The treasurer has backflipped on wage subsidies
The federal government’s “whack-a-mole” response to the coronavirus pandemic continues at speed with Prime Minister Scott Morrison and Treasurer Josh Frydenberg confirming an unprecedented wage subsidy package this afternoon, embracing a policy position that was being dismissed as recently as Friday. Frydenberg describes the so-called JobKeeper payments as an “Australian solution to what is an Australian challenge”, but that’s a bit of face-saving, as only days ago he and the PM were telling us that Treasury had advised against a UK-style wage subsidy. There are tweaks: rather than paying 80 per cent of employee salaries up to a cap, as in the UK, the JobKeeper payments will be limited to a fixed proportion of the median wage: $1500 per fortnight. But the reality is today’s announcement, benefitting some six million workers at an expected cost of $130 billion over the next six months, is a major backflip by the government. It’s also a recognition that if it waited until the end of April to provide wage subsidies through the tax system – as would have been the case under the stimulus legislation passed by parliament last week – the economic damage will already have been done.
The Opposition has welcomed the policy shift, recognising wage subsidies were backed by the union movements and peak business bodies, and shadow treasurer Jim Chalmers told a press conference this afternoon that Labor wanted to fast-track the payments, which will need to be legislated. “We call on the government to recall the parliament as soon as possible so that we can get this relief through the parliament and into the hands of workers and businesses and circulating in an economy which desperately needs support right now,” said Chalmers.
As big as the stimulus package is getting, it is by no means over. In a piece for The Conversation, Grattan Institute director Brendan Coates cites OECD estimates suggesting the pandemic could provoke Australia’s worst recession on record, shaving 2 per cent of GDP for every month that severe lockdowns continue – so a 6 per cent fall for a three-month lockdown, and a 12 per cent fall for a six-month lockdown – and concludes substantial further support will be needed to cushion the blow.
ABC business editor Ian Verrender cites Morgan Stanley estimates that some 2 million Australian jobs are at risk, and predicts a downward spiral of slowing consumer spending, rising bad debts and mortgage defaults, and corporate refinancing and capital raisings. “Make no mistake, financial markets have further to fall,” he writes.
There have been some welcome policy developments that show Australia is getting ever-more serious about the pandemic response: tougher lockdowns announced by national cabinet over the weekend and variously confirmed by the states today; Greg Hunt’s latest billion-dollar boost [$] to Medicare and mental health services, embracing universal telehealth; the deputy chief medical officer Paul Kelly’s commitment to release the epidemiological modelling; and the treasurer’s tougher foreign investment guidelines to stop vultures pouncing on distressed Australian assets.
At the beginning of his press conference this afternoon, the PM acknowledged that some would say the government’s response was “too little [while] some will say it is too much. We must work together to make this work and make it go as far as possible.” The PM flagged that worse lay ahead, with some countries potentially facing economic collapse. One thing is clear: Australia will take years, if not decades, to recover from this pandemic, and there will be no going back to the way things were.
“[Governments can] take this opportunity to ensure there is a new normal, not that we will simply return to the economic status quo post the crisis. Our community will not be the same as the one that entered this crisis and we all need to be wary of promising that … It’s not just the rate of future growth that is important but it’s the shape and direction across the economy.”
“Things have changed with this coronavirus panic. Now Australians can be – must be – back at work within two weeks. If we keep our blunderbuss approach of closing thousands of business [sic] and telling all Australians to stay home, the suffering will be enormous.”
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“The $40m Regional and Small Publishers Jobs and Innovation Package should immediately be used to support struggling regional media outlets. The Minister doesn’t need to find more money, this package can be transitioned to keep jobs and the presses going.”
Greens communications spokesperson Sarah Hanson-Young backs last week’s call by the Media, Entertainment and Arts Alliance for Minister Paul Fletcher to intervene to stop a spate of regional newspapers being shuttered.
“During last week’s one-day parliamentary sitting Bowen went out of his way to thank the health minister, Greg Hunt, for his consideration in listening to Bowen’s suggestions. And although Labor spokespeople, including both Albanese and Bowen, have criticised what they see as Morrison’s sluggishness in moving towards more drastic measures, there is little or no real aggro.”
“With the advent of the COVID-19 pandemic, most Australians have seen their retirement savings fall by up to 20 per cent, but few have any idea how the trustees of our superannuation funds prepared for the economic and financial carnage associated with the spread of the virus. Did your trustees sell out of airline shares in January when the virus first migrated out of Wuhan? How do your trustees plan to respond to the crisis? You’re unlikely to know, because the behaviour of most of our funds is as opaque as it is important.”
“But what’s so special about SARS-CoV-2, or severe acute respiratory syndrome coronavirus 2, which causes Covid-19? Well, even those of us who are in the ‘infectious disease and death game’ have only known about this virus for fewer than four months. Much of our thinking is based on global experience of the original SARS, then MERS. We’re learning fast.”
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?
The federal government’s “whack-a-mole” response to the coronavirus pandemic continues at speed with Prime Minister Scott Morrison and Treasurer Josh Frydenberg confirming an unprecedented wage subsidy package this afternoon, embracing a policy position that was being dismissed as recently as Friday. Frydenberg describes the so-called JobKeeper payments as an “Australian solution to what is an Australian challenge”, but that’s a bit of face-saving, as only days ago he and the PM were telling us that Treasury had advised against a UK-style wage subsidy. There are tweaks: rather than paying 80 per cent of employee salaries up to a cap, as in the UK, the JobKeeper payments will be limited to a fixed proportion of the median wage: $1500 per fortnight. But the reality is today’s announcement, benefitting some six million workers at an expected cost of $130 billion over the next six...
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