Gutwein is ‘throwing the kitchen sink’ at a COVID-ravaged economy

A once-in-a-generation crisis like a pandemic calls for once-in-a-generation response, writes Mercury political editor David Killick

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A once-in-a-generation crisis like a pandemic calls for once-in-a-generation response.

Premier and Treasurer Peter Gutwein is rolling the dice that a massive pump-priming of the state’s economy will get us back on track to growth. He’s “throwing the kitchen sink at it” as he says.

It is a budget for transport and housing and hospitals and schools, with some law and order thrown in.

Premier Peter Gutwein walks around during the budget lockup. Picture: RICHARD JUPE

It’s a big-spending, classical Keynesian priming stimulus budget. But it us also a budget imagined by bureaucrats, not politicians with a bolder vision.

There are no projects which will transform the state or recast our state’s direction, although we will at least have better roads and bridges.

The aim is restore the state’s upward economic trajectory. It might do the trick.

But it’s a budget in which Peter Gutwein is taking two big risks. He’s betting on the state’s ability to deliver a lot of infrastructure over the next few years.

The state struggled to deliver $500 million last year, his plan is to spend $1 billion plus, every year for the next four years.

Premier Peter Gutwein walks around during the budget lockup. Picture: RICHARD JUPE

Secondly, he’s betting that interest rates will stay at or near historic lows. Borrowing $4 billion at 1.2 per cent costs $48 million a year in interest. At five per cent it is $200 million a year. It starts to sound like a lot of money — and there is no plan and no timetable to pay it back, although the premier used the word “intergenerational” a couple of times in his press conference.

It’s all not a problem if the plan works and the economy grows faster than the repayments, but a second wave of the pandemic or another global financial shock and the things start to look tougher.

At the moment bringing down the state’s projected record debt levels look like a problem for a future Treasurer.

What are the chances of two once-in-a-generation events in quick succession?

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