Pandemic support must be targeted, not random

The human story of this recession is that the road to recovery will be littered with unnecessarily broken lives. Picture: AFP

This week the government paid $3.8bn in lots of $750 to five million people who don’t need it — their incomes have been unaffected by the pandemic.

That’s because they are mostly pensioners: people on the age pension, the bereavement allowance, the carer allowance, the carer payment, the commonwealth seniors health card, the disability support pension, the double orphan pension, the pensioner concession card, and those receiving Family Tax Benefit A and Family Tax Benefit B.

None of them has had a cut in income as a result of the COVID-19 recession except maybe those on the family tax benefits, although the tax benefit itself stays the same. Pensions and allowances have not changed.

So why are they getting $750 each? Because it’s easy to give it to them. The government has their bank details already so no public servant has to do any actual work tracking people down.

The hope is that they’ll spend it, so the people who really are struggling as a result of the coronavirus will get some of it, but that’s just a hope. Maybe they’ll spend it, maybe they won’t; maybe the money, if it’s spent, will go where it’s needed rather than through the pokies, maybe not.

Therein lies the problem with the government strategy up to now for dealing with the 2020 recession: the cash hose has been on the “shower” setting rather than “jet”. They have gone for the easy way, rather than the way that gets money into the hands of those who need it.

As a result, a lot of people who were getting less than $1500 a fortnight have got a surprising pay rise from JobKeeper, and as discussed pensioners have got two unnecessary lumps of $750, while universities, for example, are sacking thousands because they missed out.

It’s part of a broader issue that politicians share with economists, which is that they watch ABS statistics and talk about the pandemic’s effect on “the economy”, while doing “fiscal stimulus” to boost it.

While the pain of recessions is never shared equally, in this one there is a massive and unfair disparity between the clear winners, the unaffected and the losers, which makes it meaningless to look at “the economy” alone.

Devastation of the lockdowns

The devastation of the lockdowns is very specific, as we know: hospitality, tourism and travel businesses, CBD retailers, any retailer that can’t do online, arts and entertainment businesses — they’re all buggered. Many will never reopen, crushing the dreams and livelihoods of thousands of Australians who own them and work in them.

The government, meanwhile, is spraying money in ways that are easy, hoping that some of it gets to those that need it.

Apart from the two $750 dollops going to people whose bank account details they’ve got, the JobKeeper allowance is being delivered by the ATO using existing payment mechanisms, because it’s easy, and the JobSeeker supplement is being delivered by Centrelink for the same reason.

That’s not to suggest that a lot of the money isn’t finding its way to people who need it and who are very grateful for it, but there are lot of people getting more than they need, and a lot of others who are getting nowhere near enough for them or their businesses to survive, and in some cases, nothing.

In short, while the use of the existing payment mechanisms has meant that the money got out faster than it might have done otherwise, it also means a lot of it is being wasted and a lot of people are missing out.

It not only leads to personal tragedies, but also to a serious economic problem, because the windfalls of those who are getting more than they need, such as pensioners, will not offset the damage caused to those who are missing out.

That is, the economic impact of businesses closing permanently because they didn’t qualify for JobKeeper, or because the money is not enough, will simply not be made up by extra spending by the winners.

Could it have been done differently? Of course. The government took far too long to figure out what was going on and to work its way up to the $130bn package announced on March 30, later reduced to $70bn.

If it had moved earlier, perhaps when the sharemarket realised that the manure was hitting the fan back on February 20, more sophisticated and targeted payment systems might have been put in place.

Thursday’s statement on the next phase of the “fiscal support” needs to be fundamentally different in the way the support is distributed, not just less of the same.

“The economy” will probably end up being OK — Thursday’s employment data was pretty positive and the stockmarket has already recovered most of its losses. Official unemployment will rise to 8 per cent or so, GDP will shrink a lot in the June quarter and then rebound, house prices might fall 10 per cent, although the unemployment data is rubbish and the GDP irrelevant. But that’s another story.

But the human story of this recession is that the road to recovery will be littered with unnecessarily broken lives and the ABS data for 2020 and 2021 will be forever stained with their tears.

Alan Kohler is the editor in chief of Eureka Report