September 2021

Essays

Waleed Aly

The pandemic and the shrinking of Australian politics

© Scottie Cameron

Rather than prompting reform, the COVID emergency has hardened the major parties’ neoliberal ideology

President Joe Biden is spending a heroic amount of money at the moment: US$1.9 trillion on the American Rescue Plan, US$2.3 trillion on an infrastructure plan, US$1.8 trillion on child, parental and worker benefits. “Bait and switch!” cry a suite of Republican critics, eager to paint Biden as the radical who ran as a moderate. “Everything he’s recommended so far has been hard left,” roared Senate Minority Leader Mitch McConnell.

Some of this is partisan bluster, of course. Republican condemnation on grounds of radical leftism is a kind of initiation ceremony for Democrat presidents. And the Republicans can only get so far complaining about government spending: in Donald Trump’s final presidential year he spent US$3.2 trillion on pandemic aid and stimulus. But the Republicans are correct to note an important ideological difference. Nearly half of Trump’s splurge went to the wealthy in the form of corporate, charitable and retirement tax breaks. That followed Trump’s 2018 tax cuts – worth about US$1.5 trillion – that went mostly to the top end in classic trickle-down style. Biden’s plan is bottom-up in the Robin Hood style. It increases taxes on the wealthiest 1 per cent, and sends the money to the bottom two-thirds. The bottom 20 per cent get the biggest boost by quite some margin.

What, then, of the ideological contest in Australia? Just last month, Labor Party National President Wayne Swan delivered this thunderous verdict in The New Daily: “The actions of Labor premiers changed the trajectory of the pandemic and effectively routed 30 years of the neoliberal trickle-down economics burned into the DNA of the modern Liberal party.” He asserted this on the basis that “hundreds of thousands of Australians switched their vote to Labor premiers who prioritised the health and welfare of their citizens over the survival-of-the-fittest economic mentality”. And certainly, Labor premiers did well in Queensland and Western Australia’s elections with a health focus based largely on closed state borders. But is this overstated? The first government to shut its border was Tasmania’s Liberal-led government. The next was the Morrison government, in a move that drastically subordinated the economy to health imperatives. And this was after the prime minister had shut the border to highly lucrative flights from China. Certainly, there is an argument that state premiers changed the direction of the pandemic by pushing Scott Morrison towards a lockdown and fighting him when he wanted to keep schools open, but the key protagonists there were Victoria’s Daniel Andrews and New South Wales’s Gladys Berejiklian: a Labor and Liberal leader respectively.

Swan is urging us to believe that Labor has remade the ideological terrain, delivering a withering attack on neoliberalism that might echo into the future. But about 10 days before Swan’s opinion piece, federal Labor quietly dropped its key housing affordability policies and resolved to wave through the Morrison government’s “Stage Three” tax cuts. Those cuts – scheduled to begin in about three years – will abolish the 37 per cent tax rate that currently kicks in at an annual income of $120,000. It then creates a single, gaping tax bracket of 30 per cent that stretches from $45,000 to $200,000. Let us consider the ideological connotations of that.

“Australia will retain a progressive tax system in which those with the greatest ability to pay will continue to contribute a larger share of all personal income tax revenue,” declared the 2019 Budget papers in an outline of the policy. But that means almost nothing. A tax system with only two tax brackets could answer that description, as long as the higher bracket had a higher tax rate. It’s a bit like watching millions of people lose their jobs and saying, “People continue to be employed in Australia.” The question is not whether the tax system is still technically progressive. What matters, if you care about progressive taxation, is the extent to which this has been diluted.

In this case, the answer is “considerably”. The Stage Three tax cuts will reduce the share of income paid by the top 20 per cent. They will increase the share paid by the middle 60 per cent. But perhaps the most comprehensive distillation of the effect came from the Grattan Institute’s analysis two years ago. Grattan used three different indices to determine how regressive the Stage Three tax cuts would be, the longest range of which used the average tax rate paid by two hypothetical taxpayers: one who earns two and a half times the average income, and one who earns half the average income. The smaller the gap between two, the more regressive the tax regime. And doing this, Grattan found that the Stage Three tax cuts would mean our income tax system was more regressive than at any time since the 1950s. That is a strange policy to receive bipartisan support at a time when neoliberalism is meant to have been “effectively routed”.

