Ludicrously, the shifty member for Goldstein, Tim Wilson, who used taxpayers’ money in campaigning against Labor’s franking credit refund policy1, is the chair of the government’s economics committee. He has now come out and blamed the Reserve Bank of Australia (RBA) for not stimulating the economy sufficiently2. The RBA’s duty is “to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people”. It does this by setting the cash rate (i.e. the overnight money market interest rate) to meet an agreed medium-term inflation target, by working to maintain a strong financial system and an efficient payments system, as well as issuing the nation’s banknotes3. So, the only real stimulus tool the RBA has is the cash rate, and when stimulus is needed it drops the cash rate, and when a dampening is needed, it raises the rate.
During the Global Financial Crisis (GFC), from September, 2008, to February, 2009, the RBA dropped the cash rate 4.0% (to 3.0%) to stimulate the economy4, while the Rudd Labor government undertook its exceptionally effective stimulus package, which prevented Australia falling into recession. The latter was so successful, the Liberals hated it5. After the GFC, to stop the economy overheating between October, 2009 and May, 2010, the cash rate was raised from 3.0% to 4.5%, but since early 2012 it has been in a long decline, as the economy has weakened. It is now at a record low of 1.0%4.
For Wilson to blame the RBA for not stimulating the economy enough, is simply mind-boggling, and makes you wonder how he could have been considered a sensible choice to chair the Economics Committee. The RBA has asked the Morrison government to borrow at current low interest rates and increase infrastructure spending to stimulate jobs growth as it runs out of room to cut rates any further. In response to this, Wilson asserted that the RBA governor Philip Lowe had “thrown up his hands” in defeat. Wilson was sceptical that the solution was “simply to pump more money into the economy”2. The latter is precisely what is needed, as was shown by the GFC stimulus package, but it is doubly difficult now, because the Coalition government has doubled the net debt from $175 billion in September 2013 (when the Coalition took office)6 to an expected $352 billion in September, 20197.
Of course, Wilson has suggested that broader structural reform and further tax cuts need to be considered as it was “almost impossible” to build more infrastructure in Melbourne or Sydney2. Such a blinkered view of the nation and its economy is a little disturbing. One expects that the ‘further tax cuts’ will be, in part, for the top end of town, as it is they who donate to the Liberal Party. However, RBA governor, Philip Lowe has stated that in the short term, raising Newstart would give a bigger economic boost, than cutting taxes for the top end of town8. This is because money given to the rich is often squirrelled away in places like the Caymans, whereas money given to the poor goes straight back into the economy.
Given that they have cut penalty rates, done little about wage theft, even less about wage stagnation and have refused to raise Newstart, it is unlikely that they will, as Wilson said, pump money into the economy. After all, the disgusting lower orders do not donate money to the Liberal Party, so they are unworthy of any government assistance. This is what this is all about. It is not about economics; it is about money laundering. The neoliberal ideologues in the Liberal Party know how to stimulate the economy; they had an exceptionally successful example during the GFC which clearly demonstrated how it can be done. They know that the depressed retail sector9 also clearly demonstrates that money is needed by the lower orders to buy stuff like food and clothing; after all it was consumption as well as infrastructure spending which kept Australia’s head above water during the GFC. The fact that it was a Labor government which did this during the GFC, would immediately make anything similar unpalatable for the Coalition government. It would be an admission that they knowingly lied over the last decade. To anyone who thinks about politics in the slightest, this would be no surprise. For the Liberal Party, blaming someone else always makes it feel better.