Terry McCrann: Premiers take note: Aussies busting to go
Josh Frydenberg’s industrial strength hosing of money to just about everyone in the budget has raised consumer confidence in Australia, and yes, even in Melbourne, writes Terry McCrann.
Terry McCrann
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In the middle of the worst recession in nearly 100 years consumer confidence in Australia has leapt to its highest point — deep into ‘optimism’ — in more than two years.
Even in Melbourne, the location of the most punishing and longest-lasting — 21-hours a day, 7-days a week, home imprisonment — lockdown in the entire world; yes, even in Melbourne, confidence among its 5 million detainees rose strongly, crossing from pessimism into optimism.
True, it lagged behind Sydney: the Westpac-Melbourne Institute index of consumer confidence had it at 102 compared with Sydney’s 108.5, but it was still above that 100 cross-over point into optimism and was at its highest since August last year, from well before the virus.
Now while this might seem bizarrely and even impossibly counterintuitive — are there really that many masochists in Melbourne? — there’s a six-letter word that might provide much of the explanation.
CommSec’s economist Craig James noted that most of the sampling for the survey took place after Josh Frydenberg’s industrial strength hosing of money to just about everyone, in what was formerly and indeed formally known as a ‘budget’.
Indeed, as Westpac reported, a clear majority of those surveyed saw the budget as improving their finances.
Gee that’s a surprise; wouldn’t it just; if you were getting a cheque in the virtual reality mail from a Fiscal Father Christmas?
Significantly though, the positive response to Frydenberg’s big spending budget contrasted sharply with the thumbs down normally given to budgets, irrespective of whether they are ‘tough’ or ‘soft’.
There was so much money being sprayed around that the normal scepticism about the “I’m from the government and I’m, here to help you” message was just completely obliterated.
Importantly though, the optimism surge went beyond just the impact of “getting free money”; it carried over into expectations of what might come on a whole series of financial levels over the year ahead.
This is critically important — and positive — because the whole economic strategy is built on putting money in the hands of consumers in the hope they will spend it. Confident consumers spend, concerned consumers tend to save.
Optimism always — positively — drives the economy, just as negativity accentuates downturns.
This is even more important in the weird circumstances we find ourselves in when we’ve had a recession not because the economy collapsed but because the government ordered it. The Government ordered businesses to close; the government ordered people to lose their jobs — like never ever before in our entire history.
Consumers wanting to spend therefore is only ‘one hand clapping’; governments have to also order businesses to open up.
That is to say, allow them to function.
Otherwise, some combination of two things will happen.
That spending will continue to flow into areas that are allowed, like consumer durables and much of it flowing overseas. Not tourism, not hospitality, and so on.
And consumers will simply not spend, boosting savings; and confidence will peter out.
In short, 26 million Australians are ready and willing to drive the economy back into action. Frydenberg’s huge deficits might be storing up huge troubles for the future, but they have done exactly what they needed to do right now.
But it will all be for nought, unless the states open up.
The linchpin is obviously Victoria as it’s one quarter of the population and one-quarter of the national economy.
But the other states have to listen to Ronald Reagan and tear down their border walls.
Yes, we will then have to live with the virus and outsmart it.
Waiting for the ‘Godot vaccine’, that might also never come, is not the answer.
CROWN BOARDROOM WILL EMPTY
The calls for the sacking of the three directors of the Crown casino group up for re-election at next week’s AGM are impossible to argue against — even though those calls indirectly miss a rather more basic point.
This is, simply, that every one of Crown’s current directors won’t be there by this time next year. They are all going to resign or be sacked.
Because, by this time next year, James Packer will no longer be a 36 per cent controlling Crown shareholder and thus able to save — or dump — directors by his vote alone.
It will of course be interesting to see whether he deploys that vote to save the trio next week. It would be even more ‘interesting’ if he deployed the 36 per cent and failed.
As I explained last week, Packer and Crown have been locked into a journey with only one destination for some years, long pre-dating the issues around Chinese junket operators and the NSW inquiry.
Once he abandoned his ambition to build Crown into the world’s biggest and best gaming empire — ironically just as he was embarked on the $2bn-plus Barangaroo play — divorce was inevitable.
The inquiry accelerates those dynamics, but the (China) virus — and the lockdowns, social distancing and tourism bans — seriously complicates his exit.
He needs to find a buyer, with deep pockets, and find he/she/it quick.
But he might have to fall back on selling most of his stake into the market, at these virus-hit share prices, cutting back to a 15 per cent holding.
Originally published as Terry McCrann: Premiers take note: Aussies busting to go