I think I may have given readers a bum steer yesterday. I misinterpreted a crucial part of the Albo recovery plan. Via Domain:
Labor leader Anthony Albanese will call for a new focus on fairness in the recovery from the coronavirus crisis, naming housing construction and local manufacturing as two priorities in his economic agenda.
…In a major speech in Parliament House on Monday, the Labor leader will instead describe the crisis as a “once in a political lifetime” chance to reshape the economy to create better jobs.
The draft speech includes calls for sweeping investments in social housing to boost construction jobs, more heavy manufacturing to be kept within the country and a plan for high-speed rail to help ease pressure on the big cities.
…“It’s no time for a ‘snap back’ to the Liberal agenda of cutting services, suppressing wages and undermining job security.
…Asked last week about Labor policies at the last election, Mr Albanese said the party’s franking credits policy was “off the agenda” for the next election.
…“With regard to negative gearing and those issues, we made it clear as well that there will be no impact on any existing arrangements.”
I interpreted that to mean negative gearing reform would be scrapped but a reader pointed out that it is not. It is consistent with a negative gearing reform policy that includes grandfathering.
In that case, the Albo plan starts to make a lot more sense. Negative gearing is the key policy distortion in the Aussie economy, driving misallocated capital and low productivity by promoting useless house price speculation over productive investment.
If Labor retains this policy, along with a commitment to deep cuts to temporary visas then we can say that Labor would drive structural adjustment in the economy and a productivity-led recovery that will be shared evenly between capital and labour.
Moreover, it makes sense in terms of revival for manufacturing given it lowers input costs like land and the Australian dollar.
This is augmented by a commitment to public housing construction rather than contradicting it.
Even high-speed rail could be made to fit this agenda if it were done right. We do not need HSR between Sydney and Melbourne. That has white elephant written all over it. But if, say, $100bn was spent on HSR lines running out of Sydney and Melbourne, including long tunnels to deliver them underneath congested urban networks, then that can add much-needed demand and efficiency gains via big city debottlenecking. It will also lower land costs in the cities, though raise them along the line.
There are other points in favour. Labor will lift JobSeeker, a long-overdue reform that will also lift aggregate demand. Plus, it is prepared to countenance industry policy to aid the manufacturing recovery. And it is much more switched on on energy with stronger renewables drive and mooted gas reservation of some kind.
Labor is certain to sustain high permanent migration. But so is the Coalition. The difference is that under the Labor plan we would see real estate prices deflate while they would inflate under the Coalition.
In short, the former would see the economic gains spread more evenly while the latter would simply return us to the people Ponzi, right along with falling wages, absurd property prices, crush-loaded infrastructure and catastrophically marginalised youth.
I can’t see why any of this would lead to worse budget outcomes under Labor, either. A lower AUD takes care of lot of ills.
As well, Labor’s Chinese sympathies are being contained by Penny Wong. And this economic plan implicitly does more to reduce Chinese reliance by rebooting local manufacturing supply chains.
That’s the rub in the end. The Albo recovery plan can reward youth for its COVID-19 sacrifices while the ScoMo plan to restore the Ponzi and cut corporate taxes kicks ’em hard in the nads while they’re down.
