In his 2017 budget, Treasurer Scott Morrison made a crucial concession. He admitted there’s such a thing as “good debt” and “bad debt”. He argued that it’s not the size of the deficit that matters, but what we get for it.36 His reasoning: increasing the deficit in a manner that generates growth, productive capacity and higher tax revenues into the future is not only sensible — it should be standard operating practice.
This is a subtle but important admission that breaks down the gross oversimplification of public finance that has dominated our political discourse for decades. It offers us a starting point for funding the policies in this document. Getting people into meaningful work, reskilling them over the course of their lives, investing in efficient, affordable, renewable energy, will directly boost our economy.
- Reskilling the workforce to deal with automation will have $1.2 trillion economic return over the next 12 years and an immeasurable social return.
- Investing in full employment will shorten economic downturns by acting as an automatic stabiliser for the economy - injecting more money when the private sector shrinks, and less when the private sector is booming. This shortens downturns, and keeps people skilled up and ready to re-enter private sector jobs when they become available.
- Ensuring everyone has a living wage is the best thing we can do for jobs and innovation. Businesses don’t invest, expand or create jobs unless they know there are customers who can afford what they produce. A more generous social wage supports local small businesses where those wages are spent.
We can afford anything, just not everything.
History has shown that the Australian government can comfortably spend more than it takes in from taxes. In fact, Australia has never run meaningful government surpluses, nor has it needed to. Since Federation, we have been in deficit 77% of the time, and our deficits have always been significantly larger than our surpluses.37 This simple fact isn’t discussed enough - although it is widely understood by central bankers: A government who issues debt in a currency they control is never at risk of default.
Deficits only become a problem for governments when the economy is approaching its productive limits. At that point, injecting further money into the economy without other checks, such as a robust progressive tax system, risks inflation. Inflation, not revenue, is the real constraint on government spending. But Australia is a long way off reaching our productive capacity. Investing in a more generous social wage will benefit of all of us.
We can’t afford not to.
The status quo is expensive. We pay extraordinary amounts to avoid fixing problems. When considering this vision, it’s important to bear in mind all the money it saves as well as the money it requires.
We spend billions on job incentives that don’t create jobs.38 We spend billions on the healthcare system, and law enforcement addressing the symptoms of poverty and homelessness rather than preventing the causes.39 We spend billions helping people reskill at shonky private colleges, and then millions more investigating why it went badly.40 And while people may have lower taxes, they have higher energy bills, childcare costs, and bank fees because corporations continually ramp up the prices of services we depend on.
And it’s also worth noting that the costs of these proposals are shared. The more people who engage with a job guarantee, the less people who will require income support. If early education, energy and housing become more affordable the indexed level of income support will reduce.
Finally, conservatives never feel the need to explain how they’ll pay for $65 billion dollar corporate tax cuts. They never feel the need to justify the $17 billion dollars spent on fighter jets. We don’t need to justify the cost of this agenda - we simply need to do what they do: Argue its value.
36David Sharaz “Morrisons ‘good, bad’ debt claim under fire ahead of the Budget” SBS, 27 April, 2017
37Ashley Owen, “Running up and paying off government debt” Philo Capital Advisers; ABC, "Was Labour responsible for a record deficit”, ABC Fact Check, 2016.
38Rick Morton, “Failing job sites branded a mess”, The Australian, October 2017
39Ellen Witte, “The case for investing in last resort housing”, Melbourne Sustainable Society Institute, Issues Paper No. 10, March 2017.
40Report of the Senate Education and Employment References Committee, “Getting our Money’s Worth: The operation, regulation and funding of private vocational education and training (VET providers in Australia”, October 2015.