What was initially a political problem for the government over the level of support it provided for New South Wales is threatening to turn into a real economic problem as it tries to scale up assistance to reflect the likelihood the nation’s biggest economic centre will be locked down for weeks.
The worst-case scenario is Australia blundering into another recession off the back of the Morrison government’s vaccine and quarantine failures and Gladys Berejiklian’s failure to respond with sufficient seriousness to the Delta variant outbreak in Sydney.
Despite the constant demands for the restoration of JobKeeper, Scott Morrison and Josh Frydenberg have sensibly held fire so far, trying to gauge the scale of the economic hit Sydney people are going to suffer, and what it would do the wider economy. Every day makes it clearer that the hit will be substantial on both counts. But reflexively restoring JobKeeper in the early stages of a lockdown would be poor, and expensive, policy. JobKeeper, despite maintaining the link between workers and employers, is a blunt instrument. We’re still learning about the undeserving corporations, private schools and and other rorters who pocketed millions last time.
Morrison’s priority so far has been to avoid the toxic impression he initially gave over assistance that he was prime minister for NSW, and Sydney would get special treatment — especially compared with Melbourne. And restoring JobKeeper, even though it was a national program, would have reinforced the sense that what happened in Sydney mattered more than down south.
The latest Morgan poll last week, showing Labor 56-44 ahead in Victoria, would have concentrated minds within the government: it’s been generally assumed that Labor had its best shot at picking up a number of seats in Victoria in 2019 and the next election would be won or lost elsewhere. Maybe another $500 million in dodgy car parks will be needed.
The bigger challenge now is to confine the economic impact of the Sydney lockdown to the current quarter. Until a month ago, the government’s fiscal and broader economic policies were on track, with a recovery even stronger than previously forecast, and discussion of whether the Reserve Bank would be forced to move more quickly to a normalisation of monetary policy on the back of rapidly falling unemployment. Now the problem is once again about just how bad it’s going to get.
One scenario is NSW lets the construction sector resume, gets on top of the virus, and emerges from lockdown in mid to late August, with current support settings intact. Another is that lockdown — of one kind or another — persists into September, with Sydney cut off from the rest of the country for much of the remainder of 2021, while confidence takes a hit and the fall in the unemployment rate stalls, requiring much stronger support. Without that, there’s no bounce-back of the kind we enjoyed last year, but at best narrow avoidance of a technical recession and a muted recovery plagued by uncertainty, continuing problems in Sydney and no end in sight until half the population gets vaccinated.
Morrison and Frydenberg, in consultation with Berijiklian, have to work out how to respond fiscally as we see which scenario, or the more likely one somewhere in between, emerges. It’s a trickier policy problem than knowing there’s a national emergency and firing everything you’ve got at the crisis. And the consequences are different — get it wrong and Morrison and Berejiklian will wear the blame for sending us into a second recession in two years (get it right, of course, and they’ll still be beaten up for causing the extended lockdown in the first place). Meantime business, unions and everyone in between is shouting at them to bring back JobKeeper.
The good news is that the government has plenty of fiscal ammunition, having spent less so far than it anticipated last year. And Simon Birmingham is proving to be no Mathias Cormann when it comes to fiscal discipline.
The Berijiklian government’s formal decision to extend lockdown further in Sydney this week might provide the occasion for the federal government to scale up assistance still further. But don’t count on JobKeeper returning for a second go.
Usual excellent quality article thankyou Bernard Keane
We’re still learning about the undeserving corporations, private schools and and other rorters who pocketed millions last time.
Standard Coalition practice there.
get it wrong and Morrison and Berejiklian will wear the blame for sending us into a second recession in two years
Probably not, it’s amazing what can be done with the least diverse Goebbels modelled media in the first world. The myth that the Coalition are the better money managers persists despite the facts showing this to be nowhere near true.
why do journo’s pretend this jobkeeper rort is by ‘accident’? it was blatantly on purpose, it would have taken one line to say ‘if you don’t meet the requirements afterwards or your turnover/profit has increased you pay it back’. or are they all afraid of being accused of playing the politics of envy?
Jobkeeper turned out to be corporate welfare en masse, so bringing it back seems silly at the same time as it’s (correctly) being called a massive rort. Putting money directly into the hands of people who need it sounds prima facie a better use of taxpayer funds.
The TFN, gifted by Keating after the failed OzCard, is our universal identifier as demonstrated by the Labor response to the GFC – go fast, go hard, go families.
Could not be simpler so there has to be a reason the largesse was tipped into corporate accounts to distribute.
I wonder what was that reason?
Sorry, that should have been “go fast, go hard, go households”.
I would have thought with the body of work from the Jobkeeper 2020 edition, it would be relatively easy to fashion a 2021 edition that protected jobs without providing largesse to the Gerry Harveys that don’t actually need it. Make it available to any state that locks down for 24 hours or more at any time between now and 30 June 2022 (ie, after the election) and you protect jobs and encourage circuit-breaker lockdowns. It would be politically savvy, which makes me wonder why Morrison is resistant, and why Bernard Keane didn’t suggest it. There’s no point keeping your powder dry if you need it now to protect yourself.
And neither should JobKeeper return in the form of indiscriminate welfare for business. This hifalutin discussion about ‘policy’ exemplifies the ineptitude of government. Why is policy always exclusively confined to the dismal ‘science’ of economics? Why not instead work out the classes of individuals that actually need support and help them, then monitor the economic effects of being human.
Too much understanding and compassion has no real part in LNP policy or ideas. We’re talking of the good old fashioned working class, aren’t we? When has this group ever been prioritised (apart from recent covid payments).
I think you will enjoy this article by David Tyler for the Aimn titled:
Morrison and the exploding fish. A reverse ferret. Gladys under a bus. A khaki-Covid snap election?
Expect another round, when Morrison calls a snap khaki-Covid 2021 election with Lieutenant-General JJ Frewen in support; waiting at attention in the background.
I have found that if I put links sometimes the post is not posted for some reaosn.
I’ve been tracking and analysing the Covid numbers every few days since Australia’s first outbreak, and right now my view is that if Gladys Berejiklian is willing to float the idea of a Sydney lockdown into September, it won’t be ending in September.
I’m watching the ‘in community while infectious’ trends and the ‘local infection of unknown origin’ trends: a lockdown ending in September needs those numbers to drop to zero in early August at the latest, and those figures have been trending up, exponentially, at a rate that threatens to Melbourne’s daily caseload record by early to mid September.
Vaccinations will help, but there’s a lead time of weeks to months on widespread administration and a four-week lag time on taking effect, so forget them curbing transmissions by September.
Better mask compliance will help but it’s hard to quantify by how much and right now there’s no appetite for that in Sydney.
Which means we’re looking at Sydney lockdowns into October and possibly beyond,with the continued risk of transmissions escaping into the regions and possibly across the adjacent borders.
And SW Sydney is a major distribution and e-commerce hub, so there are knock-on economic impacts from any paralysis around that.
So do we believe that some growth in the rest of Australia will compensate for a likely October contraction? Just how much does the country need a November/December economic bounce to avoid a second recession before an election year?
And is ScoMo willing to make the BoJo trade-off in the UK of health for economics to make that happen?
(Or is anyone taking a bet that he won’t?)
My prediction: barring a truly miraculous vaxx rollout in Sydney over August/September, it’s either a second recession for Oz, or else an avoidable major outbreak of Delta by Christmas.
(Yeah, you’re welcome )
Disturbingly precise & accurate, as always.