“AFTER THE CRISIS”
THE AUSTRALIA INSTITUTE
ECONOMICS OF A PANDEMIC WEBINAR SERIES
WEDNESDAY, 29 APRIL 2020
SUBJECT: Australia’s economy and society before, during and after the Coronavirus crisis.
EBONY BENNETT, THE AUSTRALIA INSTITUTE: Australia obviously appears to have been pretty successful at flattening the curve so far and talk has already turned to what measures we're going to need to restart the economy. The Prime Minister has said that business as usual isn't going to cut it, but then many people in business have proceeded to outline a program of tax cuts, deregulation and IR reform that, at least to me, seems pretty indistinguishable from business as usual. We're delighted today to welcome the Shadow Treasurer, Jim Chalmers to talk about the opportunities to build a better, fairer and smarter economy and what comes after the crisis. He's joined today by our Chief Economist, Richard Denniss. Jim, thank you so much for joining us today, and welcome to our Economics of a Pandemic webinar series.
JIM CHALMERS, SHADOW TREASURER: Thanks for having me Ebony. I've been looking forward to it.
BENNETT: Do you want to kick us off, Jim? You have already written a great article in The Guardian about what happens after the crisis, but where do we find ourselves, and where do we go from here?
CHALMERS: Thanks very much for getting such a big group of us together to talk about what, I think, are the most important questions. You’re right that I engaged with some of those in a piece in The Guardian earlier this month, so I'd like to plug that if people are interested in some further reading. A lot of what I think about this period and what the future looks like has been captured in one way or another in that piece but I'm looking forward to expanding on it today.
You acknowledged rightly the First Nations people of Australia. I want to acknowledge the Yugumbir and the Jaggera people from Logan City and the southern suburbs of Brisbane as well.
It's good to be back with Richard Denniss. We are in some ways a dangerous combination Because, for those who are plugged in today who aren't aware, we last caught up at an event at the State Library of Queensland in Brisbane a couple of months ago, seems like a lifetime ago. We were talking then about what we need to do in economics and especially what we need to do to better measure our progress. It was surprising in some regards that the common sense about how we add to all the data that we have about the economy, how we measure well-being, progress, sustainability, mental health and all these sorts of things for one reason or another almost made the Treasurer combust at the temerity of our suggestions last time. Richard, we need to be very careful about our contribution today. The Treasurer's well-being is very important at a time like this. I might come back at the end and very briefly touch on some of those themes. I'll be happy to take questions about it as well and about the political scene at the moment.
But I thought in this introduction I might focus almost exclusively on the economics of where we're up to because although the economics don't tell the whole story about what we're going through and what the new Australia looks like after this crisis, it obviously tells a massive part of the story about what recovery looks like, what a new, rebuilt, recovered, and reconstructed Australia looks like.
I like that people think about AC, after-Covid, and BC, before-Covid. I thought I might pick up on that demarcation too. If we want to understand where we're going, we have to have a good appreciation of where we've been, BC, if we're going to understand what's going to happen, AC. I think there is a heightened, welcome recognition now that one of the defining features of the economy before anyone had even heard of Coronavirus was really insecure and precarious work lives. This crisis has really shone a light on that defining feature of the economy which had been there for the last six or seven years in advance of the crisis hitting.
There are all kinds of constituent parts to the challenges that we had in the economy towards the end of last year which had been developing for some years. Clearly, we’ve had stagnant wages for a while, we had very flat or declining business investment, productivity has been flat, living standards have been flat, and we've had record household debt. We've had a whole range of, not opinions about the economy, but facts about how the economy’s been performing which were troubling us even before some of these more recent, acute issues popped up. A lot of the things that we're seeing now have really accelerated some of those concerns, rather than popped up freshly. We did enter this crisis from a position of relative economic weakness rather than a position of economic strength. Our unemployment rate was a fair bit higher than our peers'. A whole range of indicators in the economy were troubling to say the least.
Now we're in this crisis and whether it's the Reserve Bank, or the Commonwealth Treasury, or the private sector forecasters, most people now expect there to be a very substantial spike in the unemployment rate with double-digit unemployment, give or take a percentage point or two. But underneath that are all the issues around underemployment. I thought the Reserve Bank Governor did a good job highlighting the issue of hours worked in the economy, which he expects to decline by something like a fifth, a massive number. The ABS under the leadership of David Gruen has been doing a good job giving us a real-time understanding of the problem as well.
In all of that context, with all of the seriousness of this health crisis which has become an economic crisis, I think the Government, to be fair, has taken some welcome steps, certainly some steps that Labor in the first instance called for, like wage subsidies. We welcome that they have done some things that are not typically the levers they would usually reach for. In the instance where we called for wage subsidies, they said it was a bad idea but then eventually came to our view; that's a good thing. I think that the Institute's made that point, one way or another, in recent weeks as well.
But I think we're at real risk of these wage subsidies being a good idea which aren't being perfectly implemented, to say the least. Too many workers are being excluded from them. More than a million casuals won't have access to these JobKeeper payments. Clearly there are issues with casual workers, in construction, for casual teachers, for casual uni staff, for people who work in the entertainment and events sector, and I know you've had another standalone event on that in the last couple of weeks as well. There are big holes in what the Government's proposing.
