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The 160,000 jobs lost while the government waited

May 5, 2020 • 14m 24s

Serious questions are being asked about whether the timing of the government’s economic relief packages may have actually led to job losses. Today, Mike Seccombe on the flaws in our rescue package that could have cost 160,000 jobs.

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The 160,000 jobs lost while the government waited

216 • May 5, 2020

The 160,000 jobs lost while the government waited

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

The government’s economic relief package has been broken into three phases.

But now serious questions are being asked about whether the timing and order of each announcement may have actually led to job losses.

Today - National Correspondent for The Saturday Paper Mike Seccombe on the flaws in our rescue package.

**

RUBY:

Okay, so can you take me back to when the government was weighing up its economic response, its first announcement? The very first one, looking back, was pretty small in comparison to what's come since. Right?

MIKE:

It seems like an eternity, I know, since we've been living under the threat of Coronavirus, but it was actually not until mid-March that the disease really exploded in this country. So it had taken about seven weeks from late January until March 10 before Australia passed 100 recorded cases.

Archival tape -- reporter:

The number of confirmed coronavirus cases has now surged past 100.

MIKE:

From there. The numbers just went up exponentially. So just four days after we passed 100, the total hit 238.

Archival tape -- reporter:

There's been a dramatic spike in coronavirus infections across Australia.

Archival tape -- reporter:

As hospitals brace for an influx of people wanting to be tested.

MIKE:

On the economic front. The government delivered that first package on March 12, which was just as the number of infections was beginning its rapid climb. And you're right, it was tiny by the standards of now. It totaled $17.6 billion and it was mainly stimulus aimed at the business sector.

There were some handouts for households...

Archival tape -- Scott Morrison:

It is about a cash injection into the Australian economy..

MIKE:

But a lot of it was directed towards boosting the cash flow of businesses in the hope that that would discourage them from sacking their staff.

Archival tape -- Josh Frydenberg:

We want to keep Australian business investing and we want to reward Australian businesses for investing even more.

RUBY:

So that first package - which was limited spending to stimulate business. Did it achieve anything, looking back now in retrospect?

MIKE:

Well, no, not really. It took some pressure off business cash flow, but the idea that if they gave money to business, that would discourage the businesses from laying off workers, well, that didn't work. Businesses kept laying off workers. So you can chalk that one up as another failure for the trickle-down theory of economics.

Ten days later, the government came back with a second package, which was almost four times as big.

Archival tape -- Josh Frydenberg:

Today the government is announcing a second package, 66 billion dollars to cushion the blow to households as a result of the coronavirus and to support businesses.

MIKE:

The headline item of that one, of course, was the decision to essentially double welfare payments for job seekers to $1100 a fortnight.

Archival tape -- Josh Frydenberg:

We are enhancing in an unprecedented way Australia’s safety net.

MIKE:

The trouble was that at the same time as Scott Morrison announced that the government would dramatically extend welfare benefits, he also announced it would dramatically extend the lockdown of the country. So essentially we're giving money to people to go out and spend and then there's nowhere for them to spend it.

And the opposition parties were pressing, first of all, on the sketchy details of the second plan. But in particular, they wanted to know why the government had devoted so much money to people who had lost their jobs and was not instead pouring more money into wage subsidies, where essentially the government pays the wages of workers to keep them employed.

RUBY:

Mmhmm. So while the government was trying to deal with the crisis by doubling unemployment payments - how were other countries around the world responding?

MIKE:

Well, other countries went further than Australia did and more quickly. So quite a lot of them did bring in job subsidies of one kind or another. Canada, New Zealand, Britain, Denmark and a bunch of other European nations implemented variance of job subsidy schemes.

But the interesting thing was that what they did was they announced these schemes before they tightened their lockdowns. So essentially, businesses and workers were given the support before the government announced that it was closing down huge swathes oof the economy in Australia.

Scott Morrison was asked about this on that day in Parliament...

Archival tape -- Scott Morrison:

Our treasury actually recommended against us taking those measures. I think that was sound advice.

