Expanding role of government during COVID-19 ‘hurting economy’, Goode warns

One of the nation’s most senior business leaders, Charles Goode, has warned of lower economic growth and a bigger welfare state.

Tony Burgess, Charles Goode and Farrel Meltzer at 101 Collins in Melbourne. Picture: David Geraghty

One of the nation’s most senior business leaders, Charles Goode, has warned that the explosion of government intervention in society to deal with the coronavirus pandemic could lead to lower economic growth, a bigger welfare state and more left-wing political policymaking in the future.

The former ANZ and Woodside chairman also fears the role of the Reserve Bank could become increasingly politicised in the wake of the emergency action it has undertaken to respond to the pandemic crisis.

“We have wanted and accepted and needed much greater interference in our world,’’ Mr Goode said in a rare wide-ranging interview with The Weekend Australian in the offices of boutique corporate advisory group Flagstaff Partners, of which he is emeritus chairman.

“Sixty per cent of the working population works for the government or is supported by the government.

“It will be difficult for governments to withdraw this support. So I think we will have a greater government involvement in our society than previously. That may move the political needle to the left. That may lead to slower growth and a more welfarist society.

“I am reminded of that comment by Ronald Reagan, that he said of government: if it moves government taxes it, if it keeps on moving you regulate it. When it doesn’t move you subsidise it.

“There is not a lot of evidence in the history of governments withdrawing from territory once they have captured it.

“I think we will have a much more government-involved society.”

READ MORE: Bank dividend ratios to hit 50pc: Goode

Mr Goode, who was joined in the interview by Flagstaff chairman Tony Burgess and Wingate founder and managing director Farrel Meltzer, said the RBA had moved from being a lender of last resort and the setter of interest rates to being a major player in the financial markets, after providing a $90bn funding facility to encourage banks to lend to business and intervening in the bond market.

“It is no longer talking about inflation-targeting as about assisting to reduce unemployment to stimulate the economy,’’ he said.

“A much wider ambit of comment is coming from the RBA.

“We are in danger of losing some of its independence and it becoming an arm of the political policy of the government.

Mr Goode, a director of investment company and major Liberal Party donor the Cormack Foundation, said he believed the pandemic had a greater impact than anything he could remember since World War II.

The crisis has led to levels of government intervention in the economy not seen since the post-war era, especially the government’s unprecedented JobKeeper and JobSeeker support packages.

Melbourne entrepreneur and philanthropist Alan Schwartz this week questioned how Australia would have fared during the coronavirus crisis without strength in the government, the bureaucracy and the public health system.

“Government is always the solution, in crisis and in normal times — protecting us against misleading advertising and medical and pharmacological quackery, educating our children, building our roads, protecting the vulnerable and the weak,’’ he said, applauding the bipartisan investment in the nation’s public sector over many decades. “COVID-19 is just an extreme example that helps us see that markets and business, as powerful and useful as they are, cannot deal effectively with things that we need to do together as a community.

“When government is too small we have a problem; when government is too big we have a problem.”

Mr Burgess supported the war analogy to describe the current crisis, which has taken out a huge proportion of the productive capacity of the economy.

“It is accentuating a turning point. This is going to push further on the retreat from the global economic liberalisation we have experienced which has led to a lot of prosperity for 40 years. You can see it in the blame game — there is a lot of fracturing going on at the moment. That is a worry. These changes were happening anyway but there might be some acceleration or reinforcement of those changes,’’ he said.

Mr Meltzer said he was hopeful the societal changes that would flow from the unprecedented lockdown would become part of the “ongoing cycle of life”.

“We have had many crises through history. These challenges come and people are resilient, they bounce back and in the end we become stronger as a society and an economy. It is part of a journey that is going to make the world a better place,’’ he said.

“People will be forced to reflect and become more mindful and appreciative of the simple things going forward.”

Immigration in Australia is forecast to fall by 85 per cent next year due to the coronavirus crisis.

Labor home affairs spokeswoman Kristina Keneally earlier this month linked rising unemployment and weak wages growth to “the shape and size of our (migrant) intake”.

But Mr Meltzer said he was wary of any knee-jerk reactions by policymakers to cut immigration.

“Any extreme swinging of the pendulum driven by unnecessary fear or political reaction or expedience can only be bad for the country in the long run,’’ he said.

The Morrison government’s pursuit of an independent international inquiry into the origins of COVID-19 has also renewed tensions in Australia’s relationship with China, which has prompted the Chinese to impose tariffs on Australian barley.

Mr Goode said Australia would continue to have greater tensions with China.

“China is changing under President Xi Jinping. There is less freedom than there was five years ago. It is a more difficult animal to deal with than it was. I think the US will have more tensions with China. It will be a big factor in the upcoming presidential election,’’ he said.

“This crisis has shown we have become too dependent on China for tourism and education. China works by different rules to us and they are prepared to threaten trade with us if we make statements that don’t agree with their worldwide interests. I think we will be more cautious on Chinese acquisitions in FIRB and we will seek to diversify some of our industries.”

The World Health Assembly this week agreed to an independent inquiry into the source and handling of the coronavirus outbreak, but the Chinese claimed it was different from the politically motivated inquiry sought by Australia.

Mr Goode said it was in the world’s interests that there be greater understanding of how the virus originated and spread. “I would like to see (Prime Minister Morrison) call for a scientific study into not only the origins of coronavirus, but how it spread, and what were the best approaches to containing that. This could be organised by the UN or the WHO and could comprise scientists around the world, including from China,’’ he said. “Instead of being an investigation, it should be a scientific study which may be more likely to get Chinese support and be less political.”

Mr Burgess said there was good reason to be worried about the current clash with China.

“We have to be mindful of our own best interests in how we conduct ourselves. China is 33 per cent of our exports. You would be unwise to gratuitously do anything to undermine that trading relationship,’’ he said. “We have probably allowed things unnecessarily to get out of balance.”