Chokehold on the economy
If anybody needed reminding, the Australian economy is in deep trouble, much deeper than either the treasurer or the prime minister realised at the beginning of last month. Then, the talk was of a “snapback” from the damage of the coronavirus pandemic; now it is of a “sobering” economic impact in “very difficult” and “uncertain times”. Making these times even more uncertain is our biggest trading partner, China, none too subtly firing the first shots in a trade war.
And as if to dramatise the issue, Josh Frydenberg’s economic statement in parliament on Tuesday was interrupted by a hacking, dry coughing fit that lasted an agonising minute. It robbed him of his voice as he was spelling out the extent of the ruin. The cough, of course, is a symptom of the “faceless and flagless enemy” he was talking about – fortunately for everyone, especially his ministerial colleagues, an overnight Covid-19 test came back negative.
The speech was no replacement for the budget that in normal times would have been handed down that day and, according to the government’s election-winning hype, would have been the first one “back in the black” in a decade. Frydenberg baulked at predicting how wide of the mark that was. Deloitte Access Economics suggested the deficit would hit $143 billion, an Australian record.
The treasurer’s focus on Tuesday was to emphasise why it is so important the nation gets back to business in a way that will not risk a second wave of infection. The promise of restoring almost one million jobs by July depends, he warned, on everyone continuing to follow the health advice. “Failing to do so,” he said, “could see restrictions reimposed at a loss of more than $4 billion per week to the economy.” In a sense, that is the size of the gamble the national cabinet – the federation’s leaders – are taking with their tentative three-stage reopening of the economy.
After almost eight weeks of lockdown restrictions, and with big gaps appearing in the multibillion-dollar rescue packages, the national consensus is fraying. Newgate Research issued new tracking that found Australians are just as concerned about the economy as they are about the threat of the virus. At the same time, “there are initial signs that some in the community may be reaching their limits with life under restrictions”. Newgate’s findings that Australians are feeling more confident about the future was supported by other surveys, seized on by the prime minister midweek.
Morrison told parliament that the Westpac Consumer Sentiment Index showed a 16.4 per cent jump, “the highest in 50 years”. He said it was rebounding “from the terrible blow to confidence that was inflicted as a result of the Covid crisis”. The ANZ’s confidence survey showed a 70 per cent rebound from the big falls “several weeks ago”. Morrison is now talking about the economy “bouncing back”.
Australians may be confident, but Deloitte projects unemployment will not return to pre-virus levels until 2024. The treasurer himself sees unemployment rising well into next year. Another survey, by accounting giant KPMG, says it will take many parts of the economy years to recover. It will not be until the start of 2022 that the arts and recreation services, retail trade, air transport and the accommodation and cafe sector will be back to what was considered normal.
Labor’s parliamentary tactician, Tony Burke, argued now is the time for scrutiny, attempting to have the government bring down a new parliamentary sitting calendar. He said “it’s ridiculous to have a situation where the rugby league is going to be going back ... and the prime minister’s saying that parliament can’t meet in the normal way”. On Thursday, it was announced that parliament will resume on June 10 for a full sitting fortnight.
As for the JobKeeper wage subsidy, scrutiny of its design extends beyond the Labor Party. Liberal backbencher Craig Kelly, whose Sydney seat of Hughes takes in many of the people who work at the airport, says “it’s unfair” that employees of Dnata, the foreign-owned airline catering company, miss out on the payment. “The company might be foreign,” he says, “but the workers are Australians.”
Kelly has raised this flaw with the treasurer, but so far to no avail. Dnata employed 4500 people in jobs that have disappeared since air travel was virtually shut down. Frydenberg was unapologetic in parliament, touting the biggest jobs subsidy program in history as saving five-and-a-half million jobs. He implied the Dnata workers would benefit from his doubled unemployment payment. It sounded like “let them eat cake”.
In his reply to Frydenberg’s picture of economic gloom, shadow treasurer Jim Chalmers declared: “All Australians get today is a cut and paste of what the government has already said.” He cheekily went on: “If only the treasurer had coughed up some detail or a plan.”