MIKE:

So instead of the job subsidy, he said the government was focused on a strengthened safety net to support people through the tough months that were ahead.

It was a very Morrison answer that he gave to that particular question in that it wasn't actually a lie, but it was a very limited truth.

For the balance of that week, the same misleading formulation was repeated by Morrison and by other ministers whenever they were asked

Archival tape -- Alan Jones:

Boris Johnson… and said I thought this was very simple ..the government will pay the salary of every employee 80 percent of the salary, isn’t that pretty simple?

Archival tape -- Josh Frydenberg:

We have used our existing tax and welfare system.

MIKE:

So you know, it clearly gave the impression it wasn't on the cards. But we know now that definitely was, the bureaucrats were working on it.

While all this was happening, of course, jobs kept disappearing. Centrelink continued to be deluged with applications for the increased job seeker benefit, and things continued to get worse despite the second package.

RUBY:

So behind the scenes, while jobs were disappearing and all these people were applying for unemployment benefits... the government was working on its own version of a wage subsidy. That's the JobKeeper package.

MIKE:

Yeah. That's right. Week after package, two, we got package 3 and this was the biggest by far. This was $130 billion. The job keeper package and the design of the subsidy scheme was interesting. It provided a flat rate of 1500 hundred dollars a fortnight that would be paid to workers by their employers and then the employers reimbursed by the tax office.

The big question here, I think, is whether the government was too slow in setting up the job, keep a subsidy and whether as a result, Australia lost more jobs.

In that brief period between the second and third packages 160, 000 Australians lost their jobs. So the question is, you know, why delay a scheme like this when they knew that they were going to shut down a big chunk of the economy?

If the ultimate measure is the number of people in jobs, things are looking pretty dire.

RUBY:

We’ll be back in a moment.

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RUBY:

Mike, there were three parts to the government’s economic response to Covid-19.. the biggest one being the JobKeeper wage subsidy. What do we know about how JobKeeper is working?

MIKE:

Well, last Tuesday, the Secretary of the Treasury, Stephen Kennedy, appeared before a Senate committee that was established to examine the government's response to the pandemic. I might also say it was a very post-Covid scene. I watched remotely as almost everyone did.

Archival tape -- Senate committee:

Thank you everyone - I declare open this hearing of this senate select committee on Covid- 19.

MIKE:

There were just two senators physically present and the other committee members or remoted in fire giant TV screens.

Archival tape -- Senate committee:

I now welcome Dr Steven Kennedy, Secretary of the Treasury and other representatives of the treasury...

MIKE:

Kennedy’s opening statement. It just left no doubt about the seriousness of the crisis. He predicted we would see unemployment hit 10 per cent in the coming three months.

Archival tape -- Stephen Kennedy:

Unemployment rose to higher levels in the Great Depression but it did that in the course of a couple of years, these movements are happening in just a couple of months. We have never seen an economic shock of this speed, magnitude and shape.

MIKE:

So, you know, it was a very sobering assessment. But it got even more interesting when the question started because it also became clear that as much as Kennedy and the bureaucracy had tried to prepare the country. And it's true, they responded very quickly and they're getting the money out the door remarkably quickly compared with what's happened historically.

But they were struggling. He made it clear they had been struggling to keep up with developments. And he actually confessed a certain amount of doubt, which is something you don't often see in Canberra. I've got to say, someone expressing some doubt that maybe things could have been done better. particularly when it came to the job keeper package,

Archival tape -- Stephen Kennedy:

It’s an open question about whether we should have advised on a more extensive wage subsidy arrangement of the model.

MIKE:

The question was and the senators were asking him this, why was job keeper not implemented at the same time?

Archival tape -- Stephen Kennedy:

Whether it could have been done the other way round, I guess people will make their judgment on that over time.

RUBY:

So it sounds like the Treasury might be making some concessions there… What about the Ministers responsible? What have they said about why they waited so long to announce the JobKeeper subsidy?

MIKE:

Well, they would say, you know, on Treasury advice, I guess.

