Now in our first recession in twenty years and with the cause, Covid-19, not going away – in fact becoming a bigger impediment to economic recovery – all levels of governments need to borrow and spend more to stimulate the economy and employment.
NSW Chief Economist Stephen Walters highlights that as the RBA has lowered interest rates to an all-time low and with money never being cheaper, government borrowing, and spending is key to rebuilding the nation’s economy.
NSW local governments are critical to this process by being agile and able to quickly distribute money for local infrastructure and services programs to keep local economies ticking over and people employed.
Unemployment is tipped to hit double figures in the next quarter, so it is vital governments do the heavy lifting by capitalising on our AAA credit rating to borrow at unprecedented low interest rates and boost the economy. This is the only way to create new jobs and provide more hours for those with a job or on Jobkeeper.
While the IMF’s forecasts continue to be pessimistic, there are glimmers of renewal and recovery for 2021, with NSW in a better position than other States to lead the economic recovery. As the economy shifts the Q2 and Q3 figures are expected to show further decline, however the multi-billion dollar infrastructure spending pipeline in NSW continues to be a critical driver along with the funding programmes to local councils who are initiating and fast tracking projects to improve local facilities like roads, parks and public infrastructure – spaces, places and amenities that are increasingly in high demand as people spend more time working from home.
Government stimulus has contributed to NSW having the lowest unemployment rate and lays the groundwork for a faster economic recovery as the Covid crisis abates.
The critical injection of public investment means this is the only area currently growing in NSW. Yet more could be done at a local level to drive local economies across the State where local Councils have greater capacity to raise capital and borrow. This means consideration should be given to local government reforms including removing the cap on rates, expand borrowing criteria and removing red tape.
Local councils are on the ground making them a valuable economic lever and driver of smaller infrastructure projects and local services. Reviewing and realigning the current financial management restrictions around borrowing will not only free up funds but also support local jobs and improve local amenity.
Regions, towns and cities across NSW has been impacted by the Covid crisis and local government has never been more central to assisting local communities and the State weather the economic storm and pave a way for economic recovery.
Sydney Business Chamber held an online forum on 5 August with Stephen Walters, NSW Chief Economist as a part of a series on Resilience and Building Back Better.