Hope for the economy is in tents

What if Kevin Rudd’s PNG Solution is not about asylum-seekers and people smugglers at all? What if it’s really a subtle plan to boost the economy, increase revenue and return the budget to surplus as promised by 2016?

As Kevin explained in his famous 2009 economic monologue in The Monthly, a sagging economy, especially when impacted by the malevolence of neo-classical New York derivatives traders, requires stimulus. Immediately. Which only a government can provide.

That thinking led to the expenditures on the Pink Batts scheme (more properly known as the “Golden Batts” debacle); the Education Revolution’s tuckshop rejuvenation programme; and Renewable Energy Targets to produce a boom and bust in solar roof-panel work. Much money was spent on these schemes. They had the salutary effect of focusing the Australian consciousness on the burden of borrowings to a degree not seen since my father worried about the level of National Debt in the ’30s and ’40s.

But times move on. Bill Evans, the highly respected Chief Economist of Westpac, now believes that world growth in 2014 will be 2.9%, rather than the IMF’s more optimistic 3.8%. He forecasts Europe will remain in recession and the U.S. will fail to beat 2% growth, compared with the Fed’s hopeful guess of 3.2%. Bill’s thought is that the Reserve Bank will cut its forecast for Australia’s GDP growth next year from 3% to 2.75%. That would spell an even greater threat to Kevin Rudd’s attempts to fund his raft of election promises in education, health, climate change, a new Sydney airport – and the PNG Solution.

Here the characteristic Rudd genius comes into play. The unfunded, open-ended PNG Solution has the scope to rescue the sagging Australian economy! He knows that much of the $800 million annual aid budget to that country already comes back in the form of equipment orders and consultancy fees. How much further boost will accrue from the building, transportation and resettlement projects in which Australian contractors and suppliers are sure to gain a significant share. I think that Kevin has had a silent conversion from Keynesian/Krugman economics. I think he has discovered trickle-down effect.

Look at it this way: the riot and destruction of Nauru’s detention centre will require $60 million and six months work to replace. The extension of facilities on Manus Island to house up to 3000 would-be immigrants will take many more millions and years of work. In the meantime, the new arrivals – sometimes running at a rate of 300 a day – will need shelter which can be provided at such short notice only by tents. Canvas-makers all over Australia will be frantically sewing Army-style bell tents for refugees, larger mess, recreation and medical tents for the compounds. This will have a beneficial effect on their local communities, and ultimately on spending stimulus, revenues, profits and tax.

Kevin Rudd has developed a secret plan to stimulate the economy. Quietly, discreetly, he is orchestrating a tent-led recovery.

Geoffrey Luck was an ABC Journalist from 1950 until 1976

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