ALP takes the low road on JobKeeper

People queue outside the Darlinghurst Centrelink office in inner-east Sydney in July. Picture: Jane Dempster

The nation’s policy commentariat has worked itself into a lather recently about billions in JobKeeper waste. The story went mainstream when it found its way into the Nine Network’s 60 Minutes. Critics from the left and right are baying for blood.

The opposition is having a field day. But it’s all rather tiresome, and it completely misses the bigger picture. Yes, JobKeeper saved our economy. But it also could have saved our politics. And the fact it didn’t is, sadly, Labor’s fault.

There was a lot to like about JobKeeper. Its design ensured fiscal support got to those who needed it most, workers and small businesses, through a highly effective delivery mechanism: payrolls. It prevented many businesses from going to the wall and from shedding many thousands of their employees.

This enabled an explosive rebound once the pandemic was under control. The rapid reduc­tion in our unemployment rate to 4.7 per cent while we were still under-vaccinated and yet to reopen properly shows what’s possible when fiscal and monetary policy work together in a low-growth, low-inflation world.

It holds out the prospect of an unemployment rate with a three in front. None of this is to say the scheme was perfect. The lack of a clawback mechanism and the exclusion of certain workers were oversights. With the benefit of hindsight, there are many lessons to inform the design of a better scheme in future. Indeed, the government implemented many such changes when it tweaked the scheme after six months.

And the arrangements it has in place today, while as generous as JobKeeper, are far better designed and likely to do an even better job. The fact the government is learning from experience and refining its response in real time is commendable yet seems lost on some who appear incapable of giving credit where it’s due.

Despite all of this, the public discussion has devolved into a populist riot desperate to expose which recipient experienced rising revenue after the fact, which paid executive bonuses, which paid foreign dividends, and so on. Sadly, these flames have been fanned gleefully by Labor, which found the short-term political opportunity too good to resist.

In doing so, it failed its own kind of Stanford marshmallow experiment. In the 1972 version, psychologist Walter Mischel offered children the choice of one small but immediate reward or two small rewards if they waited for a time. JobKeeper presented an opportunity for Labor to transform our politics. Instead, it chose instant gratification.

Last year a Liberal government whose brand consisted largely of railing against debt and deficits did an extraordinary thing. It understood the national interest called for unprecedented spending. It understood saving the economy from the pandemic required deficits as far as the eye could see. When it counted, the country was put above party and economic necessity above brand.

This presented the opposition two roads. The first – let’s call it the low road – was to wheel out the debt truck. To remind us of the enormous bill the government racked up. To pillory billions in JobKeeper waste. To decry the pandemic response as rank incompetence. The second – the high road – was to claim vindication. To congratulate the government on seeing the light. To note that maybe all that spending back in 2008 wasn’t so bad after all. To welcome this transformation of the fiscal rule book. Alas, it chose the low road.

We don’t pretend the alternative was easy. In the wake of 2008, the Liberals crucified Labor on a cross of debt. Though Australia was just about the only country to avoid the Great Recession, the now quaint sum of $50bn in stimulus became a cudgel with which to beat those reckless, irresponsible Labor economic mismanagers.

The Liberals were wrong then, just as Labor is wrong now. For an opposition, patting the government on the back is hard. Just ask John Howard, who spent years in the wilderness after having done that. But sometimes you have to be the bigger person for the sake of the country. The country may even reward you for it.

This could have been one for the true believers. It could have been Labor’s moment. The party could have embraced this new, better rule book and entrenched it for good. Instead, it’s doing its darnedest to drag us back to the old one. Sadly, it blew it.

Steven Hamilton is assistant professor of economics at George Washington University and visiting fellow at the Tax and Transfer Policy Institute at the Australian National University. Richard Holden is professor of economics at UNSW Business School and president-elect of the Academy of Social Sciences in Australia.