The treasurer seems to be relying on the animal spirits of the free market to reassert themselves – he says, “unleashing the power of dynamic, innovative and open markets”.
But even on his own side of politics some are unconvinced. Former Liberal leader John Hewson tweeted that he was “none the wiser” after the statement, saying there was “no pathway forward. We have to trust that they know what they are doing?”
By contrast Anthony Albanese announced “a vision” for a national housing stimulus plan, high-speed rail using Australian-built trains to power decentralisation, and a clean-energy revolution producing the steel needed. Constraining Morrison from the “vision thing” is the prospect – indeed, in his view, the nightmare – of intergenerational debt. The prime minister says he wants to put as “little burden on future generations as is absolutely necessary”. It is a pity he doesn’t show the same concerns about the sort of planet climate change inaction is bequeathing to those future generations.
A taste of that future was experienced during the summer’s catastrophic bushfires. The byelection for the New South Wales south coast seat of Eden-Monaro, one of the worst-hit regions, is propelling that issue. An immediate worry for the government, still to find a Liberal candidate, is the simmering anger of many residents, four months on, camping among the rubble of their towns and houses. Cobargo village leader Andrew Haydon told ABC TV they hadn’t received “a red cent” of the money promised.
Only a third of the $2 billion allocated for rebuilding and refinancing has so far been spent. Emergency Management Minister David Littleproud points the finger at the states – Victorian and South Australian victims are similarly feeling neglected. Morrison says it takes time to organise reconstruction but is confident most of the money will be out the door by the end of June. In the meantime, he announced on Monday that $650 million will go to local communities and councils for recovery. Littleproud assured RN Breakfast that the relief would not be colour coded – a reference to sports rorts going to politically targeted seats – but would be assessed transparently and independently. Of course, he doesn’t need a colour code to know millions of dollars, albeit belatedly, will be heading to the crucial marginal seat of Eden-Monaro.
Morrison’s challenges are multiple and severe, not helped by his handling of our relationship with China. Not only is the Asian giant our biggest customer but Australia is one of the few nations that actually has a trade surplus with her. So fraught is the relationship that, unlike his predecessors, Morrison cannot get on the phone to President Xi Jinping to directly sort out the latest trade row threatening billions of dollars of export revenue. Even at the Trade minister level, Simon Birmingham’s request for a phone call to his counterpart, Zhong Shan, is being ignored. Birmingham is desperate to defuse China’s threats to slap an 80 per cent tariff on barley exports worth $600 million, and to resolve the blocking of about $1 billion worth of beef exports over a “labelling issue”. Wine and dairy exporters are worried they could be next.
Midweek, Morrison and Birmingham admitted they are concerned, but they are publicly framing the problem in technical trade terms. Australia China Business Council chief executive Helen Sawczak won’t have a bar of it. She said during a web discussion with Huawei’s Jeremy Mitchell that anti-China hawks, particularly in the national security area, are giving unbalanced advice. She said, “If the spooks were managing our economic interests, this country would go down the gurgler.”
Two former Foreign ministers, Julie Bishop and Gareth Evans, were highly critical of our ham-fisted diplomacy. Evans accused the government of a Covid-19 inquiry “thought bubble” that was an “exercise in diplomatic self-isolation”. Bishop said Morrison’s talk of “weapons inspector”-type powers for health investigators was inappropriate, and said calm and considered diplomacy was required.
Bishop, who was Foreign minister for six years, was dismissed as an “airhead” by Liberal senator Concetta Fierravanti-Wells in an angry tweet. The senator is an outspoken critic of China. Joining her from the floor of parliament, Nationals MP George Christensen said Australia should no longer put up with China’s economic infiltration and blackmail.
One thing is for sure: without China’s trade, Morrison won’t get the economic bounce the nation needs.
This article was first published in the print edition of The Saturday Paper on May 16, 2020 as "Back in black. Cough, cough…".
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