Australia is firmly in the middle of the pack when it comes to Covid recovery spending, according to two projects following the global response. But some experts say that’s fine, because the kind of stimulus packages that have been implemented in the hardest hit countries were not needed.
“I think we were in need last year. I think we have a little less need right now because our unemployment rate has rebounded because we have largely contained it, ”says Richard Holden, professor of economics at the University of New Wales from South.
“Having said that, it is very clear from this budget and it is very clear from the Treasury and Reserve Bank analysis how low the unemployment rate can be before inflation really starts to move. that we’re going to target an unemployment rate of around 4% even lower… That’s a lot of jobs to create, a lot of people to put to work.
In total, federal budget documents estimate A $ 291 billion has been spent on direct economic support since the start of the pandemic. This is equivalent to 14.7% of GDP.
However, that figure is lower than the spending estimate from the Center for Economic Policy Research’s Economic Stimulus Index, which includes state government revenue and spending.
As of May 6, before the federal budget was tabled, its data shows Australia had announced tax measures equal to 17% of GDP – significantly less than Japan, which had committed funding equal to 54% of GDP.
Singapore had committed 29%, the United States 26% and Germany 20% of their respective GDP.
The University of Oxford’s economic stimulus project followed Covid-19 stimulus spending announced by 50 countries around the world.
“Covid-19 brought with it the biggest global economic correction since World War II; unemployment around the world is high, the economic output is low and poverty has increased for the first time in a quarter of a century, ”says Brian O’Callaghan, Australian economist and engineer who heads the economic stimulus project.
“Public investment acts as a stimulus for the economic gears of a nation to turn at full speed again. Governments can use stimulus spending to steer an economy towards future growth industries while immediately boosting employment and economic output (GDP). “
Guardian Australia has added recent infrastructure and Covid-19 packages from Australia, UK, US and South Korea.
This included $ 15.2 billion and A $ 28.5 billion recently announced by the federal government in infrastructure spending and tax measures.
« [The Australian infrastructure spending] is a lot. This is one and a half times the normal level of investment in transportation, ”says Marion Terrill, director of the transportation and cities program at the Grattan Institute.
“The budget brought us back to transport megaprojects. And that’s after a short hiatus in the previous budget where the Commonwealth’s largest single contribution was $ 750 million. In this budget, the Commonwealth invested $ 2 billion or more in three huge big projects. “
The budget included $ 2 billion for an intermodal terminal in Melbourne, $ 2.6 billion for the Anzac Highway in South Australia and $ 2 billion for the Great Western Highway in New South Wales.
But many other countries have been comparatively more ambitious. The UK has committed £ 58bn and £ 20bn for road and rail upgrades and its long-term housing strategy. Spain has allocated more than 8 billion euros to energy and infrastructure projects.
China has announced a slew of new projects, from renovating old roads to high-speed rail, nuclear and solar power.
Terrill wonders if large infrastructure projects are necessarily good incentives, especially since they often have long lead times. The large number of large infrastructure projects around the world will also increase costs.
“They are tapping into the resources of an already overburdened industry. Before the pandemic, engineering and construction were already reaching their limits. The number of people working in the sector had increased by 50% in the three years leading up to the pandemic. And it’s not like the mining boom where we imported more skilled workers from overseas to fill the shortfall. The borders are now closed and the construction of public transport has been fairly resistant to the recession. “
O’Callaghan also notes that the type of megaprojects Australia pursues are more traditional, “gas-recovery” type infrastructure, rather than renewables or other clean projects that others are pursuing.
“Australia has been one of the worst high-income countries in green recovery, if not the worst. While countries like Denmark, Germany, the UK and Korea spent up to 60% of stimulus spending on green initiatives, before the federal budget only 2% of Australian stimulus spending was green ” , says O’Callaghan.
Richard Holden noted that this could be due to a lack of such projects long before the pandemic hit.
“We should have a lot of green projects ready to go to boost the environment if we need to stimulate the economy that we should be able to deploy, whether it is for the maintenance of the dunes, the construction of tracks. cycling or cleaning waterways – a whole range of things that tend to be relatively labor intensive that would be a good way to spend money, ”says Richard Holden.
“It would put people back to work in a recession and things like that, and also help the natural environment.”
Notes and methods:
- Ceyhun Elgin, Gokce Basbug, and Abdullah Yalaman used the IMF’s policy response tracker to decide which fiscal measures to include in their data set
- Guardian Australia has supplemented the Oxford Recovery Observatory dataset with measurements announced after 02/28/2021 (and listed in the IMF’s policy response tracker) for the US, UK and Korea from South
- Guardian Australia used the Australian Federal Government’s list of Covid-19 economic support measures to supplement the Oxford Recovery Observatory’s dataset for Australia.
- Categorization of the US bailout from the Wall Street Journal
- South Korea Supplementary Budget Data from Yonhap News Agency
- Newly announced infrastructure and revenue measures in Australia, South Korea, US and UK have been added to the Oxford Recovery Observatory dataset and categorized according to their methodology typologies .
- Investment in traditional transport infrastructure, Investments in clean transport infrastructure, Investments in traditional energy infrastructure, Investments in clean energy infrastructure, Investments in local infrastructure (project-based) ”, Modernization of buildings and investment in energy efficiency infrastructure, Investments in natural infrastructure and green spaces and Other large-scale infrastructure investments; were classified as “Infrastructure expenditure”
- Direct provision of basic needs, targeted cash transfers for recovery, retraining of workers and job creation, support for job maintenance and targeted cash transfers for social welfare; were classified as “Transfers and employment assistance”
- Income tax cuts, VAT and other tax reductions on products and services, corporate tax cuts, corporate tax deferrals, other tax reductions and deferrals; were classified as “Tax measures”
- Liquidity aid for large companies, Liquidity aid for start-ups and SMEs; were classified as “liquidity aid”