Can Do-Nothing ScoMo do Keynesian stimulus?

Via the AFR:

Prime Minister Scott Morrison, who spent the day bunkered in meetings and planning his new cabinet, shot down suggestions that he should adopt policy beyond what he took to the election, including in the energy sector.

This is despite calls from business and some in his own party to embrace a more meaningful energy policy, especially the National Energy Guarantee which this time last year was the Coalition’s policy.

The Coalition will stick with building the Snowy 2.0 project in NSW, maybe underwriting hydro-power in Tasmania, looking at underwriting a coal-fired power station in Queensland, and passing legislation to enable the Treasurer to forcibly divest energy companies caught engaging in anti-competitive conduct.

He better get off his butt pretty quick. John Hewson has it right:

The former Liberal leader John Hewson, an ANU professor of economics, thinks that Morrison’s term will be shaped by crisis.

“I think the economy is going to implode on him,” Hewson says. “He will be facing a very different set of circumstances in six months,” he projects.

Certainly, growth is slowing, inflation negligible, wage rises feeble and unemployment rising. Abroad, Hewson points to a slowing world economy, the US-China trade war, and a growing list of geopolitical tensions. “Morrison will be forced to do something.

This is right, I think. There is a growing risk that the global economy is on the verge of another stock market shock as the trade war metastasises. With its tax cuts blocked, the ScoMo Government needs to be mulling new contingency plans for fiscal spending.

The budget can handle it but can ScoMo? It means junking Coalition surplus plans and its long tradition of trashing counter-cyclical Keynesian stimulus such as school halls, solar panels and pink batts.

The answer is: yes it can. Once advantage of being hollow is you can do anything.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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