Who Saved the Australian Economy from Covid-19?

By Carmel McCallum

“What a great question! Thank you for asking such an important question!” This line could be heard from any Liberal-National Party politician, or candidate at any forum, while they are really thinking: “What answer can I possibly give to this voter? She probably votes independent, Greens or Labor, so I need to appeal to my voters in the room. Bugger the truth!” Rarely is a question actually answered satisfactorily.

Most readers of this small independent local regional news media source - unprotected by Senate social media enquiries - will probably already know the answer to this. COVID-19 is a new challenge, different from any other in history, and continues to present us with unexpected developments.

So, who saved the economy?

It wasn’t the foreign students left stranded on our shores, many of whom were supported by, or dependent on, wonderful volunteers and local charities. It wasn’t all those casual workers, mostly female, who weren’t employed in the same workplace for more than 12 months, including people who work in the arts and entertainment industries, having very precarious job opportunities or security, often employed on tenuous contracts. 

It wasn’t local council workers, university staff or casually employed associate professors who were left in limbo without contracts renewed. It wasn’t the gig economy servants who have no employment entitlements but are classified as self-employed contractors. It wasn’t refugees who, for the first time since the Howard years, were told to go and look for a job, when their chances were ‘Buckley’s and none’. 

No, all of these people continued working as before but under COVID-19 conditions, many underpaid or, in some cases, having no income whatsoever. These people had no money to spend and were literally left out in the cold.

If people were made redundant or dismissed because of the pandemic, they were able to apply for a ‘dole’ which was almost double the pre-COVID rate. It was less than what they were used to but, on the other hand, they were stuck at home and had fewer daily expenses, not travelling to work and so on. 

Those who were on JobSeeker – previously Newstart - including single parents with school-age children were able with the increase to $1150, to spend money on fresh food, a visit to the dentist or a treat for their children. They were raised from poverty, temporarily. They spent all their money catching up on bills, feeling a slight lift in their otherwise stressful and economically oppressed lives.

Many were covered by JobKeeper, initially. People on JobKeeper continued to be employed with either their normal wage topped up by their employer and continued to work or stayed home with their job kept safe. Apprentices and many others actually earned more than they ever would otherwise. However, they were still paying income tax, so some earnings would be returned to the government.

According to ABC’s Casey Briggs in 2003, the top 20 per cent of Australians had almost 60 per cent of Australia’s wealth while the poorest 20 per cent shared only one per cent. By 2017, the poorer households had an extra $2,000 coming in - an increase of 6 per cent. Meanwhile the top 20 per cent were ‘earning’ $1.3 million extra - a 68 per cent increase. 

When the coronavirus hit, the hospitality industry, 2.5 per cent of all Australian workers, contributed one fifth of all the layoffs from February to May, reducing by about a half. The retail industry was reduced by 13 per cent. Both these industries are dominated by women.  Management jobs and similar high-paid jobs were reduced by two per cent. Professional jobs shrank by 1.7 per cent. There are now more white-collar jobs than when the pandemic began.

Australia’s inequality is greater than most European and Asian countries. We are not as bad as the USA but we are catching up. What a disgrace from such a wealthy country where few benefit from the resources and decades of wealth-generation we have had. Inequality is a direct consequence of government policy. Australia is 23rd of 37 OECD countries when it comes to income inequality and doesn’t fare well for the poverty gap or poverty rate.

On ABC Radio National’s 8th February ‘Big Ideas’, in a discussion titled ‘Ethical challenges of extreme poverty and inequality’, all speakers and the facilitator, Per Capita CEO Emma Dawson, spoke of a ‘caring economy’ being the way to go forward, for the benefit of all Australians. Dawson asked what advice they could give to the prime minister.

John Hewson, professor at ANU’s Crawford School of Public Policy, said upfront there should be proper recognition of First Australians and that this would bring significant fundamental benefits in reducing inequality.  The former Liberal Party leader said the Morrison government’s Stage III tax cuts, which benefit only the top 2 per cent, should be halted as they would not benefit the economy.  He said that JobSeeker should be increased to a level which is in line with the minimum wage and much greater than the poverty line, and that tax reform must deal with inequality. 

Hewson also argued for free universal childcare up to five years of age, as it increases the number of women who are able to work. He derided the government for phasing out JobKeeper for the 95 per cent of workers in childcare, which, Hewson said, have been neglected since 1997. He also said that infrastructure for COVID recovery should be in building affordable housing.

