Hewson's View: Govt caught short on economy and drought

The Morrison government got caught out twice this week on its hubris and rhetoric, on the state of our economy, and on the drought.

The slogan that "Our Economy is Strong" was blown out of the water when the IMF significantly lowered their forecast for our growth in 2019, far less than growth in 2018, and at 1.7 per cent, the lowest rate since the GFC.

It certainly didn't ring true for the government to respond by simply claiming that we have had some 29 years of growth, and that they "had a plan" which they were implementing.

Their "plan" is cuts in official interest rates, personal tax cuts, and the promised budget surplus - the first two having had no stimulatory effect yet, and the third apparently going in the wrong direction and against the Reserve Bank's call for budgetary stimulus. The government also mentions its $100 billion infrastructure agenda, but none are "shovel ready", nor funded.

Beyond this, Treasurer Frydenberg seemed to blame the IMF growth downgrade on the "synchronised slow down" in global growth but, while not denying the significance of the global risks to our growth, it must be noted that so far our external accounts have been working to sustain our growth. Surprisingly, they ignore the domestic weaknesses - flat wages, record household debt, cost of living pressures, job insecurity, and poor consumer and business confidence.

Policy change needed: The government has done virtually nothing to improve the drought resilience of our soils, or taken other measures to deal with the intensity of droughts, argues John Hewson. Picture: Getty Images

Policy change needed: The government has done virtually nothing to improve the drought resilience of our soils, or taken other measures to deal with the intensity of droughts, argues John Hewson. Picture: Getty Images

On the drought, the government's reluctance, even obsession, against acknowledging the significance of climate change as a cause of the drought, has made their responses seem hollow.

Although they would claim that they have committed some $7 billion in assistance to drought affected farmers and regional communities, they have done virtually nothing to improve the drought resilience of our soils, or taken other measures to deal with the intensity of droughts.

Importantly, while many farmers have come to accept the significance of climate change, now claiming this to be the worst drought that they or their families can remember, and their industry bodies such as the NFF agree, the government has chosen to ignore them, even though there has been considerable criticism of the government's response to date.

So, in both cases, rather than admit the error of their rhetoric, and begin the necessary policy resets, they in effect "double down", by acting as if "nothing to be seen here".

In this there are concerning echoes of Howard, one of Morrison's chosen mentors. It will be recalled that Howard's intransigence on two issues, undertaking to ratify the Kyoto Protocol, and being unwilling to say "Sorry" to the Stolen Generation of our Indigenous forebears, were significant in him losing both his seat and government, as they provided Rudd with two election-winning issues.

The tragedy is there are policies for the government to adopt in each case, but letting these challenges slip ensures that they will be harder, and take longer, to ultimately address effectively.

Growth can be stimulated by some infrastructure projects being brought forward, and funded initially "off balance sheet", and an increase in say the Newstart allowance would be sure to stimulate household spending.

Regenerative agriculture, simple changes in farm practices, can make our soils much more resilient and drought resistant, and be net negative in terms of emissions - that is, also offset emissions in other sectors. Moreover, farmers stand to gain additional income via selling the carbon credits earned by improving the carbon content of our soils.

Moreover, with waste spread right across regional areas, the opportunities to develop our "circular economy" in recycling and biofuels are very significant, bringing with them investment, jobs and growth right across regional Australia.

If Morrison wasn't so intent on still being "an opposition" focused on scoring points on opponents and attempting to "wedge" opponents, but rather chose to govern in the national interest instead, he could easily adopt such policies, and build considerable electoral support in the process.

Basically, voters have had enough of slogans, hubris and hollow rhetoric.

Basically, voters have had enough of slogans, hubris and hollow rhetoric - they crave authenticity and policy outcomes, and they will cut any political team that does this considerable slack. However, it seems that the Morrison government is incapable of listening and seizing the moment.

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.