Australia needs a two-pronged approach to its Covid-19 economic recovery, former prime minister Kevin Rudd has said, calling for a national infrastructure plan and stimulus strategy to revive consumer confidence.
Speaking at the Yahoo Finance All Markets Summit on Thursday, Rudd said that Australia’s first recession in 30 years requires an ‘economic narrative’ that all Australians can subscribe to, arguing that while the Government has successfully introduced a national stimulus strategy in the form of the JobSeeker, JobKeeper and Homebuilder payments, the Government also needs to focus on consumer confidence.
“One of the problems of going into recession is that it’s not just an objective fact,” Rudd said.
“One of the reasons I was so determined to avoid going into recession during the Global Financial Crisis was its impact on consumer confidence and the nation’s psychology more broadly, and I remember saying at the time that we can’t ballyhoo our way through an economic crisis.”
He said Australia successfully avoided entering recession during the GFC due to his Government’s national infrastructure strategy, which successfully boosted the nation’s psychology.
The $5.2 billion stimulus strategy incorporated payments to consumers as well as investment in medium- to long-term infrastructure projects underpinned by the National Broadband Network.
“In other words, we had a credible story to tell as one wave of economic infrastructure, as it were, cascaded into the next,” Rudd said.
“It worked not just because of what it injected objectively into the economy, but because it had a subjective impact on the nation’s psychology which brings us back to consumption.
“Therefore what I think Mr Morrison needs to do is to swallow his political pride and embrace a national infrastructure strategy because it is the essential piece of the economic narrative which for our country is missing at present.”
However, Rudd conceded that crises always appear easier to navigate in hindsight, and that during the GFC he also had no idea if the world was about to see a catastrophic banking sector collapse, a scenario that many of his own advisers had forecast at the time.
While leading through that fog, Rudd said the key was to have a clear strategy for the future.
The global kingpins in the world beyond coronavirus
Looking to the future, the former Labor prime minister said Australia needs three things: to develop that comprehensive economic narrative; balance Australia’s currently turbulent relationship with China; and build a big Australia.
That includes super-charging migration and investing in climate change mitigation technologies and renewable energies, and recognising the major role technology will play in the formation of future world powers.
“We need to recognise that technology will be king, and if we’re not on the global technology revolution cusp, then we’re going to get radically left behind,” he warned, calling for greater investment in the information technology and biotechnology sectors.
“We need as a nation to be world leaders [in those technologies], and we have the brains and the capacity to do it.”
The University of Queensland is currently working to find a vaccine for Covid-19, with Rudd noting Australia’s success in life sciences research needs to be matched by the information technology sector.
“For the future, data is the new factor of production and he or she who controls data, he or she who controls the algorithms for the management of the data in the future, that he and she will very much be the global kingpins of the global economy in the future.
“That’s the contest in which we need to be fully engaged, and we’ve got the national brain power with which to do it.”