Angela Jackson, Senior Economic Consultant for Equity Economics and a public sector economist, said that inequality is stopping progress and that our economy is not reaching its full potential, with reduced productivity, health inequalities and poorer educational outcomes. She believes a redistribution of wealth can be achieved by changing the balance between wealth and tax income. With wage growth currently flat there is a lack of incentive. 

Ms Jackson proposed capital gains and death tax as a tool to achieve redistribution. Not very popular with voters though many countries with better equality and standards of living quite readily accept such taxes for fairness. She also spoke of the lack of job security and the gig economy, how people on low wages and no sick pay or a payment for service, tended to go to work throughout lockdowns as without their small pay they would not be able to pay rent or eat. Around 30 per cent of Australian workers fall into this category. Ms Jackson said there needs to be universal entitlements and that if there is more flexibility it should accompany job security.

John Quiggin, Australian economist professor at University of Queensland, was first out of the gates with promoting the Universal Basic Income (UBI), a humble income guarantee. He pointed out that the Age Pension is exactly this, introduced in days when governments had more concern for how we would care for people who were no longer able to work and earn an income. He also highlighted how these same people continue to be active by volunteering and taking on creative and caring roles. 

By stopping the stage III tax cuts, the UBI could be cost-neutral, he said, estimating it would cost about $20 billion or about one per cent of our national income. Quiggin also pointed out that lower earners spend all their money whereas the wealthier would save it or invest in items which don’t benefit the overall economy. He also wanted the NBN properly funded. Because interest is projected to be lower than inflation, there has been a lack of private investment and fewer projects. 

As Dawson pointed out, the tax cuts not only would exacerbate inequality, but there would be less revenue for the government.

Hewson said that Job Seeker and Job Keeper kept our economy safe, while the tax cuts, up to $60 billion (plunging the economy into an enormous deficit), are based on an expectation of growth so will be unfunded and not deliverable. 

Tax cuts for the top end has little flow-on to creating jobs or increased growth, said Jackson, and he believes tax cuts should instead reward people for effort and hard work. Top end tax cuts dampen economic growth which reduces the incentive to invest in job creation. Wealthier people will just sit on their wealth as they get returns without job creation investment.

Jackson also stated many benefits to free childcare. At least three days of free childcare would lead to 90c in the dollar benefit to the working parent. Increasing the number of women in the workforce would generate a boost of up to $11 billion to the economy, just by making work financially viable for them. 

The government needs to reimagine workplaces. With the pandemic, educational disadvantage has fallen on poorer children, increasing inequality and stalling Australian future growth, even going backwards. People are getting lost. There should be benefit for all the community.

Only two-thirds of full-time jobs have come back and, at the moment, there are at least eight people unemployed for every job available. Since 2013, the mutual obligation required to be fulfilled to obtain social security benefits has been a challenge for many. To receive a benefit, job seekers are required to apply for 20 jobs per month, basically one job application a day, although greatly reduced from the previous requirement of 40 a month.

Applying for a job has never been easy and needs preparation and enough money to pay for the transport if you are lucky enough to get an interview. Many need to fit applications and interviews in with other piecemeal work the person may have.  Many younger people have just given up looking for work and are not even counted in the unemployment figures.  

The Morrison government, a few weeks ago, came out of the party room and smirking, offered a measly $25 a week to people on JobSeeker. Very few commentators have condoned this paltry adjustment. The Age Pension has been set for the most part around the poverty line, which is about 60 per cent of the minimum wage. If JobSeeker were to be nearer the poverty line, the government would have needed to pay the equivalent of the COVID supplement of $250 a fortnight. JobSeeker, with the increase, will only reach 55 per cent of the minimum wage – well under the poverty line.

Even Peter Strong, CEO of Council of Small Business Organisations Australia has said that JobSeeker should have had an increase of between $40 and $80 a week. Surprising? Although still not enough he also talked about how it was easier and more accessible for job seekers when it was all under the same umbrella such as the Commonwealth Employment Service. Also surprising! 

He suggested that there be place-based support, locality-oriented with individual support where needed, saying “Talking to industry, designing training and listening are important to managing change.” He also talked about encouraging employers to employ workers as part-time rather than casual and to simplify the work-placement system. Sounds like a shift and maybe he has the ear of some who could have the influence to take this on.