Of course, we shouldn’t overdraw the comparison in these American and Australian vignettes. The most obvious and fundamentally important difference between them is that Biden has just won an election, while Labor lost one that looked unlosable. Biden is governing, while Labor is adopting the now familiar small-target pose of Opposition. Moreover, Biden didn’t campaign on such a redistributive brand of politics anywhere nearly as hard as Labor did. Labor could no doubt argue that the 2019 election delivered a decisive verdict on redistribution in Australian politics, and Labor therefore has no choice but to respect it. But that would represent neoliberalism’s triumph.

In America, the pandemic has expanded politics, while in Australia, politics is shrinking. Indeed, the overt ideological distance between the major American parties is now chasmic. To be sure, that distance is occasionally terrifying – especially given Trumpian Republicanism’s war on vaccination and masks, which has the practical effect of Republican politicians killing their own voters. But it is quite a development, given the American neoliberal consensus that has existed roughly since Ronald Reagan declared: “Government is not the solution to our problem. Government is the problem.” Trump’s protectionist, anti-globalist rhetoric seemed so starkly alien precisely because it violated what had become a bipartisan orthodoxy, and even then, as we’ve seen, his policies often ended up favouring the wealthy. The early days of Biden therefore show an ideological departure.

In so many ways, Trump laid the groundwork for that departure. He mishandled the pandemic so catastrophically that he effectively removed himself from office. In doing so, he left behind such a crisis that it licensed something new, because almost no one who voted for Biden would have been hoping for continuity. Moreover, that crisis revealed just how economically precarious most American lives really were. And because Trump spent his last year spraying cash at people, he’d even broken that taboo. The pump was primed. All Biden had to do was slightly change its direction and crank it. He even has the confidence to utter the American heresy that government is a good thing: “Government isn’t some foreign force in a distant capital. No, it’s us, all of us, we the people.” Time will tell if it works. But for now, Biden’s approval ratings are surprisingly solid given the polarised state of America and the shibboleths he is breaking.

In Australia, the pandemic has offered no such ideological rupture. That might seem an odd claim when the same party that ran a years-long debt-and-deficit scare campaign ended up introducing a wage subsidy – which is perhaps the kind of policy shift Swan has in mind when he talks of neoliberalism’s demise. True, we’re at a point where mass public spending is politically uncontroversial. But it’s important to recognise that this is not an ideological shift. It’s a form of emergency politics. That’s a different thing. Emergency politics is the temporary suspension of political norms, not necessarily the lasting embrace of new ones. It is meant to facilitate a return to normal, at least in theory.

Whether that’s true in practice depends very much on how people experience the crisis, and how politicians decide to use it. And, from the beginning, Scott Morrison showed no desire to alter the ideological terrain. His economic language in the early days of the pandemic had nothing to do with evolution or transformation. He spoke of an economy that was in “hibernation” and that would at some point “snap back”. While people on social media crowed that the JobKeeper subsidy signalled Morrison’s sudden conversion to communism, they overlooked that Morrison was imagining a world that would return to its previous arrangements after a hiatus. The free market had not failed. It had been artificially shuttered by government diktat for non-economic reasons. The purpose of Morrison’s extraordinary spending was to preserve our pre-pandemic economy, not to remake it.

Meanwhile, even amid the emergency compromises, the Morrison government found moments to express its continued ideological commitments. This is most visible in its attitude to casual workers, many of whom fell outside the JobKeeper eligibility requirement of having worked consistently for a particular employer for 12 months. As Labor pointed out at the time, this made no sense in industries such as the arts, where people rarely worked on a single project for that length of time. Labor therefore argued that JobKeeper should be available to anyone who could show a year-long record of employment in a particular industry, even if that spanned several employers. The Morrison government never entertained the idea.

But perhaps the most destructive example concerned casual sick leave. The unions – which at that time were working remarkably constructively with the industrial relations minister – identified very early on that about a third of workers had no access to paid leave, and that the lowest paid of these would therefore likely go to work when they were sick, which was to court a public health disaster. Accordingly, they argued Australia needed a pandemic leave scheme. This always seemed a good idea. By the arrival of Melbourne’s second wave last year, it was obvious how good it was. Transmission was exploding in lower socioeconomic areas, especially among those in insecure and casual work, and largely in workplaces. Eventually, the Victorian government introduced a suite of payments to anyone who would lose income while they tested and isolated.

