolish to expect much from a government that can't even keep an election promise to conduct a proper review of carbon policy, and is hogtied by slogans and dogma.
![The GDP figures which came in worse than the gloomiest forecasts were a "wake-up call", said Treasurer Scott Morrison.](/web/20161209221814im_/http://www.theage.com.au/content/dam/images/g/t/5/t/6/2/image.related.articleLeadwide.620x349.gt7a7v.png/1481238464976.jpg)
And to top off a miserable political week, the Deputy Prime Minister added his voice to those calling on the National Australia Infrastructure Fund to provide a billion dollars for an economically questionable railway line to service Adani's proposed Carmichael coal mine in Central Queensland. No pressure guys.
While we're short of the Commonwealth funds for Infrastructure Australia's list of projects that would more than pay for themselves, here's a proposal to finance a railway line of dubious viability and merit. I'm not talking here of carbon and climate issues, but just whether the railway and mine could become stranded assets.
Pet projects and hobby horses
Political interference, politicians' pet projects and hobby horses, too often result in mega-projects that don't pay. It's no surprise that Barnaby Joyce would jump aboard – he's the man ignoring the cost benefit analysis he commissioned to move a government authority to his electorate. If it's a choice between the national good and National Party votes, you know the outcome.
Listening to Joyce on Brisbane ABC radio yesterday, he remained locked in the mindset of Australia's future continuing to depend on primary industry – exporting minerals and food. That's not the future of a rich, advanced country wanting to be richer and more advanced. Primary industry is a good thing, but if its share of GDP and employment doesn't continue to shrink as the rest of the economy grows, Australia will be in trouble.
So while the government continues to stress a return to surplus and lower taxes as the path to our salvation, a key part of its nation-building budget has been made a test of the integrity of the National Australia Infrastructure Fund board – an independent body, appointed by the government.
Should the NAIF decide to go into the Adani railroad financing business, it will have to provide a very clear, unquestionable business case, a case that includes consideration of the cost. Would this really be the best thing the fund could do with one billion dollars, a fifth of its money?
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