One has to question how viable the employment agencies would be without all the subsidies they receive, and for doing what? We have all heard anecdotes about how these ‘companies’ treat people and how these profit making ventures are rewarded for results and not servicing the unemployed. There are four operators in Vincentia, while the highest unemployment rate would be in the nearby St Georges Basin area, where shopfront rents would be lower too. 

Job agencies didn’t even have much effect on the unemployment rate before COVID, so it’s hard to imagine that they will be effective in finding employment now, and especially with JobKeeper removed and JobSeeker reduced. Keeping the unemployment rate at around five per cent provides competitive labour forces and keeps downward pressure on wages. In other words it keeps wages low and allows for poorer work conditions.

Treasury predicted that removing Jobkeeper on 28^th March would cause up to 150,000 to be unemployed and looking for work. On JobSeeker they will receive $620 a fortnight.

It needs to be pointed out that keeping businesses operating, by continuing JobKeeper payments, not only saves jobs and provides a liveable safety net but stimulates the economy and the government continues to collect tax.  

Watch the Documentary How people are getting rich from your unemployment from GetUp.

This documentary shows how the government has built a poverty machine that’s seen job providers become some of the most profitable businesses in the country. For the hundreds of thousands of unemployed people in Australia, joblessness means living in poverty. But for the people who are supposed to help us back into work, our crisis is nothing more than a financial opportunity.

Phillip Alston, Special Rapporteur on Extreme Poverty and Human Rights with the United Nations Office of the High Commissioner, says that governments having a sole objective to enhance economic growth are creating terribly unequal societies which is a barrier to growth. “Addressing inequality solely from an economic perspective is insufficient. It [equality] must be recognised as a human right. It’s an ethical challenge and if we don’t acknowledge that we’ll never make real progress.”

The government is even setting up a ‘Dob-In Line’ so that employers can report applicants for not making an effort when they come to tick off their obligation list. Peter Strong says that most employers would be reluctant to use this but Liberal MP Michaelia Cash, now Attorney General, when asked about this on ABC Focus said “action will be taken.” 

The past several weeks has seen governments at state and federal level floundering as a result of, unbelievably in 2021, their inability to hear the voices of women, with some members showing a total lack of respect for women and with no real plan for action to change. Hopefully more women in the halls of government will mean a much more compassionate and caring operation of governance.

During the pandemic it was mostly women who were left jobless, required to work from home, while teaching their children, assisted by schoolteachers who are, by a large majority, mostly women, and many would have been subject to domestic violence or abuse which would have been hidden as a result of the lockdowns. Recovery from the pandemic, both economic and social, will not be led by gas mining of any kind, by JobMaker which only found about 600 jobs and cost us millions, HomeBuilder, or by reducing tax for the highest income earners.  

Oh, by the way, the bigger answer to the question is: most of the credit could be given to those who have been on JobSeeker or, as Andrew Wilkie MP called it, PovertyKeeper. They had a temporary glimpse of what having a decent life could be. This includes many lower paid men as well and wages will not increase in the near future according to Phillip Lowe of the Reserve Bank of Australia. Meanwhile, we are already almost at the bottom of the list of OECD countries for inequality and unemployment benefits.

So our economy wasn’t saved, but it didn’t become a complete train wreck either. Most people benefited for a while. Some industries received huge windfalls – such as the gas-led recovery we really didn’t need. The rich got richer, the poor got poorer and mental health and domestic violence took a huge hit.

Thank you to those who had to suffer through the pandemic as a result of job loss and lockdown. Those of us who don’t fall into that bracket owe you much. Vaccinations will help but alone they won’t be the happy ending to the story. We can only hope that you will someday be rewarded by an insightful government policy which believes in equity and fairness. The ‘care’ approach, investing in childcare and aged care, can mean one million dollars leading to one billion in GDP. Seems to be a no-brainer!

The Morrison government is purely hedging by treating people, mostly women, as less than they are, forcing them into poverty and desperation. This is demeaning our fellow Australians. Well, here we go again, but maybe the polls are starting to indicate a shift in feeling. Let’s hope so.

Feature image: Australia's Covid-19 Economy. Image credit: surapong/Shutterstock.com