I’m not sure whether there is much clearance that goes on in these self-serving submissions from investment banks (hint: senior executives should take some note of the rubbish that is put out under your firm’s name) but at least Malcolm Turnbull has the smarts to ignore them.
Check out this shocker from Morgan Stanley and one know-it-all (more like, know nothing) Daniel Blake.
Evidently, all we need to do is:
- Spend an extra $8o billion on taxpayer funded infrastructure;
- Don’t worry about the cost because Australia’s AAA credit rating could be maintained;
- Do something about negative gearing;
- Do something about superannuation tax concessions.
In true Keynesian nonsensical style, the gap in government infrastructure spending has subtracted from economic growth, according to Dan.
Here’s a tip: when the costs of a project exceed the benefits, we are worse off. And most of the projects on offer have negative cost-benefit ratios, in part because of the unbelievably inflated costs because no government has been game to tackle the rackets and rorts in the large construction game, courtesy of the CFMEU and the cartel of companies that dominate this space.
In fact, we are ahead of the pack because of the government’s slowness to spend on infrastructure.
And don’t you just love the idea of private sector crowding-in – that must be investment banking speak for large fees. But that’s OK because Dan (is he related to Dan the Man, perhaps?) thinks the government must have clarity and vision on infrastructure, something he clearly thinks he has plenty of. Oh please, please.
Here’s the ‘free’ advice:
Morgan Stanley has urged Malcolm Turnbull to reboot the economy with fiscal spending and a renewed debate on negative gearing and superannuation policy, saying Australia has scope to invest $80 billion in infrastructure before risking its AAA credit rating.
Global ratings agency Moody’s this morning sent out a clear warning to the incoming Prime Minister, saying that further uncertainty could dampen business confidence and add to the challenges facing Australia — which could risk the country’s AAA rating.
But investment bank Morgan Stanley highlighted infrastructure spending, along with productivity and tax reform, as key areas of focus for Mr Turnbull, arguing Australia has the room to accommodate a big economic stimulus.
A research note by analysts headed by Daniel Blake says that rather than supporting the transition away from the mining investment boom, declining public investment has stripped out 0.4 percentage points from Australia’s GDP from the election of Mr Abbott through to the first quarter of 2015.
The end of the resources boom is expected to wipe 1.6 percentage points from economic growth through next year, Morgan Stanley said.
“The Liberal Party promised an infrastructure stimulus, but delivery has fallen well short of expectations,” Mr Blake said. “Clarity and vision on the infrastructure agenda is critical.”
With net debt at just 14 per cent of GDP, Mr Blake said the country had the scope for stimulus spending of up to $80 billion, or 5 per cent of GDP, whilst still retaining the AAA credit rating.
“We believe this would catalyse consumer and business confidence and likely see some crowding-in of private investment.”
Australia’s AAA rating keeps borrowing costs low at a time when the nation’s debt load is increasing.
Meanwhile, Mr Blake urged Mr Turnbull to go back to Productivity Commission chairman Gary Bank’s to-do list of policies outlined in 2012 and Ken Henry’s tax review of 2007 in order to unlock productivity gains and drive efficiency.
He said that the federal government’s current tax reform white paper shouldn’t be abandoned, but hoped that previously ruled-out policy changes to negative gearing and superannuation were “allowed back into a genuine debate”.