The federal government, however, demurred, only beginning to consider a payment scheme while Victoria’s case numbers continued to surge around them. At length, the Commonwealth would introduce its own suite of isolation payments, though they were neither as swift nor as widely available as Victoria’s. And so, when it was Sydney’s turn to endure a COVID-19 wave, the same problem arose: low-paid people in insecure work avoiding getting tested because they couldn’t afford to miss work. Writing anonymously for The Sydney Morning Herald, a western Sydney doctor vividly described the real-world consequences:

[S]ome patients attending emergency departments are staunchly refusing to get tested because of the implications for their family. The necessity to quarantine close contacts would prevent hard-up family members from working …

Tragically, in certain western and south-western Sydney hospitals, COVID-infected patients are presenting so late in the course of their infection that it is necessary that emergency teams intubate them immediately upon their arrival. Such late presentations are not being seen at hospitals from the north, centre and east of Sydney.

Clearly, a pandemic leave scheme would have been costly. It may even have been rortable for a time. But something similar might be said for JobKeeper, which saw several highly profitable businesses pocket millions in government payments. I think the Morrison government has a good argument when it says that was unavoidable given how quickly JobKeeper had to be enacted. The wastage was more than offset by the economic benefit. But then, why not adopt the same latitude on pandemic leave? Any waste might have been well worth it.

In October 2020, with Melbourne still in lockdown, the Morrison government managed something quite extraordinary. It passed a budget that included a new (youth) wage subsidy and delivered a record deficit with an accompanying record debt, while still demonstrating that its overarching ideology hadn’t shifted at all. This record deficit was built and sold very significantly on tax cuts, whether in the form of concessions that allowed businesses to claim deductions for just about everything they spent, or cuts to individual income tax. The latter were certainly of help to low- and middle-income earners, reaching people on as little as $45,000 per year. But they also reached up as far as the top 12 per cent of taxpayers. Meanwhile, the budget slashed the unemployment benefit, JobSeeker – which had been temporarily doubled some six months earlier – to a level below the poverty line.

Here were two measures working against each other. The tax cuts were aimed to stimulate the economy by giving businesses more money to employ people, and giving workers more money to spend. But if you believe, as Treasurer Josh Frydenberg said, that the aim of the tax cuts was to put money in the hands of people who will spend it, then JobSeeker would have been a more efficient way to achieve that. Slashing JobSeeker was therefore a curious decision because it couldn’t even be explained on the grounds of limiting government spending: Frydenberg had been explicit that the government would shelve such spending concerns until unemployment had fallen to below 6 per cent, which the budget assumed was two or three years away. That doesn’t mean the Morrison government’s policy mix was indefensible. It’s just that any such defence requires you to make assumptions consonant with trickle-down economics, including that a more generous unemployment benefit deters people from getting a job. In short, it requires you to make the same assumptions that have underpinned the Liberal Party’s economic ideology for decades. Again, no change.

All this might have presented a political opening. The pandemic had sent people to the dole queues who would never have imagined they would be the kind of people to find themselves there. For decades now, Australian politics has proceeded as though unemployed people weren’t truly part of our political community. Coalition governments particularly were fond of announcing tightened “mutual obligation” requirements and “crackdowns” on welfare payments, and the Newstart Allowance had been frozen for a quarter of a century under governments of both stripes. In the lead-up to the 2019 election, Labor had pitched itself as being concerned, above all, with “fairness”, but that was focused overwhelmingly on workers and house-hunters, not the unemployed. A policy platform bold enough to pledge to restrict negative gearing and capital gains tax reductions, abolish most franking credits and boost penalty rates, refused to promise an increase to Newstart. The most Labor would pledge was to review the amount. And then, suddenly, the narrative surrounding unemployment changed. The pandemic vividly demonstrated that people might become unemployed through no fault or will of their own, driven there by circumstances completely beyond their control. At the time of the 2020 budget, the most recent government data said there were more than 15 jobseekers for every vacancy.

Meanwhile, among the employed, the pandemic highlighted the ways in which insecure work wasn’t merely a matter for those who endure that insecurity directly. In July 2020, consulting firm Taylor Fry found that in both Melbourne and Sydney, those hit hardest by pay cuts and reduced working hours were actually inner-city professionals. Areas of high unemployment had been cushioned by the boost to JobSeeker, and low-paid casuals were the ones getting sick. But when those infections triggered lockdowns, it was middle-class workers and business owners whose work disappeared. Suddenly the plight of those with insecure work rebounded on those with hitherto good jobs. Inequality had become a problem for everyone, not just those at the bottom.

Yet no honest observer could say these have become major themes in Australia’s pandemic politics. Labor raised these sorts of arguments, but not with any tremendous urgency. In fairness, it had little choice. This was around the onset of emergency politics, which inevitably limits the scope for opposition. In an emergency the public barracks for incumbents, willing them to succeed on the understanding that the stakes are too high for any partisan celebration of their failure. The political tone is one of pulling together, which was firmly in evidence in the early stages of the pandemic as a cross-party national cabinet formed, and all manner of collaboration arose between businesses, unions, government and scientists. In that context, overly critical Oppositions are unlikely to be heard, and even less likely to be indulged. This, I suspect more than anything else, explains how incumbent state Labor governments won the elections Swan invoked.

