By Chaneg Torres
NSW Young Liberal President Chaneg Torres provides a blueprint for economic recovery post COVID-19.
The economic response to the extraordinary economic challenge presented by COVID-19 should ensure the economy is able to grow rapidly and create jobs into the future after the crisis is over.
Due to the huge economic shock caused by COVID-19 and the necessary social distancing measures in place, businesses are under immense pressure and many Australians have lost jobs and income. It is estimated that unemployment will reach as high as 10%.
The Federal Government has rightly moved to support the economy in supporting businesses with asset write offs, breaks from levies, and providing support for jobs that are at risk due to extraordinary external factors including a $130 billion wage subsidy for an expected 6 million Australians. During extraordinary times, the scope of Government must rightly temporarily expand.
However, we mustn’t forget that this comes at a real cost. The combined Federal and State public debt will reach an astronomical $1 trillion.
While fiscus stimulus might stave off negative growth and unemployment figures in the short term, there will be an even larger debt and deficit hangover when this crisis has inevitably passed.
This debt and deficit hangover will eventually have to be paid for by taxes. It will be young people who will ultimately be saddled with higher taxes and a potentially lower standard of living, without the same level of services our parents have enjoyed.
There is an increasing temptation in some quarters to suggest that this crisis shows the failure of markets, open global trade, and small government to deal with national challenges.
This thinking fails to see the obvious: this is not merely a severe business cycle downturn. This is an economy shut down by Government deliberately to deal with a health crisis.
The temporary nature of these measures is key. It is important that Liberal Governments keep their eyes on sustainable growth for future generations.
Governments should not just be looking at short term solutions for the crisis at hand. They need to look at real economic reform that will enable the economy to bounce back from the crisis stronger than ever, and maintain its resilience for future crises.
Indeed, before the crisis, our nation already faced a long term productivity challenge and stagnant wages growth.
Only open and competitive markets and allowing businesses to innovate and grow without the impediment of too many taxes and regulation will ensure the economy bounces back and future generations are not left with a huge bill.
Governments should maintain their commitment to pursuing open global markets, so that Australian farmers and businesses can sell their surplus overseas, and working Australians can have access to affordable goods at a time when their budgets are squeezed. Yes, let’s ensure that this doesn’t come at the cost of our national security interests. But let us not be deceived by the siren call of high tariffs and subsidies which only drain taxpayers money and protect special interests from competition and ultimately hurt working Australians with higher taxes and a higher cost of living.
Once the crisis has passed, Governments must be deliberate about addressing debt and deficit as a matter of generational justice, rather than merely relying on bracket creep and slowing growth in spending, so that young Australians are not burdened with unsustainable spending and debt.
Governments need to make it easier for businesses to hire and retain staff during an economic crisis by revisiting burdensome industrial relations laws and the maze of awards that put a straightjacket on small business, as well as abolishing payroll tax – all of which price young people out of the labour market and make it difficult for businesses to keep open during bad economic times.
Governments also need to undertake serious tax reform, bringing forward the income tax cuts, slashing company tax, getting rid of inefficient taxes like stamp duty, and shifting to a reliance on less distortionary broad based taxes. This sort of reform would boost spending and investment more sustainably and more effectively in the long term than any stimulus.
Finally, Government should give people the permanent choice to use the money they earn the way they want by making superannuation voluntary, perhaps as an opt-out system. This would boost spending without the Government needing to rack up further debt, and give young people the freedom to choose to save for a house.
An economic crisis presents the opportunity for real reform that unleashes growth and protects our standard of living in the long term.
Getting it right is imperative for our generation, who will bear the costs of intergenerational inequity.