Thursday, May 28, 2020

Today by Paddy Manning

Bottoming out?
But the RBA governor Philip Lowe offers a glimpse of optimism

Image of RBA governor Philip Lowe

RBA governor Philip Lowe

There were dark clouds looming over Reserve Bank of Australia governor Philip Lowe’s testimony before the Senate select committee into COVID-19 this morning, but there were also rays of sunshine. Most commentary has focused on his fears that the federal government’s $150 billion fiscal stimulus might be withdrawn too quickly. Lowe suggested that there should be preparation for an extension or modification of the centrepiece JobKeeper scheme, now worth $70 billion, and a discussion about whether it “transitions into something else or is tapered”. In a doorstop interview afterwards, committee chair Katy Gallagher said Lowe’s evidence “finally proves that Scott Morrison’s snapback economic recovery is simply not going to happen”. In September, about 3.5 million workers will be coming off JobKeeper, she warned, while another 1.6 million people will lose the JobSeeker supplement, some $20 billion in early-access super will have stopped flowing, and loan deferrals worth $250 billion will have to start being repaid. “So that is the fiscal cliff that we are facing,” Gallagher said. It is a very grim prospect. 

Continuing uncertainty about the fallout from the pandemic is a large part of the problem, with Nine newspapers reflecting on the disconnect between Wall Street – which is nearly back to February highs – and a rapidly deteriorating real economy. Australia is in a kind of twilight zone: on the one hand we are relieved to have dodged the most feared health consequences of the virus, but on the other we have yet to see the worst of the economic data that will almost certainly confirm we have fallen into a deep recession, shattering confidence. The mostly pre-COVID stats we are still getting, such as today’s capital expenditure figures for the March quarter, show there was already a weakening going on. Shadow treasurer Jim Chalmers said that capital expenditure has now fallen for five consecutive quarters, in “its longest downturn since the 1990s recession, with investment plans slashed for next financial year”. 

Katy Gallagher got stuck into the federal government for letting the heightened uncertainty drag on, particularly over the JobKeeper program. “They’re not providing any information,” she said. “Whether they’re prepared to taper, whether they’re prepared to target. We’re not having a budget until October.” 

Gallagher and Chalmers together picked out Lowe’s gloomier comments, including that the economy will need support from both monetary and fiscal policy “right through the next year or so”, and his hopes that fiscal support “will be there for a long period of time”. In part, said Lowe, this is because for the last 20 years or so monetary policy has been used as the main swing instrument to manage the business cycle. But with interest rates near zero and the bank engaged in a form of quantitative easing, Lowe said that “in the next little while, there’s not going to be very much scope at all to use monetary policy in that way, so I think fiscal policy will have to be used”.

But Lowe had opened by stating that, given our national health outcomes were “better than earlier feared, it is possible that the economic downturn will not be as severe as earlier thought”. Asked about the dire April jobs figures, which showed more than 600,000 Australians had been put out of work, and that true unemployment had jumped to 9 per cent, Lowe agreed they were terrible, but he also said there are signs of a “bottoming out” in the labour market. More than the headline rate of unemployment or underemployment, Lowe said, the RBA was watching the number of hours worked. “It may be in six months’ time that we bounce back well.” 

One thing is clear. The JobKeeper program – with its winners and losers, its bungled assumptions and its fast-approaching fiscal cliff – is in urgent need of review.

“We have patiently respected your wishes for our silence, but quiet diplomacy has not worked. Therefore, on the day of Kylie’s 33rd birthday, we call on the Australian government to lobby for her immediate release.”

Friends and former colleagues of Australian academic Kylie Moore-Gilbert, who has been held in solitary confinement in Tehran’s notorious Evin prison for more than 600 days on spying allegations, call on the Australian government to exert more pressure on the Iranian regime.

“I would characterise it as, ‘Technology changed and we needed to reprioritise what we needed to get to have the best capability for Australia’.”

Air vice-marshal Catherine Roberts tries to explain why the $16.5 billion Joint Strike Fighter will no longer have Maritime Strike or Beyond Line of Sight capabilities, which cost $1.5 billion, in a joint-committee appearance.

The Accord according to Morrison
Scott Morrison’s appeal for a new compact between workers and businesses has reminded some of Bob Hawke’s 1980s Accord. But there are big differences – especially over what can be bargained for.

The number of regional and local newspapers to close (36) or shift to digital-only models (76) as part of a sweeping restructure of News Corp’s Australian operations, with the loss of hundreds of jobs.

“New analysis of poverty in Australia finds that, before COVID-19, households with children with a female main income earner were more than twice as likely to live in poverty as those in which the main income earner was male, highlighting the impact of caring roles on poverty in Australia.”

The second part of a report titled “Poverty in Australia 2020”, released by the Australian Council of Social Service and the University of NSW, highlighting that a post-COVID snapback on childcare or income support risks trapping single mothers and their children in poverty.

The list

“Dread and avoidance are common impediments to writing, but Davidson’s degree of affliction is legendary. A deadline turns her into a flight risk. She has moved countries to avoid finishing a manuscript, and she still likens the act of writing to stage fright, performing a recital for which she has no sheet music, on an instrument she has forgotten how to play.”

“The first anger is domestic. She calls it ‘the insane rage of the person who does all the housework’. Helen says this anger was forbidden. She says, ‘in those days, in our circles, judgemental was a dirty word’. She says the trouble with anger is that it has to go somewhere. If it doesn’t, it will devastate everything around it.”

As part of The Monthly’s 15th birthday celebrations, throughout May we present a dedicated selection of great essays from the archives for your reading pleasure.

“COVID-19 brought me back to square one. Everything seemed pointless once again. I suddenly felt lost. The atmosphere in America is eerie. People look at each other with fear and faces are covered with masks. There is no human interaction; it feels like Chicago, where I am living, is a ghost city.”

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Paddy Manning

Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is the author of Inside the Greens and the unauthorised biography of Malcolm Turnbull, Born To Rule?


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