Clearly, we are past the non-combatant phase now. I’d estimate our pandemic politics changed most decisively in late May this year, when the Victorian government enacted its fourth lockdown and proceeded to blame the Morrison government for it, citing the slow vaccine rollout and the Commonwealth’s refusal to build specialised quarantine centres as hotel quarantine’s inadequacy became increasingly clear. It also demanded financial support to fill the gap left by the now-retired JobKeeper program. The Commonwealth responded by trying to assert that Victorians had already received an outsized share of government support, and that the real solution to Victoria’s problems would be to stop locking down its citizens. In the end, Victoria won that fight: the political focus turned towards quarantine and vaccination failures and the Commonwealth introduced a new system of payments. The victory only became more comprehensive a few weeks later when New South Wales – once Morrison’s poster child for non-lockdown pandemic management – found itself enforcing a lockdown in Sydney that now has no end in sight, having tried for some nine days to show it could avoid one. The consequences for the Morrison government are now abundantly clear. Its poll numbers have dropped dramatically, as has popular support for Morrison. Focus groups in the politically consequential seats of western Sydney unearthed a broad sense that voters blamed Morrison for their predicament and saw him as incapable or unwilling to do what the job asked of him.

So, federal Labor is now far more strident, confidently lambasting the Coalition on quarantine and vaccination, and even offering populist policy suggestions of its own, such as Anthony Albanese’s idea of paying $300 to every citizen who gets vaccinated. The principal lines of attack against Morrison are that he failed to order a wide enough range of vaccines in sufficient quantity, that his approach to the rollout lacked sufficient urgency, and that the federal government bungled the bits it accepted were urgent, such as in aged care. But note the nature of all these arguments: they are entirely managerial. They are not political in any grand sense. There is no worldview at stake here. Nothing really that is relevant beyond the short term.

Indeed, anything that might be more than that is being strategically shelved. That’s why Labor’s formal decision to acquiesce to the Coalition’s Stage Three tax cuts is so emblematic. This is a policy that would remake Australia for generations as a less equal society, but to oppose it would be to invite a conversation about something Labor would now consider a distraction. Labor is gearing up for the next election wanting to talk about nothing other than the pandemic. It’s not promising to make a better country. It’s just promising to out-manage the Coalition.

Meanwhile, numerous long-range policy problems go unanswered. House prices have defied all predictions of a pandemic-induced crash and are rocketing up – a modest prediction has them increasing 16 per cent in Sydney by the end of the year. Despite Scott Morrison’s promising rhetoric of a new pact on industrial relations (remember when he “booked the room” for stakeholders to meet?), nothing remotely like a new Accord has arisen, which suggests wage stagnation is likely to remain unaddressed even after the worst of the pandemic. And just last month the Intergovernmental Panel on Climate Change released its new report declaring that our species has roughly a decade less to solve this existential problem than we had thought. That triggered some political discomfort within the Coalition government about the absence of a net-zero emissions target, but even here Labor can only say so much: it has a target but no clear set of policies to achieve it, and has its own internal conflicts about what to say about coalmining and whether it should support opening new gas fields.

“Labor is ambitious for progressive reforms in tax, health, superannuation, industrial relations and climate,” insisted Wayne Swan in his opinion piece. From his vantage point within the party, perhaps that is visible. From outside the party, though, Labor appears to be shedding all such ambitions so it can avoid the risky enterprise of saying anything about them. That might be a sound political strategy, especially given what happened in 2019, but it suggests that Labor doesn’t believe the neoliberal era is over. It apparently accepts that Morrison is still a strong chance to win, and that if he doesn’t, it will likely be for reasons of bungling rather than philosophy. And if that’s true, nothing has been routed, and nothing will be, this side of the election. If Labor is planning a rout, it will have to pull off its own bait and switch. But to whatever extent Joe Biden has pulled that off, he did so with a clean slate, not having already ditched policies from a previous election defeat. Would Labor in government seriously spring on voters the very policies they rejected in 2019? And if it has alternative policies up its sleeve, what disaster will Labor say it is solving given we’ve heard little about any such disaster for so long?

Waleed Aly

Waleed Aly is a writer, broadcaster and academic.

Cover of The Monthly, September 2021
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