Pandemic capitalism with Australian characteristics

On Monday, new social restrictions came into effect in Australia, with a two-person limit for outside gatherings to contain the spread of coronavirus. New Zealand has closed its borders to nonresidents, as we have, and declared a state of emergency. New York State extended its emergency “pause”, asking non-essential workers to stay home until April 15. In Sweden, life carries on as normal, with public health officials arguing COVID-19 can be stopped solely by vaccination or herd immunity. Brazilian President Jair Bolsonaro is defying calls to stop gatherings because of “a little flu”. “The virus is here, we’re going to have to confront it. Confront it like a man, not a boy!” he told his nation. Brazil had a similar number of infections to ours on Sunday, about 4000; it had 114 deaths compared with 16 here. The pandemic sees countries going it alone, both medically and economically, doing what suits them based on means, culture and capability.

That’s the context for the historic and eye-watering in scale $130bn JobKeeper package of wage subsidies announced on Monday by Scott Morrison and Josh Frydenberg. It’s the third fiscal rescue effort in 18 days, mere “stimulus” now recast as a retro, low-sugar tonic. This move is sold as a lifeline. More like a vital organ donation. Australia progressively has been doing whatever it takes to “keep the engine running”, as the Prime Minister described it. That has seen $320bn, or one-sixth of the size of our economy, allocated to cushioning the blow from the pandemic. Remember, Canberra’s annual spending on everything is $500bn. Mr Morrison said now was the time to “dig deep”. We are lucky to live in a country where authorities are able to do so, although this will be paid for, and then some, by taxpayers long after the calamity is over. It’s a gobsmacking remaking of our economy, if only temporarily.

We are fashioning an evolving strain of crisis capitalism with Australian characteristics. The new package will give eligible employers — those whose revenues have plunged by 30 per cent or more — a $1500 per fortnight wage subsidy for six months to retain each worker who was on their books at the start of this month. By binding workers and employers in this way, the scheme does a few clever things. One, it means the recovery, when it comes, will be swifter. Two, workers will have a better chance of maintaining skills. Three, it will keep people on existing payrolls and be administered by the Australian Taxation Office. Four, it will take pressure off welfare infrastructure, such as Centrelink. Five, it applies to a broad category of workers. “This is about keeping the connection between the employer and the employee and keeping people in their jobs even though the business they work for may go into hibernation and close down for six months,” Mr Morrison said. The government estimates that six million workers, including contractors, sole traders and casuals, will benefit.

Mr Morrison emphasises the flat JobKeeper payment, unlike the British scheme that guarantees 80 per cent of salary, is a better fit with our social egalitarianism. It will, however, cost a lot more. The Treasurer said $1500 a fortnight was equivalent to 70 per cent of the national median wage or 100 per cent of the median income for workers in the most affected sectors: hospitality, retail and tourism. At face value, Mr Frydenberg’s wage-subsidy scheme has taken the best aspects of the British and New Zealand models. Perhaps it is the “last mover” advantage. As well, to iron out welfare system anomalies and likely snags for families where a partner loses a job, the government has temporarily adjusted partner income tests to just below $80,000 for JobSeeker payment.

Even though this is a policy move without precedent, it does fit our values. It certainly fits with desperate times. And it fits with the government’s rhetoric from the start that responses would be scalable, proportionate, targeted and within existing delivery systems. Again, Mr Morrison is fighting a war on two fronts; he is not choosing the economy over health, or vice versa. His mantra is saving “lives and livelihoods”. Given how swift the play, it’s remarkable that he has been able to switch between two modes. Having immense financial resources from the start — and being prepared to ditch long-held conservative doctrines — has been an advantage for Mr Morrison and his custodian. Whether it is fiscal overkill will become apparent only well after the crisis. It will take fortitude to wind back this mammoth expansion of the state; not so much the taking away as the paying back.

“Capable states,” posits veteran strategic analyst Allan Gyngell, “whether democratic or authoritarian, will address the health and social problems more effectively and get their economies moving faster when the crisis passes.” Like Singapore and Germany, he argues, Australia is likely to be among those successful states due to effective public institutions. With so many different paths taken, it’s a time to keep our heads and trust our fundamentals: experts, officials and delivery systems. That doesn’t mean we ignore lessons of good practice: South Korea’s testing regime, Singapore’s contact tracing or Germany’s wage subsidies. Nor should we revert to jingoism. That’s as much a test for Mr Morrison and his medical and economics brains as it is for armchair epidemiologists or those advocating a radical course. For now, we are in a position of strength. Even if there are missteps, our endowments, core values and newly super-sized public sector can beat this devastating biological foe.