Canberra Report - More Debt Should Be Smart Debt - Wednesday, 7 October 2020

Canberra Report - More Debt Should Be Smart Debt - Wednesday, 7 October 2020 Main Image

By Joel Fitzgibbon

07 October 2020

In the past a key test for a Federal Budget has been its capacity to fund its policies without
driving taxpayers into unnecessary debt. COVID-19 has made commentators, economists
and the broader community more tolerant of public debt. But it should not provide
government with a license to lazily spend the community’s money when we already have
the biggest budget deficit in our lifetimes.


Rather, the test will be (at the time of writing the Budget had not been delivered) how well
the Government plans to spend its ever-growing debt. A reckless spend-a-thon in the
middle of Australia’s first and deepest recession in one hundred years won’t be the right
response. Tax cuts must be efficient, well-targeted and must act to incentivise work and
investment. Programs to support business and the workforce must also be designed to
encourage, not discourage work.


Infrastructure spending must be based on both merit and its capacity to produce jobs
quickly and deliver long-lasting benefit. The Government should invite every Council to
submit a list of projects – they all have plenty of them ready to go.
The debt now accumulated will be with us for decades – let’s hope the money is well-spent.


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I was fortunate to spend the long weekend on a dairy farm. COVID-19 and welcome rains
have taken the plight of our dairy farmers off the front pages, but their challenges remain
enormous. Last year Australia lost 500 dairy enterprises, we can’t let that continue. The
drought is not completely behind us and its impact will impact on farm finances for years.
But the biggest issue remains the power imbalance between our farmers and those who buy
their product for sale.


There is clear market failure in the dairy sector. Market failure describes a situation where a
market can’t operate fairly and efficiently for some reason. In this case it’s the market
power of the processors and the retailers. The economic textbooks tell us that governments
should let the market work without interference and find its own level, but it also tells us
that when there is market failure, government intervention is justified.


The government needs to find a way to regulate the price the farmers receive at the farm
gate. It needs to be a fair price. I’ve suggested the Government ask the ACCC to investigate
the merit of allowing it to set a minimum farmgate milk price in each dairy region (because
each is different). That would still leave scope to allow the price to rise and fall as it
currently does but not fall below the average cost of production in the region. But the
Government refuses to provide the ACCC with the reference needed to test my idea. Mainly
because it’s not their idea, I suspect.