Opinion

Paul Bongiorno
The case against winding back JobKeeper

Two weeks ago, during the last sitting of the federal parliament before the budget early next month, Anthony Albanese decided it was time to take up the fight against the government on the economy.

The Labor leader sensed the prime minister and his treasurer, Josh Frydenberg, were embarking on a course of action that would see jobs and economic management become the key issue at the next election. Rather than it being the Coalition’s strong point though, Albanese saw what could be its fatal weakness.

His conviction was strengthened by what the parliament had just done at the government’s insistence: extend but scale down two of the critical programs that have shielded the nation from an even deeper recession. While the JobKeeper payments and the beefed-up JobSeeker unemployment benefit were given a six-month reprieve, Albanese is not alone in thinking the wind-back was too much too soon.

In his last speech of the recent sittings, Albanese told parliament, “This Morrison recession is the first in 30 years. For many Australians it will be an experience that they have never had before and that, indeed, no one ever wants to have.” Morrison bristled at this attack and countered with his descriptor of the “coronavirus recession”. Of course, what caused the recession was not the virus, per se, but rather the restrictions imposed to save lives. Although these measures received bipartisan support in the early days of the pandemic, consensus has now fractured.

The accepted wisdom is that Labor can’t win on the economy. Even if things go bad on the Liberals’ watch, they argue it would’ve been even worse under Labor. Except this time, Albanese argues, it is the Liberals who have made things worse and the projected 1.4 million people out of work by Christmas will be the painful result. If Morrison cops the blame for this, it will spell electoral disaster.

Even though Labor was able to stave off a recession during the global financial crisis, the Liberals gave them no credit. Instead, they attacked Labor’s spending – minuscule in comparison with the Covid-19 response – as reckless, a crippling debt burden for future generations.

This time, Labor is arguing the Liberals are being rash by withdrawing stimulus or, worse, directing spending to top-end tax cuts that will not deliver the desired results.

Here, the opposition has some high-powered support from leading economists. Nicki Hutley from Deloitte Access Economics says bringing forward the next two stages of the legislated tax cuts won’t provide the stimulus needed. Yet Frydenberg has all but confirmed he will be heading this way in the budget.

Hutley says those people on the highest incomes are going to benefit most from the tax cuts, and they tend to save their money rather than spending it in a way that will stimulate the economy. The Australia Institute agrees, saying the tax cuts have a poor stimulatory effect, not least because “the bottom 20 per cent of taxpayers miss out”.

Deloitte’s research for the Australian Council of Social Service (ACOSS) found the government’s planned cuts to the coronavirus supplement for people on JobSeeker, Youth Allowance and parenting payments “would see the economy lose $31.3 billion and 145,000 full-time jobs over the next two years”. The worst impact would be in regional areas, where there is one job vacancy for every 28 unemployed people.

Cassandra Goldie, the chief executive of ACOSS, says 2.2 million people rely on this boosted payment, which ends on September 28. Goldie is calling on the government to extend the supplement and to “move quickly to legislate a permanent, adequate JobSeeker rate” before the current boosted payment is slated to revert to $40 a day at the end of the year.

The Labor-aligned McKell Institute on Thursday released its analysis of the JobKeeper changes. It says that by Christmas the wage subsidy’s scaling down “represents a $9.9 billion reduction in fiscal support” in comparison with what would have occurred had the Commonwealth maintained JobKeeper at the original rate.

The institute says 3.4 million full-time and part-time workers will be affected. Many “zombie businesses”, propped up by JobKeeper, will not be able to keep going at the lower rate, which could swell the number of people out of work even further than these projections. Likewise, the minutes of the Reserve Bank board’s latest meeting, released on Tuesday, made clear the economy needs more support, not less.

But economic experts aside, the golden rule of politics still applies: there is always a price to pay for taking something off people. In rolling back JobKeeper, Morrison can’t hide behind the premiers or get far by blaming Victoria. The national economy and social security are squarely in his court.

Wanting to get back to being a “good Liberal government” that starts paying down debt may appease his fiscal conservatives, but it makes Morrison politically vulnerable to Albanese’s charge that the prime minister is presiding over a recession that is longer and deeper than it needs to be.

