Contributed by Joe Montero
The present economic conditions call for a response that helps people. Victoria’s Andrews government has delivered a budget and a good part of it is in line with what is needed.
Allocating $9 billion over four years for hospitals, $5.3 billion for social and public housing, $4.4 billion for rail, $3 billion for school upgrades, $1.9 billion for disability support, and $1.6 billion for clean energy, are necessary contributions.
So is the $619 for creating new jobs for those most affected by the pandemic, although this is going to be a long way short of what is needed, to stem the tide of rising unemployment and underemployment.
But the capacity of a state government is limited, constrained by insufficient independent financial resources, and being locked into commonwealth budgetary arrangements. Economic policy is primarily the province of the federal government.
Perhaps the Andrews government budget’s most important legacy will turn out to be that it has fired a shot against what is coming out of Canberra. It has the potential to be a thorn, helping to broaden the debate over what Australia needs.
Even if the Victorian budget can go no way near fixing the state’s immediate practical problems, it can still make a start, and the budget, even with warts and all, does this.
Fixing requires a more ambitious project to transform the economy. A proper transformation must depend on the rebirth of manufacturing on a new and sustainable foundation.
The Advanced Circular Polymers pant, which recycles plastic waste, opened in July this year at Somerton in Melbourne’s north and was partly funded by the Victorian government
The new economy can create linkages across sectors and create real and permanent jobs.
It will cost, and here lies the problem. Some of what has been allocated to create new jobs will go to construction. This is good news. But on the scale of what is needed, it is only a drop in the ocean.
The market is not making the transformation, and if this failure is going to be turned around, the only realistic option is public investment on a scale that is sufficient to make a difference.
Since the state’s capacity to raise funding is limited, and it’s locked into Commonwealth grant agreements, only the Australian government can do the job.
Paying for the transformation means raising the funds. This raises the matter of taxation reform. Not the kind we’ve had lately. But tax reform that puts an end to the top end tax evasion industry.
Corporations with more than more than $250 million in income a year were reported by the Australian Tax office, to have failed to pay $2.5 billion in the 2014-15 financial year.
In the subsequent May budget statement, Scott Morrison, the then Treasurer, admitted that this evasion amounted to at least $7 billion. Oxfam, suggested that this was still an underestimation, and according to its own estimate, $7.7 billion had left Australia’s shores in 2014 alone. The evasion industry has continued to thrive since then.
Here is the means to funds for an economic transformation through the rise of new industries and the modernisation of older ones. A part could be used to help smaller businesses recover from the pandemic, and to take advantage of future opportunities.
Although the Victorian government does not have the jurisdiction to do this on its own, it can play an important role in winning over public opinion and pressuring to bring about this change.