The Andrews government cannot identify any legislation it needed to override, but experts say that is the point.When Daniel Andrews signed a declaration for a state of disaster in Victoria at 1.43pm on Sunday, it was a part of a final salvo in a battle to control a resurgent and invisible enemy.
Economy in the deep freeze
Treasurer Josh Frydenberg’s hands were blue as he stood behind his lectern, physically distanced from Scott Morrison in the prime minister’s courtyard on Tuesday.
The pair were holding an outdoor news conference on an icy Canberra morning, and nothing the country’s two most senior politicians had to announce could thaw the wintry malaise that’s set in across much of Australia. The chilling realisation is that they, like the rest of the nation, are at the mercy of a virus that is threatening to get out of control.
The health consequences are frightening enough; the economic ones no less intimidating. Nowhere is this more obvious than in Victoria. Wednesday’s spike of 484 new cases in a single day – two weeks into a six-week lockdown – was followed by 403 new cases on Thursday. The high numbers are profoundly concerning. On Tuesday night, Victoria’s premier, Daniel Andrews, had a long phone conversation with his New South Wales counterpart, Gladys Berejiklian. Both agreed that keeping the border between their two states as tightly shut as possible was critical. But the fear is that it may be too late, with clusters growing in NSW and many cases either directly or suspected to be linked to Victoria.
Treasury’s midterm review of JobKeeper and JobSeeker, according to Frydenberg, assumes the Victorian lockdown will last only six weeks, after which Australia’s second-largest state will come out of the deep freeze. Developments this week have cast a pall of doubt over that prospect.
Morrison told his shivering audience of press gallery journalists he thought there was “a genuine understanding in the community that this is a virus that will plot its own course, and it will wreak its own havoc where it chooses to do so … What we are in charge of is our own response and we need to calibrate that response carefully.” His worried backbenchers are hoping that his careful calibration has an eye to their voters and the fact that thousands, if not millions, of them are facing financial ruin for the first time in their working lives.
Here, the treasurer couldn’t offer the assurances many people want to hear. “The unemployment rate will continue to rise,” he said. This is the paradox of the Covid recovery: the more businesses open up, the higher the unemployment rate will go. People will start looking for work again, but there won’t be enough jobs to go around. Treasury’s JobKeeper review said unemployment could reach 8 per cent in September and go higher still by the end of the year. Frydenberg is putting the “effective” rate now at 11.3 per cent – that includes those not working any hours and those who have given up looking for a job.
The Tuesday news conference was to announce a scaling down of the pandemic job subsidy scheme and unemployment relief payments. The September cliff was avoided but small business lobbyist Peter Strong told ABC TV that won’t stop 100,000 businesses permanently closing their doors. He fears the number could be much higher.
For reasons not immediately apparent, the prime minister decided it was better crisis management to keep the relatively good news that he had decided to extend JobKeeper and JobSeeker beyond their legislated September cutoff separate from how much it was all costing. That bad news was saved for Thursday’s economic update, although Frydenberg tried to smooth the landing, warning in midweek interviews of the “eye-watering huge numbers” to come. The treasurer then unveiled two years’ worth of forecasts that offered little silver lining for jobs and economic recovery. Talk of “snap back” was buried in a sea of red ink.
Even so the budget deficit for the current financial year is a projected $184.5 billion – the biggest since World War II. But it is sure to be revised upwards of $200 billion in the October budget. More spending in the next three months is simply unavoidable.
JobKeeper, at a cost of just under $12 billion a month, was, according to Morrison, “unsustainable”. But economists, including the Grattan Institute’s Brendan Coates, say stripping $8 billion a month out of the economy when the phase-down ends in January is too much too soon. He told The Canberra Times, “Unfortunately, at the same time the government has pulled back on the JobSeeker payment, so for those who are no longer eligible for JobKeeper, they’re going to see a big drop in their income, from $1500 a fortnight to about $810 a fortnight – so a decline of almost half.”
