JobKeeper bungle throws a spanner in reform plans

Illustration: Tom Jellett

The $60bn JobKeeper blunder does not augur well for a government hoping to deliver once-in-a-generation economic reform. The prospect of systemic policy change was always optimistic, but this fiasco has made it even less likely. This monumental mistake is emblematic of a political system seemingly incapable of successfully implementing landmark reform.

The impact of the biggest budget miscalculation in Australian history is threefold: voters will be less willing to trust the government; the opposition has turbocharged its partisan attacks; and the public service has been shown to be ill-equipped to deliver 1980s-style economic transformation.

Achieving lasting policy change that wins public support and delivers a sustained uplift to growth, productivity and jobs has eluded governments for almost two decades. Our political system has been gridlocked and gummed up for so long that the degree of difficulty is even harder than it was for the Hawke, Keating and Howard governments.

Add to this the erosion of trust in politicians and institutions in recent decades, the revolving-door prime ministership, the diminution in the calibre of ministers, the impact of social media and the 24-hour news cycle, and the declining importance of think tanks, business groups and unions. None helps reformist governments.

In the immediate future, confidence in the Coalition managing the economic response to COVID-19 will be undermined. While this is a public service gaffe, the Treasurer and the Prime Minister must take responsibility for it and have done so. But achieving permanent policy change requires the government to have credibility and authority to secure and maintain voter support.

Scott Morrison has rebuilt political capital in recent months. Josh Frydenberg has been an effective Treasurer. But this error will dent their credibility and authority as economic managers. It will make it harder to convince voters to trust them on big policy ideas in the future. Popularity can be fleeting in politics but trust, when it is gone, is difficult to rebuild.

Second, major reform is difficult when the opposition is implacably opposed. There are plenty of examples of recalcitrant oppositions in the Hawke-Keating and Howard years not supporting government initiatives. But these days, given the more tribal nature of politics, oppositions have louder voices and governments are not as talented as they once were.

The JobKeeper mistake has seen Anthony Albanese’s much vaunted bipartisan approach — he says — to the COVID-19 response go out the window. The opposition has reverted to type: overly political, cunningly opportunistic and sneeringly cynical. Albanese and Jim Chalmers have gone for the jugular and not missed. Their criticism of Morrison and Frydenberg has been personal, pointed and unforgiving. The Albanese-Chalmers one-two punch has probably extinguished any chance of genuine co-operation on a significant post-pandemic economic or social policy plan. Labor was never really all that bipartisan or interested in being a reform partner anyhow. This is understandable given the attacks that have come their way over Labor’s economic stimulus package in response to the global financial crisis.

Third, this bungle questions the capacity of the public service to develop, cost and implement big policy initiatives. The Treasury, once the most respected and feared of departments, is responsible for a huge error. In recent decades, Treasury has been gutted of expertise, its independence has diminished and its influence as a policymaker has declined.

Bernie Fraser was secretary of Treasury from 1984 to 1989 and governor of the Reserve Bank from 1989 to 1996. Fraser, who began working for Treasury in 1963, is saddened but not surprised by the JobKeeper miscalculation.

“It symbolises the problems that have beset the public service in recent years,” Fraser said. “Right from the beginning of my time it was important to get the figures absolutely right and if the figures didn’t look right, then they were wrong. This was imprinted in my mind from very early days. Those up the ladder also checked the figures closely because their credibility was on the line.

“The public service has lost the respect that it had under earlier governments. Public servants come a distant second to ministerial advisers these days. Public servants too often want to protect a minister. It is no surprise the public service has diminished as a career for so many. The quality and accountability of the public service has suffered. These things should not have happened and would not have happened in earlier days.”

Frydenberg said businesses incorrectly filled in forms sent to the Australian Taxation Office. But that does not explain how JobKeeper was costed by Treasury at $130bn but now will cost $70bn.

All governments were struggling to forecast the economic impact of COVID-19. But this slip-up is greater than the cost of any other short-term program implemented by the Australian government.

This accounting blooper may be good for generations of taxpayers, who have less debt to repay. But the argument for not extending JobKeeper to other sectors of the economy left out in the original design due to the cost is no longer convincing. Nor is the argument for not extending a version of the scheme beyond September. The result is the $60bn JobKeeper bungle will damage the government and chances for delivering major economic reform.

On a personal note, this column will be paused for a few months while I continue working on a biography of Bob Hawke. I was reluctant to take a sabbatical from journalism as it seemed we might be on the cusp of an exciting new era of reform. Well, that was probably never going to happen. The JobKeeper fiasco has confirmed it. Australian politics will remain, as ever, a busted flush.