All in this together?
The governments relief program is heavily tilted towards existing power structures
The government has not been shy about opening the floodgates in its economics response to the Coronavirus. A large part of this has been channelled through the Job Keeper program, which in reality has been a massive cash cow for corporate sector. At the same time other important groups including small business, charities, universities and the arts and entertainments sector have been neglected. As a result the combined effect of the pandemic and this liberal government has been to further concentrate power in our society.
Designed by treasury in four days the 60bn dollar job keeper program was always going to be a messy money fire hose splurging cash everywhere. Sure enough Corporate profits increased almost 15% in the last quarter. The government had the option to reduce this subsidy overkill — possibly by introducing a claw-back whereby the subsidy could be paid back if profits had increased beyond a certain threshold. There are also some businesses which have increased their trade tremendously without the need for job keeper such as the supermarkets. A one of excess profits tax would recoup some funds whilst fitting with the take from those who can afford it to provide assistance to the unfortunate spirit of the times. The government’s failure to implement any of these measures will prove hard to justify in light of their other actions or rather lack of actions.
The recent furrow over ‘dividend keeper’ misses the mark if narrowly so. Ignoble exceptions aside for the most part companies have prudently maintained a cash buffer as dividends have fallen despite high profits. However, it makes little difference if dividends are paid out now or later, the extra cash will still benefit investors in the long run.
While consumers are more cashed up than ever many of the businesses they could eventually spend that money on are in danger of failing. Many businesses have had their rent deferred but not forgiven. The governments decision not to use more aggressive policies to incentivise lending to small businesses has seen the interest rate spread between small business and corporate loans increase. Large companies are gobbling up credit while lending to small business has decreased. But surely there is a strong case for rent forgiveness as well as concessional loans. It would be obscene to have a wave of business failures at the same time as overall profits surge due to government support. For now the bankruptcy moratorium delays any reckoning while also taking the political heat out of the issue.
For the most part any losses created for landlords could be allowed to pile up in the banking system where they could be dealt with at a latter date. The government holds the reigns in determining policies banks would have to follow. Banks benefited during the financial crisis from a valuable government guarantee of their deposits, (the Financial Claims Scheme) so it’s only reasonable to ask them to help now. Loan forgiveness could start now with the worst affected areas according to location and lockdown policy than be expanded gradually to harder to assess circumstances.
Migrants, international students and the 97'000 asylum seekers living int he community have been worst affected by the pandemic. The burden of providing a compassionate response to their needs has fallen on the charity sector which is struggling to cope with demand. Without support the charitable sector — which directly employs 1.3m — may have to scale back its future activities.
Few sectors have had a good pandemic but the for-profit childcare and aged care can be counted among them. The government has poured an extra $1 bn dollars of covid support monies into aged care to top up the existing $ 17.3 bn yearly revenue the sector enjoys. This comes with very little direction or oversight as to how the money is to be spent. The Government initially rushed to create a free childcare scheme but than changed course when it became clear this would reduce childcare profits. Providers were given 708m in no strings attached post dated transition payments. While mining, armaments and gambling get the headlines, these for-profit human services possess some of the most effective lobbies in Canberra.
The arts and entertainment and universities sectors seem to have been deliberately snubbed. The 250m support package for the arts — half of which is in loans — is just 0.3% the size of the jobkeeper program alone. For reasons not explained the university’s are ineligible for job-keeper. Recessions generally see a rise in enrolments so higher education has a role to play in a strategic pandemic response — allowing people to further their careers despite setbacks.
Bringing forward scheduled income tax cuts would further underline the governments determination to splurge money wherever it is least needed. With the majority of the benefit going to the top 10% of earners the tax cuts benefit exactly those workers who are lest likely to have been affected by the pandemic. The young have seen their career progression stalled and job losses have been concentrated amongst casuals and low wage earners while many higher earners have simply piled up cash with no way to spend it. In these circumstances the tax cuts are an especially inefficient way to boost the economy.
This has all occurred while behind the scenes an absurdly sectional interest — The National Covid Commission — is tasked with designing our post pandemic economy. Stacked with energy sector executives the commission lacks any representation from the arts and entertainment, the university sector or hospitality — which have been objectively most affected by the pandemic.
Rather than responding to the needs created by the pandemic, the government has rewarded those constituencies it is closest too. In doing so it has certainly sloshed a lot of money around, while the leg work to distribute the arts and entertainment package or even the bush-fire assistance package has still not been done. One wonders when there will be a return to the language of belt tightening and austerity. We can expect those services which got Australia through the pandemic to be the first singled out for cuts. The government is using the pandemic to reshape Australia in it’s own image.