Economist Stephen Koukoulas says what also has to be factored into the pain is the end of the banks’ mortgage repayments holiday – a holiday that only added thousands of dollars to borrowers’ indebtedness anyway. Already one of the nation’s biggest charities, the St Vincent de Paul Society, says many first-time clients are presenting for help. Chief executive Toby O’Connor told ABC TV these are people who have never been out of work before and have commitments on their homes, and cars, that they can no longer meet.
Still, the government spent an extra $20 billion on income support this week – an unthinkable cash splash just a year ago. That it is facing criticism for not being more generous is indicative of the brave new world we now live in. With collapsing revenues, economists at the big banks, including Westpac’s Bill Evans, are forecasting a budget deficit this financial year above $200 billion. We will have to wait until the October budget to see whether Treasury agrees. That will also be when we find out if Morrison will permanently raise the JobSeeker unemployment benefit, as he indicated this week.
Morrison must be grateful that neither the Labor opposition nor the mainstream media have made any carping criticisms of the $6 billion spent paying about 875,000 casuals more through JobKeeper than they were earning before Covid-19 struck. It’s very different from the way the Liberals in opposition attacked the Rudd government for the “waste and mismanagement” of its global financial crisis stimulus packages.
But unlike the free childcare scheme, this anomaly has been allowed to remain in place until September. Ken Henry, Treasury head at the time of the GFC, thinks it is “deeply ironic” that the Liberals have now embraced the kind of spending they previously criticised. He told ABC Radio, though, that then, as now, “it is more important to get the money out the door”. But he said that “people will be able, on every occasion, to criticise any fiscal stimulus measure as involving an element of waste”. He said it’s “an easy criticism”, and he could have added it’s cheap opportunism. It certainly makes the Liberals’ decade-long mantra on the evils of debt and deficit and Labor’s inability to manage money look puerile.
The key to Morrison’s record approval ratings is without doubt his eschewing the habit of a lifetime and going for statesmanship rather than ugly partisanship. He has continued to resist making political capital out of the dire situation in Labor-governed Victoria.
Morrison took great umbrage at a question from Sky News’s Andrew Clennell on Tuesday. Clennell asked if some “manifestation” of the JobKeeper scheme would be kept in place until the next election. “Is it possible that the next election could be later next year or are you committed to going a full term?” Clennell asked.
Morrison dismissed the election talk, saying “politics is nowhere near my mind”. And, he said, “It’s got nothing factoring into my thinking at all.” He wound up the indignation by reminding Clennell that people are dying in Victoria “and you are asking me questions about when the next election is”.
But Clennell couldn’t see a denial in the answer. Some in the government believe Morrison would have to be weighing up his options. “Elections are always on a prime minister’s mind. He’s a politician, isn’t he?” was the reaction of one Liberal MP. “It’s like asking if a monk prays.” Unless Morrison manufactures a double dissolution trigger by throwing up contentious legislation Labor cannot support, the earliest he could call a poll of half the senate and the house of representatives would be August next year.
The idea is not far-fetched. The hardest thing for any government is trying to take something off people. With unemployment forecast to increase, income support marked to be scaled down and the virus spooking the nation, a darkening mood in the electorate would be no surprise. Better to go while you are ahead.
Not that Morrison is sharing his thoughts with his MPs. Six weeks ago, he cancelled his weekly virtual party room meetings. “He didn’t like the questions” is the view of one. A similar explanation is proffered by the Labor Party for the cancellation of the early August sitting of parliament.
The manager of opposition business, Tony Burke, says if the AFL and the NRL can organise “Covid-safe” games, then there really is no excuse. “We’re less physical than them,” he says. Crossbench senator Jacqui Lambie reckons it’s a bad look for politicians not to go to work while teachers and others are expected to front up.
The special protocols put in place to allow the treasurer to come into the ACT from Victoria to present his economic update are being cited as a model that could be applied to the whole parliament. Josh Frydenberg, for one, would find it much warmer in the house of representatives chamber.
This article was first published in the print edition of The Saturday Paper on Jul 25, 2020 as "A bitter chill to swallow".
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