Terry McCrann: Victoria’s virus explosion needs a national response, so start with tax cuts
With a quarter of the nation’s economy going back into recession with Victoria’s latest lockdown, the real financial horror story could be yet to come. And there are three things the Federal government can do to prevent it, writes Terry McCrann.
Terry McCrann
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The Victorian lockdown is a major national disaster and demands a national response.
It could all on its own permanently destroy businesses and jobs that might have survived the national lockdown from which the rest of Australia is — hopefully — emerging.
Obviously, it threatens to destroy those jobs and businesses most directly and devastatingly in Victoria itself but it will also flow on to do so in other parts of Australia.
We saw this in the small yesterday when one shop owner phoned Neil Mitchell on 3AW to tell him that after struggling through the earlier lockdown, the new Dan Andrews one had forced her to close the 70-year old business permanently.
We saw it in the large yesterday when Solomon Lew announced his Premier group would close all its stores in Melbourne — at this stage, only temporarily, but let’s see — and would continue to not pay rent on them, feeding that pain out to property owners.
Tourism operators and hospitality more broadly right across Australia have not just lost their international customers for who knows how long, but now also one quarter of their domestic customers as well for six weeks — hopefully, no longer.
The real horror scenario — bad enough as is Victoria sending one quarter of the national economy back into recession — is if other states and most critically NSW had to follow.
That would be catastrophic and that prospect renders absolutely necessary sealing Victoria and Victorians off from the rest of the country. But it also demands that other states make absolutely sure they don’t do the same sort of bungling which has had such a catastrophic result in Victoria.
Near the start of all this, I had one plea: could we at least stop doing the “stupid stuff” after the Ruby Princess. Victoria has posed that question again.
The most obvious thing that the federal government could do — and the Treasurer Josh Frydenberg yesterday all but stated it would — is to bring forward the tax cuts promised in the last Budget.
Even before the virus arrived and caused the government to order the economy into recession, there was an argument some or all of those cuts should have been fast-tracked because of how soggy the economy was even then.
But back then around the start of the year — how far, far back into distant history does that look now? — the government, and Treasurer in particular, were still intent on getting a Budget surplus. Fast-tracking the tax cuts could have cruelled that.
Well, Frydenberg can well and truly kiss goodbye to that hope; there is no way — no way — that he will ever preside over a surplus.
He will join every treasurer we have had since Peter Costello in all having written all of their budgets in red ink. And Frydenberg’s will have been the richest and reddest of them all.
One doesn’t have to subscribe to the latest economic nonsense called “Modern Monetary Theory” — that deficits don’t matter (short response: they do) — to understand that these current deficits are both unavoidable and necessary.
Frydenberg, and indeed his predecessor as treasurer, the Prime Minister Scott Morrison, have certainly embraced that reality. So it’s a very short step now to bring forward the tax cuts.
While the cuts are not only necessary — and a desirable alternative/addendum to just more spending — they would clearly not be sufficient.
Most importantly, you only get a tax cut if you pay tax; and you only pay tax if you are earning an income (which, importantly, includes an on-payment of JobKeeper).
A tax cut would not put a cent into the hands of those whose jobs have been ordered destroyed by either the national lockdown or now the Victorian state lockdown. This means the federal government now has to do two things which it had been wavering over.
It has to permanently increase the JobSeeker payment — the dole. No, it does not have to keep it at the doubled $550 a week, but at the end of September it cannot return it to the old $275 a week.
Secondly, it has to make some extension of the JobKeeper payment. I would hope it would take the opportunity to fix the things it got wrong when it hastily tried to copy the far superior NZ version.
Frydenberg will deliver a Budget update in two weeks. We cannot wait for action until then.
Originally published as Terry McCrann: Victoria’s virus explosion needs a national response, so start with tax cuts