Expand Rudd's stimulus package into a green New Deal!

February 7, 2009

At first glance Prime Minister Kevin Rudd's Nation Building and Jobs Plan looks like a pre-emptive strike against looming recession and unemployment.

With $42 billion extra in government spending (the biggest since World War II) this is surely the economic stimulus package the economy needs, as the tsunami of global slowdown rolls towards Australia.

(The fact that Malcolm Turnbull's Liberal-National opposition has decided to vote against it as an extravagant waste of taxpayer money simply reinforces the impression that it's the right package for the times.)

But the plan, despite its positive features, remains a severely inadequate response to the recession that is beginning to hit working people. It also only starts to tackle the massive backlog of public investment needed to upgrade health, education and public transport, and begin building the infrastructure for environmental sustainability Australia sorely needs.

Despite its welcome billion-dollar investments in school upgrading and house insulation, Rudd's plan is mainly designed to soften the worst aspects of the recession by increasing public spending by as little as necessary, before winding it back as private profitability and investment eventually revive.

The Updated Economic and Fiscal Outlook that contains the stimulus package forecasts that the federal budget deficit will peak at $35.5 billion in 2009-10. It sounds like a vast amount of money, but it's only 2.9% of the economy's annual output, or Gross Domestic Product (GDP).

In former treasurer Paul Keating's "recession we had to have" (1991-92), the federal government deficit reached 5.4% of GDP, $66 billion in today's terms. To seriously counter the present downturn, the Rudd government would have to countenance a deficit of that size (or increased taxation of the capitalists to reduce it).

Rudd and treasurer Wayne Swan say that their package will "support" 90,000 jobs. That means that it will, if all goes to plan, maintain or create 90,000 jobs more than would otherwise be the case.

Yet, treasury forecasts that official unemployment will increase from 4.4% (498,000) to 7% (around 750,000) by 2010. So while Rudd's plan will "support" 90,000 jobs, it will do nothing for the extra 250,000 workers expected to join the dole queues.

The main reason is that the Rudd-Swan plan falls far short of offsetting the expected crash in private business investment. This is presently forecast to drop by nearly 3% of GDP by 2010, and could easily collapse more if the global economic nosedive fails to bottom out.

With household consumption and exports also predicted to stagnate, the plan's expansionary stimulus of 2% of GDP for 2009 is too small to counter the forces shrinking the economy.

However, Rudd's package also gives a clear glimpse of what a genuine jobs plan could and should achieve — and could have achieved long ago if Labor and Liberal governments had not been slaves to the dogma that public investment only exists to offset falls in private capitalist investment.

Its $28.8 billion in direct investment will produce a long-needed upgrading of schools.

Insulating over two million ceilings and installing solar hot water systems in Australian homes will reduce power bills and greenhouse gas emissions across the country. The plan to expand social housing by 20,000 at last begins to tackle — but frustratingly slowly — the public housing waiting list of 200,000.

But imagine what could be done if the package was designed to fully counter the coming recession. The Socialist Alliance says that would amount to a "green New Deal", which would fund:

•An emergency plan of rail infrastructure construction;

•The immediate establishment of a Sustainable Energy Authority to drive the shift to renewable energy and the phasing out of fossils fuels;

•A massive upgrading of urban public transport; and

•A boosted plan for eliminating waiting lists for social housing and repairing existing public housing stock.

The other essential aspect of such a plan would be to lift the dole, the pension and other welfare payments to at least 35% of average weekly earnings, reducing poverty and increasing consumption, as well as a sustained increase in government funding for health and education.

The economy, environment and social justice demand such an approach. More than the Rudd government's cautious exercise in "counter-cyclical policy", it would start to put people and planet before profit, putting a stake through the heart of the neoliberal capitalist model that has brought our planet and human society to the edge of disaster.

[Bea Bleile and Dick Nichols are national co-conveners of the Socialist Alliance.]

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