Generous JobKeeper gave us a very good virus

Many, and quite probably millions, of Australians have had a ‘very good virus’, but none more so than public servants.

Compared to other nations Australia has been relatively untouched by the global pandemic. Isabella Kulling and Abigail Dodgson in the sun Bondi beach with masks on. Picture: Damian Shaw

Some, indeed many and quite probably millions of Australians have had a “very good virus” — just as many had, if they survived the initial catastrophes, a “very good GFC”. Thanks in both cases to the policies of governments and central banks, including our own Reserve Bank.

I am talking of course about having a “good virus/crisis” in the financial sense. Clearly, we have also had a “very good virus” in the actual virus sense. At least, so far.

According to the rich lists we went into the GFC in 2008 with around 30 billionaires; we emerged with some 35; and then we just kept, for want of a better word, growing them since.

By 2019, we had grown that number to 90; then along came the virus and the worst, if also the briefest, recession in our entire history, and yet we emerged barely months later with, according to The Australian’s The List — Rich 250, some 122 billionaires.

Across the Pacific, the Americans have “done it” much bigger.

Further, this time there wasn’t even the ritualistic fear and loathing and virtual jumping out of windows, Great Depression-style, that we did see in 2008, on Wall Street, Midtown and the Upper East Side, in those really crazy days after Lehman went down.

According to the latest list from Forbes, America — mid-virus last year — had 614 billionaires.

On first acquaintance, that makes our 122 look very impressive on a pro-rata basis. But the American ones are real-dollar billionaires; we only had 90 or so of them, depending on the exchange rate used. True, still well more, pro-rata.

Of course, they did do it bigger in absolute terms. The two richest, Amazon’s Jeff Bezos and Microsoft’s Bill Gates, came in at $US179bn and $US111bn respectively.

In our dollars, that’s $235bn and $145bn, although I’m not sure whether the Bezos number is pre or post-divorce. Whatever, they sit somewhat higher than our two richest, Gina Rinehart at $36bn and Andrew “Twiggy” Forrest at $30bn.

There of course hangs a neat and vast encompassing tale not of two cities but of two national dynamics. The two in America got rich digitising and conquering the world; our duo got rich digging up WA and shipping it off to China.

They are also, as I have written but it bears repeating, Australia’s two single biggest individual taxpayers, paying over $1.1bn between them in the 2018-19 year, well over $1.5bn on my estimate in the 2019-20 year and over $2bn this year, thanks of course to China’s insatiable demand.

The Chinese can do without their rich red Grange galore; they cannot do without our rich red Pilbara ore.

That’s the tax the duo effectively pay at the corporate level; Fortescue and Hancock Prospecting. But again, it’s worth pointing out, to the extent those corporate profits flow to them as individuals via dividends, they will end up paying much more, adding to 49c in every dollar of the underlying corporate profit. Plus the state royalty.

It’s not just the very rich. That wealth accretion has percolated deep into the suburbs, especially of Melbourne and Sydney.

Andy Warhol famously said that in the future everyone would have their 15 minutes of fame. The – very un – social media that of course did not exist in his day has delivered 15 minutes of infamy instead for everyone.

Now, that generic “everyone”, at least in Melbourne and Sydney, is well on the way to being a millionaire; at least, initially, in gross terms — the value of the property they’ve purchased — and in time in net terms as well.

In the both cases, the virus and the crisis, if you went into it owning assets, you emerged with the value of those assets, broadly, enhanced.

The experience of the 1930s set the pattern. If you went into the Great Depression rich and not over-geared and kept your wits about you, you could emerge even wealthier — and straight into another wealth-generating opportunity: World War II. But that’s another story.

The great difference between then and the two nows — the crisis and the virus — is that this time, governments and even more central bankers have been actively and aggressively pro-wealth retention and indeed pro-wealth expansion.

They have done so with zero or near-zero interest rates and QE, printing of money that has facilitated governments delivering massive and what will be permanent budget deficits of the like that previous generations of both policymakers and politicians would, far from blanching at, would never have in their wildest imaginations conceived possible.

I certainly don’t resile from my comments last week that one (of the two) big thing(s) the government got right was JobKeeper.

Irrespective of the financial impacts, the government had a moral obligation to do it after destroying or damaging businesses and jobs.

It’s now become apparent, or should be, that JobKeeper — and another policy — had a very big consequence in “spreading” the “having a good virus” further down the wealth pyramid.

That other policy was the $32bn-plus the government handed out, free and clear, to 690,000 SMEs.

The way JobKeeper was structured, you only had to have had one very bad month through 2020 to get it for at least six months. For the great swathe of SMEs — those outside Victoria — it turned into a $1500-a-fortnight-per-employee free gift for at least three months.

The focus on the supposed big-business rorters completely misses both the point and the numbers. It was actually hard for big business to get JobKeeper outside the specific policy victims like Qantas.

As the Ownership Matters analysis showed, big biz got $2.5bn of the initial $80bn of JobKeeper last year. SMEs got the other $77.5bn plus the $32bn in the direct hand-out.

The other group which had a “very good virus” were of course the two million with jobs in the public sector; they kept their jobs and got pay rises, and something of a holiday.