Analysis
Updated
The daily shockwaves hitting us in the time of the
coronavirus can mean the extraordinary nature of individual changes can
be lost.
Never was this more true than this week when the Morrison
Government announced, first, an extraordinary $130 billion wage
subsidy, then, a few days later, free childcare.Politicians have taken to ramping up the sound of their announcements over recent decades: a budget surplus of eleventy gazillion dollars (small print, in 30 years time); spending $30 gazillion on new roads (small print, over 10 years). That sort of thing.
The numbers have become so meaningless and incomprehensible to most voters that it has made the small, local announcements of $5 million for new change rooms at the footy oval (of the sort that have featured in the sports rorts affair) a much more potent political weapon.
But this week was something new.
Scott Morrison and Treasurer Josh Frydenberg announced they would spend $130 billion on wage subsidies in the next six months to keep people in jobs, or at least in hibernating jobs.
It was an extraordinary thing to do, a much needed and good thing to do in the circumstances. And it obviously represented a huge break in the thinking of a conservative government, just as completely refashioning the finances and support of the childcare sector required a complete break with its past views.
The extent to which the economic crisis — and the necessary responses — now surpass anything that happened during the global financial crisis is highlighted by the figures from the US this week showing an extraordinary 6.6 million people registering for unemployment benefits (10 times the worst week in the GFC) and estimates the US unemployment rate has jumped from 3.5 per cent in February to 17 per cent.
The Morrison Government speaks now of the bridge to the other side of this crisis; of returning to some form of business as usual, but also of adjusting for now to the new normal.
It has enlisted community leaders, as well as public servants, to track a path back to "the other side".
But one of the most difficult tasks we now face is actually working out what any kind of new normal might look like, and what it will require of politicians and government policies.
Are 'snap back' policies even possible?
Consider, first, just some of the changes that have been forced on all of us — not by government fiat but circumstance — in just a couple of quick months. Changes we have all talked about for years.Working from home. Telehealth. Online learning. These are all things that have happened to some extent in the past. But we have now been forced to adopt them on a scale never before imagined.
Will we necessarily go back, in any of these areas, to the way things were before?
Now consider some of the changes made by the government.
The Prime Minister repeated this week that:
"One of the important principles we've put in place is to ensure that the [spending] measures are temporary and they do not provide long tails of expenditure.It's clear what the Prime Minister means here: the Government is avoiding announcing spending programs that extend over more time than necessary, and are also able to be turned off if things improve quickly and they are not needed.
"Now, it's an observation, it's not intended as a criticism. It's just learning from history. When we went through this last time [in the GFC], there were long tails on expenditure and there were structural changes to expenditure.
"There are not structural changes here. There is a snap back there, a snap back to the previous existing arrangements on the other side of this. And so there is an intensity of expenditure during this period.
"And then we have to get back to what it was like before."
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Where's the realism?
But we also need a bit of realism. Adding $200 billion to spending — which is the rough running total to date — represents a massive structural change in the budget in the form of the cost of public debt interest.This is just as it must be to save lives and try to keep the economy functioning. But we shouldn't kid ourselves what a huge structural change in the budget it will represent.
This isn't on a scale that can addressed by simply cutting back programs you don't like as a Government.
It is of a scale that will require — globally — either higher taxes or printing money.
Politicians may furiously refuse to acknowledge this for now.
The Federal Government was insisting this week that it was still intending to go ahead with legislated tax cuts and would not contemplate the sort of tax savings measures put forward by Labor at the last election — like changes to franking credits.
But it is just the way it is.
We are likely to emerge from this episode internationally with a much higher inflation rate, and a range of other very different economic variables.Savings for retirement which were once on a level that meant people could self-funded will have been eroded away, requiring a lot more reliance on the state.
People who have been heavily over-extended in negatively geared property will be limping through, and likely to wind back their investments, meaning huge changes in property markets and rental market availability.
The community perceptions of risk and reward will change: consider the approach to thrift of the generation who grew up in the Great Depression.
And there is the question of just how realistic it is that the threat of this virus will dissipate and the Government will be able to simply quickly turn off forms of assistance like the JobKeeper allowance and the increased JobSeeker allowance, or return to the previous system of funding childcare, or not intervene in areas like mortgage holidays and eviction moratoriums.
Legislation to protect tenants from exorbitant increases in rents in the years after World War II was still in place in some states 40 years later.
Video: PM says he's drawing inspiration from his grandmother during coronavirus pandemic.
(ABC News)
Relationships have changed
So many relationships in society have been changed — not necessarily for the worse — by this sudden shock to the world: the relationships between banks and their customers; the relationships between unions and employers.Some of the most interesting changes in the past few weeks have been somewhat overlooked amid the more momentous health and assistance spending.
That is particularly true of agreements to make significant changes to industrial awards covering millions of workers to put more flexibility into what wage earners can do, and when they can do it.
Those changes are supposed to have limited lives. But the experience of having made those changes and seeing how they work will mean unions and employers will be compelled to look at the old way of doing things anew.
Equally, it feels like all our politicians have benefited from the experience of the national cabinet, a venue in which the Federal Government has for once not been able to simply dictate the terms to the states and territories.
In an era in which executive government has increasingly done just what it liked, the push and pull of different ideas being tested between governments which have different powers, has been a good thing.
We are heading somewhere different as a result of this crisis. It may not necessarily be somewhere worse.
Laura Tingle is 7.30's chief political correspondent.
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