Financial journalist and commentator, Michael Pascoe, says the proposed withdrawal of Government stimulus over the next three years is going to be “genuinely scary.”
Mr Pascoe told On the Job with Francis Leach and Sally Rugg, that while the JobKeeper and JobSeeker payments “stopped us having a recession that would go on and on,” the economic forecast looks “frightening.”
“Over the next three financial years, the government input to the economy will go from nearly 15% to just 5%, so the government sector is going to withdraw 10% of the GDP,” Mr Pascoe explained.
“What nobody seems to get is that if the Government is taking 10% of the GDP out over those three years, let’s say as an average of 3.3 per cent a year, the private sector would have to be booming, would have to be growing by 3.3 per cent just for the economy to standstill, to break even.
“Now the private sector has not grown at that rate for a very, very, long time. So, what that means is with the government pulling back so much money we’re not going to have growth, we’re not going to have unemployment fall.”
With the negative economic impacts of such a move clear, and an federal election looming, Mr Pascoe is hopeful the Government will change tacts, but worries ideologies may trump economic reason.
“The ideological forces are obviously very strong in the Government,” he said.
“Josh Frydenberg quotes Margaret Thatcher and Ronald Reagan as his heroes – a bit of austerity, a bit of discipline as he was telling everyone earlier this month.
“There is a belief that there is some tough medicine to be had and if we all take our tough medicine, we will be better for it.”
“It is a delicate balance between allowing the economy to reset its parameters and assisting it to get there.
“I think they look like pushing the envelope to see how much pain people can handle.”