Opinion

Paul Bongiorno
A long road to recovery

The federal parliament came out of hibernation midweek to commit a mind-boggling $130 billion to saving the jobs of millions of workers. But there is a six-month limit on the emergency wage subsidies, with Scott Morrison desperate for a way out of the economy-destroying containment of the coronavirus pandemic.

The options are limited and dangerous and the prime minister needs no reminding of the diabolical choices confronting him. Although he has confounded his critics both on the left and the right by embracing what can only be described as mammoth Keynesian stimulus, Morrison has no appetite to keep the tab open indefinitely. Some economists, such as Chris Richardson or Stephen Koukoulas, say he may have no option. But others, including former Coalition adviser John Adams, say enormous damage has been done, locking the nation into huge debt for generations.

Adams is a voice of market economics often identified with the Institute of Public Affairs, which hitherto had significant input into the ideological framework of the Liberal government. Now the chief economist for bullion dealer As Good As Gold Australia, Adams wrote in a paper published this week that “within the space of 4 weeks, the Australian economy has been utterly destroyed by the largest set of economic fiscal and monetary stimulus packages in Australian history which will have long-lasting and detrimental consequences”.

While Adams believes much of this could have been avoided had the Morrison government acted much earlier in January, closing the nation’s borders and introducing tighter quarantine and isolation measures, that doesn’t alter the fact of where we are now as a country. And there is a broad national consensus that the government’s unparalleled response is urgent and necessary. The question is how long it can or will last.

On Tuesday the prime minister, alongside the chief medical officer, Brendan Murphy, released the modelling on which state and federal governments have been relying to prepare our response to coronavirus. Of necessity the modelling was based on international data and spelled out a number of scenarios, with projections on deaths and cases. The option of taking no action was horribly unacceptable, as outlined by Professor Murphy.

When the states applied some of these assumptions to themselves, particularly to how their regional centres and hospitals would cope, the prospects were dire. They simply didn’t have the number of intensive care beds and ventilators to meet a serious infection outbreak. This impelled premiers Gladys Berejiklian in New South Wales and Daniel Andrews in Victoria to lead the charge calling for draconian measures such as closure of businesses, lockdown and social distancing.

Murphy and Morrison sang from the same song sheet: the health measures were working but “we can’t be complacent”. Worrying both men was the thought that Australians might slip into their usual convivial holiday mode this Easter. Morrison urged his fellow citizens to keep the “tension in the cord”. Murphy said: “If we in any way lose that rigour that the Australian community has embraced, particularly over Easter, it could all come undone.”

Still, Morrison said the support measures “cannot go on forever” – and threw out large hints on his exit-strategy thinking. Like the states and territories, he will be looking for guidance from new modelling based on Australian data to determine the extent of the virus in the general population or more specific communities. He wants to get back to “some sense of normality” and is suggesting some states may take their foot off the brakes earlier than others. It’s a toe-in-the-water approach. But it could also see the rate of infections skyrocket in, for example, Western Australia or South Australia, which so far have had considerably lower infection rates than the more-populated states.

Berejiklian sees no way out of social distancing restrictions this side of a vaccine being developed. But one medical expert told The Saturday Paper there is no guarantee one will be found, and points to the fact that 11 years down the track there is still no vaccine for the coronavirus that caused SARS.

Infectious diseases expert Professor Peter Collignon believes we are seeing an overreaction. He told The Canberra Times that restrictions on people sitting on park benches or walking on the beach don’t make biological sense. He said he believed people were safer outside than inside: “I don’t see how anyone’s going to get this virus if they keep two metres away from someone and I don’t see how anyone’s going to get it if they sit on a park bench.” The Australian National University academic is sceptical of models that predicted 51,000 deaths across the country. He says people will die and we have to plan to minimise the toll, but that other alarming modelling done for SARS, swine flu and MERS massively overstated the threat.

Newspoll found almost universal support for Morrison’s wage subsidy package, with approval of the way he’s doing his job reaching a level not seen for a prime minister since Kevin Rudd in the global financial crisis. But the prime minister should have no reason to think this big uptick is anything other than ephemeral. After all, Rudd didn’t last another two years in the job. This current crisis is a rapidly evolving monster that is directly affecting millions of Australians in a way that the GFC didn’t. And while voters are prepared to cut their leaders some slack, there is a limit to their tolerance for pain, or for huge cock-ups such as the release of passengers with Covid-19 from the Ruby Princess cruise ship.

In holding the official cash rate at the record low of 0.25 per cent, the Reserve Bank sounded an ominous warning on Tuesday. Governor Philip Lowe said: “There is considerable uncertainty about the near-term outlook for the Australian economy. Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place.” Lowe pulled no punches on what lies ahead. He said: “A very large economic contraction is … expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years.” The risk for Morrison politically is whether people will be more grateful to him for saving their lives than angry at him for destroying their livelihoods.

It is into this space that the Labor Party and the trade union movement have stepped. There is support for extreme measures in such menacing times; but as Opposition Leader Anthony Albanese told parliament, he would not let “the perfect be the enemy of the good”. Labor would move “sensible amendments to improve the legislation” but would not vote against the package if the government refused to accept them.

Labor, like the unions, identified a million casual workers who miss out on the JobKeeper Payment. A glaring example is a casual who has been working for, say, eight months but not the required 12 months to get the $1500-a-fortnight payment. On the other hand, a casual who may have been employed for a year or more for one shift a week would effectively get a huge pay rise from the subsidy. Labor says in many cases, due to Australia’s insecure work arrangements, casuals are the family’s breadwinners.

The secretary of the Australian Council of Trade Unions, Sally McManus, had some success modifying the government’s proposed legislation. Thanks to her newly acquired working relationship and regular “line-by-line” negotiations with Industrial Relations Minister Christian Porter, the legislated exemptions to pay and conditions as set out in the Fair Work Act will be strictly time-limited. After her Tuesday session with Porter, McManus was grateful he had agreed not to cave in to some business groups and big miners, such as Gina Rinehart, who were pushing for a “widespread removal of workers’ rights akin to WorkChoices”. McManus said the legislation now only “applies to employers eligible for the JobKeeper Payment”.

Albanese had success in getting the senate to agree to set up a select committee into the government’s Covid-19 response and recovery. It will be chaired by shadow Finance minister Katy Gallagher. He says it is “designed to be a broad- and long-ranging vehicle” that will scrutinise the government. It will have two other Labor senators, two government senators, a Greens party member and independent Jacqui Lambie. It will submit its final report “no later than June 30, 2022”, but Albanese says it will “no doubt produce interim reports along the way”.

Albanese makes the point that the $320 billion expenditure so far has been allocated without the usual parliamentary scrutiny. In normal times not only would that occur but governments would also amend the legislation as it is rolled out and unintended consequences are discovered. To do this, of course, they need parliament to sit. That is just another reason for more scheduled sittings ahead of the delayed August resumption.

The select committee could well play an important role in Morrison’s plans for a staggered revival of the economy. No one is talking “snap back” anymore.

This article was first published in the print edition of The Saturday Paper on Apr 11, 2020 as "A long road to recovery".

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Paul Bongiorno is a columnist for The Saturday Paper and a 30-year veteran of the Canberra Press Gallery.