The era of big fiscal spending has only just begun
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Splash
  • Features
  • Videos
  • Long Read
  • Games
  • Epaper
  • More
    • COVID-19
    • Bangladesh
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Subscribe
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard
TUESDAY, MAY 17, 2022
TUESDAY, MAY 17, 2022
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Splash
  • Features
  • Videos
  • Long Read
  • Games
  • Epaper
  • More
    • COVID-19
    • Bangladesh
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Subscribe
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The era of big fiscal spending has only just begun

Analysis

Daniel Moss, Bloomberg
13 May, 2021, 01:15 pm
Last modified: 13 May, 2021, 01:17 pm

Related News

  • Prioritise dev projects, spend wisely: PM Hasina 
  • Monthly Tk1,000 allowance sought for unemployed, poor
  • Bangladesh’s remittance growth to remain flat in 2022: World Bank
  • Shares drop as stubborn US inflation stokes worries on rates, economy
  • Don’t expect Chinese stimulus to save the global economy

The era of big fiscal spending has only just begun

Australia's approach to fight Covid is a warning to the world

Daniel Moss, Bloomberg
13 May, 2021, 01:15 pm
Last modified: 13 May, 2021, 01:17 pm
The Covid-19 crisis has led to reforms in the business assessment process. Photo: Collected
The Covid-19 crisis has led to reforms in the business assessment process. Photo: Collected

Australia is fortifying the economy with huge government spending that will last well beyond this year's projected global rebound. With Covid-19 infections resurgent in Asia, prompting fresh curbs on activity, it's time to shift our thinking about the longevity of big-ticket stimulus. This isn't going to be a one-shot deal. 

Prime Minister Scott Morrison's team forecast this week a shortfall worth 5% of gross domestic product in the year through June 2022, greater than anticipated. Finances will be in the red at least until 2025, officials predict. (This, in a country once fixated on a balanced budget.) The message contrasts starkly with pledges by Morrison and Treasurer Josh Frydenberg in late 2019 that they would deliver surpluses. Treasury, meanwhile, expects GDP will rise 5.25% this calendar year, before cooling to 2.75% in 2022. The government is also trying to drive unemployment down to levels rarely seen in the past half-century. 

Australia certainly isn't the only place to unleash fiscal stimulus to combat the pandemic; the US, Japan and Europe have all primed the pump. What's distinctive is that previous antipathy to deficits has gone out the window. When you consider that the country's borders are likely to stay effectively shut through late 2022 and the vaccine rollout is severely delayed, the approach makes more sense. "The pandemic has heralded an era of permanently larger public spending," Marcel Thieliant, a senior economist at Capital Economics, wrote after Frydenberg's annual budget speech Tuesday. It doesn't hurt that the central bank is sending strong signals that it will extend quantitative easing and, possibly, the practice of capping yields on some government bonds. Both measures would hold down the cost of borrowing to finance deficits.

The budget's political appeal is potent: An election is due next year and Morrison's conservative bloc commands a narrow majority in parliament. It may only be this year's economic expansion that matters to voters. The opposition Australian Labor Party, which came close to defeating Morrison in 2019, has struggled for a message since the pandemic began. Labor can hardly accuse the government of jeopardizing the recovery through austerity now.

The message could ultimately have more resonance beyond the island continent. Before the pandemic, it had been fashionable to think Australia had some secret sauce, enabling it to cruise for three decades without a recession. It survived the Asian financial crisis of the late 1990s, the dotcom bust of the early 2000s and the collapse of Lehman Brothers Holdings Inc. I was in the audience at a luncheon address to the Economic Club of New York a few years ago when Federal Reserve Chairman Jerome Powell said, only half-jokingly, that Australia seemed to have escaped the ups and downs of business cycles.

If people are still paying attention to what Australia does, it's a sobering message. Normal economic policy just got abnormal for the long haul. The budget challenges any idea that business will come roaring back. Australia allocated A$2.1 billion ($1.6 billion) to support aviation, tourism, the arts and international education providers. They will need it. Few places in Asia look ready to let anyone go much of anywhere.


Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement

Top News / World+Biz / Global Economy

Fiscal spending / Economy growth / Economy / Economic Growth / Global economic growth / Global economy / Spending

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • A packet of US five-dollar bills is inspected at the Bureau of Engraving and Printing in Washington March 26, 2015. REUTERS/Gary Cameron
    Dollar price crosses Tk100 in open market 
  • Finland's Prime Minister Sanna Marin speaks during the plenary session at the Finnish parliament in Helsinki, Finland on 16 May 2022. Photo: Reuters
    Finland's parliament votes yes to NATO
  • Govt fixes tolls for Padma Bridge
    Govt fixes tolls for Padma Bridge

MOST VIEWED

  • People shop for cooking oil made from oil palms at a supermarket in Jakarta, Indonesia, March 27, 2022. REUTERS/Willy Kurniawan/Files
    Why Indonesia's palm oil export ban has not cooled cooking oil prices
  • Despite Bangladesh having about 24,000 km of waterways, only a few hundred kilometres are covered by commercial launch services. Photo: Saad Abdullah
    Utilising waterways: When common home-goers show the way
  • Illustration: TBS
    How Putin revived Nato
  • Food inflation pain puts emerging markets between rock and hard place
    Food inflation pain puts emerging markets between rock and hard place
  • NATO prepares to add Finland and Sweden to northern defenses
    NATO prepares to add Finland and Sweden to northern defenses
  • EU braces for storm as Ukraine fallout cascades in economy
    EU braces for storm as Ukraine fallout cascades in economy

Related News

  • Prioritise dev projects, spend wisely: PM Hasina 
  • Monthly Tk1,000 allowance sought for unemployed, poor
  • Bangladesh’s remittance growth to remain flat in 2022: World Bank
  • Shares drop as stubborn US inflation stokes worries on rates, economy
  • Don’t expect Chinese stimulus to save the global economy

Features

Despite Bangladesh having about 24,000 km of waterways, only a few hundred kilometres are covered by commercial launch services. Photo: Saad Abdullah

Utilising waterways: When common home-goers show the way

6h | Panorama
Illustration: TBS

How Putin revived Nato

8h | Panorama
The reception is a volumetric box-shaped room that has two glass walls on both the front and back ends and the other two walls are adorned with interior plants, wood and aluminium screens. Photo: Noor-A-Alam

The United House: Living and working inside nature

8h | Habitat
Pcycle team members at a waste management orientation event. Photo: Courtesy

Pcycle: Turning waste from bins into beautiful crafts

9h | Panorama

More Videos from TBS

Can your coworker be your closest friend?

Can your coworker be your closest friend?

9h | Videos
The mystery behind Pyramid

The mystery behind Pyramid

10h | Videos
Finland, Sweden decide to join NATO

Finland, Sweden decide to join NATO

21h | Videos
Where you can swim for Tk5

Where you can swim for Tk5

23h | Videos

Most Read

1
Representative Photo: Pixabay.
Bangladesh

Microplastics found in 5 local sugar brands

2
Mushfiq Mobarak. Photo: Noor-A-Alam
Panorama

Meet the Yale professor who anchors his research in Bangladesh and scales up interventions globally

3
Impact of falling taka against US dollar
Banking

Taka losing more value as global currency market volatility persists

4
Govt tightens belt to relieve reserve
Economy

Govt tightens belt to relieve reserve

5
Union Capital asked to return Tk100cr FDR to BATBC 
Banking

Union Capital asked to return Tk100cr FDR to BATBC 

6
How Bangladesh can achieve edible oil self-sufficiency with local alternatives
Bazaar

How Bangladesh can achieve edible oil self-sufficiency with local alternatives

The Business Standard
Top
  • Home
  • Entertainment
  • Sports
  • About Us
  • Bangladesh
  • International
  • Privacy Policy
  • Comment Policy
  • Contact Us
  • Economy
  • Sitemap
  • RSS

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net

Copyright © 2022 THE BUSINESS STANDARD All rights reserved. Technical Partner: RSI Lab