At a time when Labor is sharpening its attacks on the government, Morrison’s marketing skills seem to be deserting him. On Tuesday, he went to the Hunter Valley with scarcely a journalist in tow to unveil a “gas-led recovery”. After the announcement, there was no news conference. Strange, given the plan was being touted as a major pillar in his JobMaker strategy.

The irony of going to an area rich in thermal coal to announce a gas-fired power station – that the taxpayers will build if energy companies won’t – was not lost on Nationals senator Matt Canavan. The coal warrior reminded the prime minister that it was part of the Coalition agreement for the government to keep pushing coal. On Tuesday, he told Sky News he was sceptical that gas alone could bring manufacturing back to Australia and said he would keep pushing for the government to build another coal-fired power station.

Morrison and his Rhodes Scholar Energy minister, Angus Taylor, are sending very confusing messages about coal to the industry and the electorate. They have before the parliament a bill to underwrite a feasibility study for a new coal-fired power station in Queensland. But the government is caught between the Nationals’ coal-hugging base in central Queensland and its metropolitan voters who are demanding climate change action. They are the ones who helped “green” independent Zali Steggall take Tony Abbott’s hitherto rock-solid safe Liberal seat at the previous election.

New South Wales Energy and Environment Minister Matt Kean, who has launched two renewable energy zones for the state, says major energy companies such as Shell and BP are diverting from fossil fuels “not because they are greenies but because they are capitalists”.

The Australian Energy Market Operator says current projects already in the pipeline will “more than compensate” for the closure of AGL’s Liddell power plant in the Hunter Valley – including the energy provider’s own plans beyond the power station’s demise. There is no gap to fill, despite Morrison’s claims.

Meanwhile, the Australian Energy Council, representing the biggest energy operators, is unimpressed by what looks like old-fashioned socialism. The threat to step in if private enterprise doesn’t do what Morrison wants will likely become “a self-fulfilling prophecy”, Credit Suisse analyst Saul Kavonic told The Australian. The plan certainly risks billions of dollars of taxpayers’ money on what could become a stranded asset. For a federal government gas plant to be competitive with battery storage or pumped hydro plants in “firming up” energy supply, says a NSW government source, it will almost certainly require more taxpayer subsidy.

Anthony Albanese has his own energy problems, with his shadow Resources minister, Joel Fitzgibbon, welcoming Morrison’s initiative in his part of the world. But his colleague Mark Butler, the shadow Climate Change and Energy minister, doubts the Morrison plant will ever be built. The slew of government announcements, and indeed reannouncements, on Tuesday are not a recovery plan in the time frame that’s needed. By contrast, Butler says, the existing pipeline of renewable energy projects would create more than 50,000 jobs “if only Scott Morrison would take up Labor’s offer to agree on a bipartisan energy policy that would unlock that investment”.

On Monday, Morrison put his name to yet another announcement with Angus Taylor. After seven years in government, the Liberals will finally get around to bringing Australia’s fuel security up to international standards. But curiously the prime minister was a no-show at the news conference. In fact, Morrison hadn’t faced the media since his intervention to secure a quarantine exemption for Sarah Caisip to attend her stepfather’s funeral in Queensland. In an open letter to the prime minister, Caisip’s stepsister Alexandra Prendergast accused Morrison of using her grieving family “to try and advance your political agenda”.

In a further sign that relations with Annastacia Palaszczuk have hit rock bottom, the Queensland premier accused the prime minister of bullying her in a phone call. Her office says Morrison yelled down the line “you will do this” – a version of events denied by the PM’s office.

The premier suspected a political set-up after Peter Dutton went on radio earlier that day to criticise Queensland’s “heartless” border rules only to have the issue emerge as the first opposition question in parliament. An hour later, Morrison – close to tears – went on 2GB to plead with Palaszczuk to show some compassion.

The spectacle of Morrison and Dutton criticising anyone for a lack of compassion over borders is gobsmacking. A prime minister can’t keep running for cover when the stakes are so high.

This article was first published in the print edition of The Saturday Paper on Sep 19, 2020 as "Greater compassion will lessen recession".

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