As the COVID-19 crisis deepens by the hour, it’s becoming clear to even the most casual observer that the economic and social impacts will be with us for years to come.
The length and intensity of the aftershocks will be determined by the government’s response over the coming days and weeks.
It is, arguably, already too late. Thousands of workers are being laid off every day while casual hours evaporate and Centrelink collapses under the load of an unprecedented surge of claims for support.
The forecasts are dire. At the current rate Westpac chief economist Bill Evans
estimates that another 800,000 Australians will lose their jobs by mid-year, more than doubling the unemployment rate to 11.1 per cent. Mortgage stress and defaults are sure to spike, with a five per cent contraction
in the economy likely in the coming months.
It didn’t necessarily have to be like this.
Admittedly, even a capable government would struggle with the scale and complexity of the calamity we’re facing, so perhaps we shouldn’t expect too much from this lot. But Morrison has wilfully ignored economists and the lessons of other countries by failing to respond fast enough and in the right ways.
Bolstering the social safety net was a welcome move, and it seems like we’re getting closer to a comprehensive nationwide lockdown (which in the absence of a vaccine is the only solution – read more about that below), but their ideological reluctance to pour money into the economy will cost Australians dearly.
Morrison’s biggest mistake is his failure thus far to do anything adequate to protect jobs which, as the leader of a government deeply in love with jobs rhetoric, seems like a massive PR screw-up in addition to being an unconscionable dereliction of duty.
Businesses and unions alike have been urging the government to consider a wage subsidy to underwrite workers’ pay cheques and allow businesses to keep staff on the payroll.
It’s a model that’s been adopted all over the world. In the Netherlands companies that have taken a 20 per cent revenue hit are eligible for 90 per cent wage support. In Denmark, the government will match as much as 75 per cent of wages for companies facing the prospect of cutting at least 30 per cent of their workforce.
Even UK PM Boris Johnson, Morrison’s right-wing populist doppelganger, thought this was a pretty good idea, introducing an 80 per cent subsidy
on wages for staff kept on by their employer during the crisis.
But the Australian government has refused to follow suit.
Early in the week Morrison said a wage subsidy wasn’t feasible because the systems didn’t exist to pay it, something echoed
by Finance Minister Mathias Cormann on Friday. This, quite frankly, sounds like bullshit.
The ACTU, meanwhile, has proposed an Australian Coronavirus Wage Subsidy
program which, for companies that suffer a 25 per cent revenue decline, would meet 80 per cent of wages for workers who would otherwise be made redundant or stood down.
ACTU president Michele O'Neil said “keeping people employed is both a financial imperative and a public health necessity”.
“The Morrison government must provide at least the equivalent wage subsidy [as the UK] for Australian workers if we are to avoid mass unemployment,” Ms O'Neil said.
“The Government must reassure Australian workers, and the businesses who employ them, that they are with them and will mobilise all of our collective resources to combat the health, social and economic uncertainty that lies ahead.”
Let’s hope they start to listen. And that it’s not too late.
Alison Pennington is a senior economist at the Centre for Future Work and is therefore much smarter than me and actually qualified to talk about this stuff. As she identifies, the government’s ill-designed plan to boost business cash flows (what they falsely claim is a wages subsidy) actually “amounts to public support for income inequality”. Her piece on this topic in New Matilda
is well worth a read.