Terry McCrann: PM’s subsidy scheme shows he just doesn’t get coronavirus crisis
As with the virus itself, we are only just starting on the journey through the economic and financial disaster, but the Prime Minister — and his treasurer — just don’t seem to get it, writes Terry McCrann.
Business
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Unfortunately, one has to say, the prime minister Scott Morrison and even more his treasurer Josh Frydenberg — and so, presumably, his key advisor, treasury head Steven Kennedy – just don’t seem to get it.
They are quite deliberately — and, I hasten to add, completely appropriately – closing businesses down right across the economy, and they seem to believe that providing loans and pitifully tiny wage subsidies will keep those people in them employed.
Frankly, is it a Canberra problem? Is anybody going to lose their job in Canberra? Is anyone there going to take a pay cut; far less a pay cut all the way to zero?
Let me try to explain it to you and to them. I’ll use the example of a business with a turnover of $39 million ($750,000 a week) and a wages bill of $26 million ($500,000 a week).
Only someone living in a Canberra bubble could believe that if that business’s turnover has been slashed to zero — to stress, that’s $0 per week — that a payment of $50,000 is going to keep it paying out that $500,000 a week in wages and salaries, week after week for who knows how long.
And that’s even before you take account of all the other regular costs of a business, like rent, power, insurance, etc. etc.
The same problem applies as you scale down to smaller businesses with turnovers of $10 million or $1 million, and through those that are losing ‘only’ say 50 per cent or 80 per cent of their turnover.
Yes, if you could know the pain was only going to be for, say 3 or 4 weeks, a business might be able to load up with debt and struggle through. But this could go for months.
And what about the cut-off, at $50 million?
In a yet further bizarrely Canberra ivory-tower wrinkle, you only qualify for any of this if your turnover is less than $50 million.
If it is exactly $50 million you don’t.
How exactly did the combined political and bureaucratic intellectual might conclude that if you were a business with a turnover of $49.99 million and your revenue was being slashed to zero, you needed help?
But if you were a business with turnover of $50 million, far less $51 million and so on, you’d sail through when your turnover was slashed to zero? Or do you now qualify on the basis that your turnover — at zero — is now less than $50 million?
The problem is both inadequacy and structure.
The fiscal support has to be done on a three tier-basis.
Yes, cheap loans, but don’t expect to be repaid.
Secondly, much more realistic subsidies to business to keep people in their jobs – like paying 50 per cent of wages and three-way deals on rents (govt, biz and landlord).
And at the third level, like what the Brits are doing, paying say 50 per cent of wages directly to people who lose their jobs.
As with the virus itself, we are only just starting on the journey through the economic and financial disaster.