Pushing envelope for recovery

Josh Frydenberg described the May labour force statistics as a devastating set of figures. In two months, the number of jobs liquidated was 835,000. People are abandoning the labour market. If the participation rate had stayed at its pre-pandemic highs, the unemployment rate would be 11.3 per cent rather than 7.1 per cent, which is bad enough. At the end of the previous deep recession, Australia’s jobless rate was 11 per cent. It prompted straight-talking, if discreet, Treasury secretary Ted Evans to famously declare in October 1993 “for the nation as a whole, the level of unemployment is a matter of choice”. As Paul Kelly explained in an April obituary, the late Evans meant the level of unemployment was just as much a political decision as an economic one and depended to a large extent on decisions politicians took about labour market flexibility.

On Thursday, Scott Morrison went close to pledging to carry the “whatever it takes” spirit of keeping a COVID-addled economy on life support beyond the September cut-off dates for the new JobKeeper wage subsidy and JobSeeker booster shot. Not that the Treasurer is planning a fiscal splurge in next month’s economic statement. Rather, with a record 20 per cent of the labour force unemployed or seeking more hours than they can get, the transition will be delicate and require further income support for workers in the most-affected industries, with young people and women likely to need extra help. That’s the demand side. But the Prime Minister argued his five-year supply-side JobMaker plan would be the key to clawing our way back to the pre-crisis growth trajectory.

Mr Morrison declared he would be “pushing the envelope” on reforms, with the goal of lifting growth in gross domestic product to 3.5 per cent, or by one percentage point above our long-term rate. He has set an ambitious, perhaps unrealistic, metric by which his performance will be measured, as well as a context for the supply-side fixes his executive must bed down. No doubt the likelihood of passing legislation on cutting red tape, industrial relations flexibility and lower company tax, if it will ever get to that, remains a severe constraint. That’s what Evans meant about unemployment being a choice. We hope Labor and the Senate crossbench will reflect on that when the crunch comes later this year. But it should not deter the Prime Minister and Treasurer from being bolder, with the reformists’ mantra “if not now, when?”, and arguing for policies that incentivise businesses to expand, invest, innovate and hire people.

The government also is hoping the five working groups of employers and unions on workplace reform will find common ground to, among many matters, reduce the number of awards and their complexity; speed up deal-making processes and aid compliance; and improve greenfield agreements and those covering casuals. JobKeeper is not perfect but it has kept three million workers in touch with their employers. The economic emergency, by necessity, has seen co-operation and more flexibility in the way work gets done. It has been a quiet triumph of common sense and purpose. Mr Morrison said this mindset would be vital in recovery because too-rigid systems would mean people needlessly losing jobs in the tricky transition in the latter part of the year and beyond. That same spirit also should guide the national cabinet, charged with raising skills levels and reforming federal financial relations.

This leads us to the reopening of the economy and the issue of borders. As Rosie Lewis revealed on Thursday, border closures and the clampdown on interstate travel are costing nearly 5000 jobs a week and shrinking GDP by $84m a day, according to modelling for the Australian Tourism Industry Council. Queensland is the worst- affected state but is reopening its border on July 10. South Australia is letting in some people before fully reopening in a month. NSW, Victoria and the ACT never closed their borders, while Western Australia, Tasmania and the Northern Territory remain in limbo. Tourism operators are right to argue we are “living in a state of confusion”. The medical advice has been clear, so again, this dislocation is a matter of choice. As Mr Morrison put it bluntly: “If we want Australians back into jobs then we need Australia open.”