Via Domain comes Scummo’s endorsement of Make Australia Stupid Again (MASA):
“At the end of the day when we have to decide, do we think that the United Australia Party would be more dangerous to the Australian economy than Bill Shorten, the Labor Party and the Greens? Well I’m sorry, I think Bill Shorten the Labor Party and the Greens are,” he told the leader’s debate on Monday.
OK, so what are MASA policies?
Other policies expected include:
- $150 a week increase in the age pension at $15bn cost;
- tax deduction for the interest paid on ALL mortgages at $7bn cost so long as it is only new mortgages. If it is all (and it would surely have to be) then it will cost something like $60bn;
- 20% cuts tax paid by people domiciled more than 200kms from major cities at unknown cost;
- restrict super funds to investment within Australia (cause we live on an island);
- fast trains for Sydney or Melbourne to deliver peeps to CBDs within one hour from 300kms which would probably cost $100bn being very conservative.
As well, by killing PAYG, there is a new $70bn black hole in the Budget for the first year that everyone seems happy to ignore.
Prima facie, then, amortising MASA over three year forward estimates would deliver an annual Budget black hole of roughly $125bn.
To offset that we would have an extra $70bn to spend in the private economy in the first year plus enormous asset price bubbles in housing and shares for several years. This would send consumption crazy so the MASA claim that GST would increase is true, though that would all go to state governments not federal. Indeed, state budgets would boom with stamp duties too.
The Federal Government would benefit from higher income tax and capital gains but lose on lower nominal growth as interest rates were hiked by 150bps and the Australian dollar shot straight to 90 cents. Let’s be very kind and say that the Budget fills in $25bn of the $125bn black hole.
Then, in two years, the party would end abruptly as the RBA panics with inflation taking off. Housing and share prices would crash and we’d find ourselves back where we started except with $300bn more public debt, an additional $300bn in household debt, a titanic $100bn structural Budget black hole growing every minute as China’s structural slowdown hammers commodity prices and the local economy implodes.
We’d need to immediately reverse many MASA policies to repair the Budget, exacerbating both the housing and share market crashes and intensifying a pro-cyclical super-recession sending us into some kind of downwards growth spiral that would not stop until the AUD hit 30 cents.
This is all back of the envelope (like MASA costings) but it gives the gist of it. It would certainly be fun but I’m not sure it qualifies as responsible.
Perhaps Scummo should take another look?
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.