Buckle Up for a ‘Pro-Growth’ Pivot — The Future of the Aussie Economy

On the other side of this virus and leading on the way out we are going to have to have economic policy measures that are going to have to be very pro-growth, that is going to enable businesses to employ people, that is going to enable businesses to invest and businesses to move forward.

Those were the words of ScoMo on Thursday afternoon. Articulating his vision for a ‘pro-growth’ agenda.

It was easily the biggest takeaway from the PM’s speech. Because beyond the virus and all its immediate ramifications, long term the economy is the bigger quandary.

Beating COVID-19 was never the problem. The real challenge is beating it without crippling the country. A matter that almost every nation is now grappling with.

Managing this virus has been a balancing act like no other. And it will likely continue to be so for months to come.

You can’t just brush off a pandemic that easily.

But, we can all agree that we need a new plan moving forward. Whatever ‘normal’ was prior to this outbreak, it won’t be coming back.

That goes for society, for the economy, and for the government.

The question is though, how will the PM and his party facilitate this pro-growth? After all, it’s all well and good to talk the talk, but how will they walk the walk?

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Forget the surplus, it’s all about growth now

In the lead up to our last election there was one thing and one thing only that ScoMo really cared about: a budget surplus.

His entire campaign revolved around getting us back in the black. A goal that certainly had its merits, and clearly resonated with voters.

Things haven’t quite panned out in the PM’s favour, however.

Whatever hopes there were for a surplus are now long gone. The major stimulus measures have seen to that. Not that I’m faulting them for it.

Had the government stubbornly tried to deliver a surplus, this downturn would have almost certainly been worse.

What is curious to me though, is just how much ScoMo has changed his tune lately. With his stimulus agenda out of the question, he seems to have done a complete 180. Growth at all costs is the PM’s new mantra.

Now we could argue ‘til the cows come home over whether this is a good idea or not. I myself can certainly see plenty of merits and drawbacks to a ‘pro-growth’ agenda. As always though, it will come down to the actual policy.

What will be interesting to see, is what sort of direction these policies take. As ScoMo noted in his speech:

…there was a very clear message from the economic advisors this morning, particularly Dr Lowe, and that is, that if we thought that we can just grow the economy under the old settings then we need to think again.

This is a sentiment that I didn’t expect from the government. And truth be told, I’ll remain sceptical about it until I see policies in writing.


Well simply put, we’ve had it too easy. Our Aussie economy has been so good for so long that no government wanted to risk upending it. Both major parties have played it relatively safe on the economic front.

Sure, we’ve seen some divisive policies in recent decades, but nothing truly groundbreaking.

Now though, with our first recession in 29 years almost all but guaranteed, ScoMo has the freedom to get adventurous. It’s time to shake up our economy…

Hey, big spender

Let me make it very clear from the get go, no one really knows how the PM will implement his ‘pro-growth’ strategy just yet. I doubt he even has a totally concrete idea himself.

But, what I think we can safely assume is that it will involve fiscal policy.

Spending is how ScoMo cushioned this downturn, and spending will likely play a big role in the turnaround. The PM even hinted at infrastructure being a key factor in his strategy:

I mean one of the things that the transport and infrastructure ministers are working on right now, I think they’re meeting now, led by the Deputy Prime Minister is how we can get some of these projects going again.

…I want to see more roads built, I want to see more bridges built, I want to see more roads fixed, I want to see those things happening now.

It certainly falls in line with the direction ScoMo already had in mind. After all, he fast-tracked a $3.8 billion infrastructure package back in November.

So, clearly construction of new, big projects will play a role in our recovery. Something to keep in the back of your mind over the coming weeks and months. I’d be looking very closely at any stocks affiliated with building or material supplies.

Companies like Boral Ltd [ASX:BLD] and Brickworks Ltd [ASX:BKW] have been heavily sold off, for example. Two stocks that could make a swift comeback if we see a flurry of new projects tabled.

Even this may just be the tip of the iceberg though. While I believe fiscal policy will play a big role in this pro-growth agenda, we can’t rule out other reforms.

Perhaps we’ll see more tax cuts, or new incentives. Maybe even changes to workplace policies. We could even see some adjustments to deregulation.

Whatever they decide to bring to the table, it is clear that the government wants a new direction. One that you cannot afford to ignore as an investor.

ScoMo has before him a blank slate to tune our economy. Something no PM has had for the better part of three decades.

Let’s just hope he brings some fresh ideas to the table. Because if he can pull it off, investors may be in for an incredible result.

One thing is for sure though, optimism is gradually creeping back into society.


Ryan Clarkson-Ledward,
For Money Weekend

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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