But I spoke to Sally McManus, who's the secretary of the ACTU. McManus was involved in the planning. And she says that the unions had advocated a wage subsidy way before the second package was even dropped.

You know, she reckoned about seven weeks previously she had been in meetings with employers and with the industrial relations minister, Christian Porter, pushing for a wage subsidy. And they were completely opposed. She described him as being fixated on delivering relief through Centrelink rather than through a wage subsidy.

Archival tape -- Sally McManus:

They thought the Job Seeker was the way to do it, and that was partly because the employer organisation were saying we don’t want to be Centrelink.

MIKE:

So her take on that, was that by doubling the dole. That simply sent a message to employers that they could let people go and they would be looked after because they would be getting double what they would otherwise have got when unemployed. And, of course, that's exactly what happened.

Archival tape -- Sally McManus:

A whole lot of employers just let their people go, and so we kept arguing and pointing out to the employers what a state that was.

MIKE:

As the number of businesses closed and the unemployment lines grew. Employer groups and she mentioned the Business Council of Australia in particular, came around to realize that a wage subsidy was absolutely necessary. And then after them, the government followed.

Archival tape -- reporter:

It's the third stimulus package since the package was declared and is anticipated to assist more than 6 million workers.

Archival tape -- Scott Morrison:

Today we are introducing a 1500 per fortnight Job Keeper payment to keep Australians in their jobs even when the work may dry up.

RUBY:

So Mike, we now have a wage subsidy in Australia. We know there are problems with the JobKeeper scheme - especially around who is eligible and the 2 million workers who are excluded. Do we know what the government is likely to do with the scheme next?

MIKE:

Well, the Treasury Secretary Kennedy told the Senate committee the other day that there was no fourth package being planned. So I don't think we can expect any more big buckets of money.

The big issue here is that there's like 2 million people eligible for the scheme. A large proportion of those people are in the in

And then, of course, there's the art sector. So that's a big anomaly, Another one relates to the higher education sector.

And the Treasurer Josh Frydenberg has had extraordinary powers granted to him to make changes to the scheme and who's in and who's out. So far, he's resisted. suggestions that include more people, so it doesn't look like there's going to be much, much more on that front.

As to the likely course of events from here, all I can say is that there's going to be some tough months ahead, both for a lot of businesses and a lot of workers, as Kennedy himself said in the committee. We don't really know where this is going to end up, that the final shape of it is hard to predict because it depends on how the disease itself unfolds,

We've got to wait and see how the world comes out of this. It's going to be a very nervous time.

RUBY:

Mike, thanks so much for your time today.

MIKE:

My pleasure. Thank you for having me.

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RUBY:

Also in the news...

New Zealand’s Prime Minister Jacinda Ardern has confirmed she will be attending today’s National Cabinet meeting with Prime Minister Scott Morrison and state and territory leaders to discuss the implementation of a “trans-Tasman bubble.”

The bubble would allow international travel between Australia and New Zealand.

Yesterday, New Zealand recorded its first day of no new cases of Covid-19 since the country’s lockdown began more than one month ago.

**

And Victoria has confirmed a further 22 cases of Covid-19, including a cluster of 19 cases at the Cedar Meats Australia abattoir in Melbourne’s west.

Victoria’s Chief Health Officer Brett Button said the meatworks cluster -- now at 34 cases -- is quote “not a risk to the general community and it’s not going to get out of control.”

In NSW, Anglicare has confirmed the death of a 15th resident at its Newmarch aged care facility in Kingswood, Western Sydney.

I’m Ruby Jones. This is 7am. See ya tomorrow.

The government’s economic relief package was broken into three phases, but serious questions are being asked about whether the timing and order of each announcement may have actually led to job losses. Today, Mike Seccombe on the flaws in our rescue package.

Guest: National Correspondent for The Saturday Paper Mike Seccombe.

Background reading:

JobKeeper: The inner workings of the bailout in The Saturday Paper
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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216: The 160,000 jobs lost while the government waited