You have no idea how hard it is for big business

I have disturbing news. The big business people of Australia are feeling quite upset about the recent federal election, or so I am informed by The Australian Financial Review.

Quite frankly – and this is a shocking thing to say – the mood of the campaign was "anti-business". As young people say, big business was disrespected.

Those rotters in the Labor Party were shameless in their behaviour, seeking to win votes by portraying their Liberal opponents as apologists for big business.

Why did the Libs have cutting the rate of company tax as pretty much the only item in their plan for Jobs and Growth? Purely, so the voters were asked to believe, to please the Libs' cronies at "the big end of town".

Why were the Libs so vigorous in their opposition to Labor's idea of a royal commission? Because they were doing the bidding of their big four banking mates, Labor claimed.

Really, it was disgraceful. But perhaps even more depressing was the performance of the Libs.

Malcolm Turnbull, one of our own – and didn't those Labor people keep hinting at it – the man in whom we had such faith after Tony Abbott's failure as their longed-for messiah, has proved such a disappointment.

He may have championed a proposal to cut the company tax rate by a niggardly 5 per cent, but he wanted to string it out over a decade – a decade! With, mind you, big business not getting a penny until close to the end.

Talk about trickling down the trickle down. Surely if lower company tax is the big reform it needs to deliver jobs and growth, the sooner you do it the better. Be decisive. Take risks for the good of the nation.

But Turnbull lacked the leadership to increase the goods and services tax or to cut the top personal tax rate. Such a disappointment.

And he performed so poorly against Labor and the mushrooming populists – when could you ever accuse big business of trying to be popular? – he looks unlikely to be able to deliver on the company tax cut. Such a disappointment.

Then, to top it off, no sooner is the election over than Liberal loudmouths like Michael Kroger start blaming the Business Council of Australia for their poor performance.

The Libs went out to bat for big business, but we failed to back them with donations or ads. There's talk Turnbull had to pay for a lot of the campaign himself.

Well, really. It's not the business council's job to pass round the hat. The Liberals' job is to fight for the interests of big business purely in the national interest.

What part of "all care but no responsibility" do the Libs not understand?

And then there's the way the pollies suck-up to small business. All that bull about small business being "the engine room of the economy".

Yeah, sure. Say it enough times and the punters forget most of them work for big business, not small.

It couldn't be because small business has more votes than we do, could it? We could try telling our employees who to vote for, but I'm not sure we'd get far.

So politicians on both sides are a huge letdown. Why won't they show a bit of leadership? Why won't they put their jobs on the line in the national interest? Don't they think we would?

As for the voters themselves, big business is more in sorrow than in anger. How can you blame people for acting like sheep when they're so badly led?

There are so many crazy ideas abroad that the pollies have failed to scotch. Do you know there are people who think business should be paying more tax, not less?

There are people who can't see why business needs a tax cut when it's already doing such a good job of avoiding paying much. This is so unfair. Some of us do pay quite a lot of what we're supposed to.

The pollies' failure of leadership makes it hard to blame ordinary people for not understanding there's a budget repair job to do and we have to get on with it. There are "harsh realities" that must be faced.

Strong policy action must be taken and the public must be persuaded to take its medicine.

If the budget is to be balanced we all have to give up something. Businesses have already offered to give up some of the tax they pay, and now it's your turn to volunteer.

Government spending is growing unsustainably. Surely you could give up some of those free visits to the doctor. Surely you could pay more for your pharmaceuticals. Surely your pension doesn't need to be so generously indexed.

Someone needs to tell you this: all the talk of a royal commission is reducing confidence in the banking system. Stop it, or on your own head be it.

And lack of support for big business on both sides is sapping confidence in the economy.

I mean, really. With such hopeless politicians and foolish, self-seeking voters, how can big business to get on with its job?

The incompetence and unworthiness around us is so disheartening. It's all we can do to get out of bed each day and collect our pay.

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Why Treasury is wrong on deficits and debt

The last speech of the retiring Reserve Bank governor, Glenn the Baptist, was a touch biblical. Whatever your point of view, you could find a verse here or there that seemed to back you up.

If, for instance, you accept the conventional view that the budget deficit is way too high, that the government should be more daring in seeking to cut the deficit, and its opponents should be less opportunist and more responsible in agreeing to spending cuts, Glenn Stevens offered a verse for you to quote.

He observed that "when specific ideas are proposed that will actually make a difference [to the budget deficit] the conversation quickly shifts to rather narrow notions of 'fairness', people look to their own positions, the interest groups all come out and the specific proposals often run into the sand.

"If we think this rather other-worldly discussion will not have to give way to a more hard-nosed conversation, we are kidding ourselves.

"That will occur should there be a moment of crisis, but it would be better if it occurred before then," he said.

A treasury secretary couldn't have said it better. But look at the totality of Stevens' remarks and he's actually challenging the conventional wisdom.

"As would be clear from my utterances over the past couple of years, I have serious reservations about the extent of reliance on monetary policy around the world."

The problem is that what central banks do could never be enough to fully restore demand after a period of recession associated with a very substantial debt build-up.

"In the end, the most powerful domestic expansionary impetus that comes from low interest rates surely comes when someone has both the balance sheet capacity and the willingness to take on more debt and spend," he said.

"The problem now is that there is a limit to how much we can expect to achieve by relying on already indebted entities taking on more debt.

"In some countries there may be no safe way of [increasing] borrowing and spending because debt, both public and private, is just too high.

"In Australia, gross public debt, for all levels of government, adds up to about 40 per cent of gross domestic product. We are rightly concerned about the future trajectory of this ratio.

"But gross household debt is three time larger – about 125 per cent of GDP. That is not unmanageable – but nor is it a low number."

Get it? He's saying that monetary policy is out of puff. Lowering interest rates is no longer very effective in encouraging households to take on even more debt. (He noted later that he'd never believed cutting rates had much effect on businesses' decisions to increase investment spending.)

So which sector has the most capacity to increase its deficit spending "in the event that we were to need a big demand stimulus"?

The public sector. Sorry, but that's not what a treasury secretary would say.

Stevens was quick to add: "I am not advocating an increase in deficit financing of day-to-day government spending. The case for governments being prepared to borrow for the right investment assets – long-lived assets that yield an economic return – does not extend to borrowing to pay pensions, welfare and routine government expenses, other than under the most exceptional circumstances.

"It remains the case that, over time, the gap in the recurrent [my emphasis] budget has to be closed, because rising public debt that is not held against assets [my emphasis] will start to be a material problem."

Now that's something no secretary to the treasury would say. Unlike all its state counterparts, federal Treasury has long opposed the drawing of a distinction between government recurrent spending and government investment in "long-lived assets that yield an economic return" and add to national productivity.

Treasury wants little old ladies to feel as guilty about borrowing to improve the Pacific Highway as they do about borrowing for "routine government expenses".

So, let's worry about getting the recurrent budget back to surplus (as most state governments did long ago), but not about borrowing for infrastructure. Agreed?

Except that when you read the budget papers carefully enough to find the info Treasury has hidden on page 6-17, you discover that the expected underlying cash deficit for this financial year of $37 billion includes capital spending of $36 billion.

Get it? We're already back to a balanced recurrent budget. So why so much hand-wringing? And why aren't we getting on with planning the infrastructure pipeline we could expedite "in the event that we were to need a big demand stimulus"?

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