This good step in the right direction will help a lot of people stay connected to the labour market but nothing's stopping the Government from expanding it so that more workers maintain that link with their employers. That matters in the near-term as we think about those long lines of people outside Centrelink in recent weeks and those calling MP’s offices including mine. How many people we keep attached to the labour market matters for how we come out of this crisis as well. It matters for the recovery. For those people who have strong memories of the early 90s recession, one of the problems there was that people who became detached from the labour market either took a very long time to reattach, or in many cases, particularly older workers, didn't find their way back into the workforce at all. So, it's critically important that we get this right.
You rightly mentioned at the start, Ebony, that we have made some really welcome progress on the health front. On the health front Australians have done a good job by doing the right thing in the main, with some high-profile exceptions. They've done a good job and we have been flattening the curve. That's a very good thing and our spokespeople Chris Bowen, Anthony Albanese and others have welcomed that progress. But I think what we need to guard against is those developments converting to a complacency about the economic consequences of some of those necessary steps on the health front.
This risk of complacency is best captured when we come to the Prime Minister's language about the so-called "snap back". This will become a very prominent term over the next six months or so as people judge what happens in the economy against his expectations for the economy and some of the language about snapping back. It's troubling that in the commentary today of the very useful committee in Canberra yesterday which looked at some of these issues, that the reopening of some parts of our society and economy is feeding that assumption that things are going to come good quickly. That's a dangerous assumption. That would be good if it were true. Clearly, some sectors are going to come back much quicker than others.
But I think "snap back" has two main sets of problems associated with it. The first one is an assumption that people will "snap back" to work. There's a lot of people on this call who will understand that unemployment particularly in crisis times is notorious for rising very quickly and for declining very slowly. For a lot of Australian workers the recovery will be patchy and it will be slow. I think the Reserve Bank Governor talked about a long shadow from this crisis and that really is a rebuke to those people who think that the economy will "snap back" quickly. It will be a patchy recovery and we need to be careful about how we withdraw the support from the economy which has been provided to workers. It almost matters as much how you turn the tap off as it mattered how you turned the tap on, particularly when it comes to the speed of turning it on and turning it off.
The second part of "snap back" which is troubling, and again you alluded to it in your introduction, is this idea that we will "snap back" to all of the old failed prescriptions of the past, particularly when it comes to that Institute of Public Affairs agenda around harsh deregulation, austerity, and industrial relations reform. It will be news to a lot of Australian workers who it has just dawned on how insecure and precarious their work was, that the answer to that is to make things more insecure and more precarious for people. I think if we went back to more of the same ideas that have been failing the last seven years, then that would be a recipe for more and longer stagnation, whether it's in wages, unemployment, broad-based growth, and all the things that we care about the most.
I'm getting towards the end of this introduction, but we can't keep going like we were before. The way that the economic debate was set up, so much has changed. We don't know whether it's temporary or permanent. We don't know whether some of the changes we're seeing now are an historical oddity or something more enduring. We do know that a light has been shone on insecurity in the economy. We do know that people have been more reliant on public institutions to be a part of the solution to what we're going through. We do know that everybody's work-family balance has been impacted in some way or another. We are reconsidering what's essential in our economy and in our society. And there will be a temptation for countries, not just ours, to bring up the drawbridge on our international relations and our foreign engagement and that has implications for our local workforce as well.
People are petrified about what all this means. Many people on the call would understand this either in their own lives or the lives of the people that they talk to. People are really worried that a story is going to be written about the economy and society after this crisis that large swathes of the Australian population are going to be written out of. That's a fear that I share as well. I think it would be really disappointing if we asked Australians to make all of these sacrifices to get through this massive challenge in our health system, our economy, and our society, only to get to the other side and be told by the Government that all of a sudden, good news! it turns out that what we need to do now is all of the things that we were saying for the last seven years. I think we can do better than that.
We need to have a big conversation about how we grow the economy in a more inclusive way and how we create good jobs. We need to start by working out where there is capacity for genuine common ground to be found. Even if you make a quick list off the top of your head; clearly something needs to be done to get business investing again and that should be more targeted than most of the ways the Government has proposed in the past; energy policy has been a handbrake on inclusive growth, and we need to get that right; if we care about full employment, we need to think about labour market programs; social housing. There's almost a consensus on Newstart, now JobSeeker, that the old rate was too low. The business community thinks that, and John Howard thinks that. It's really just the current Government that's been dragging its heels. We need to think about training, particularly making sure that people can adapt and adopt new technology. Surely, we can agree on that. We need to think of the role of science, and research and development, particularly for those of us who care about making sure we have some industrial, specifically manufacturing, capacity in this country.
So, we care about what Australia looks like AC. We had some challenges BC, before the Coronavirus. In my portfolio work and my political work I think our objectives need to be broad prosperity; how we distribute and redistribute opportunity; how we make things sustainable, environmentally but in terms of our long-term decision making as well; and clearly there are other important pillars which we probably won't have time to talk about today around democracy, national identity, national security as well. To finish where I started, before we go to Richard and some questions, I think in addition to all of the ways that we have traditionally measured how we're going, that we can do a better job of measuring what matters, agreeing as a nation what we care about most in the economy, and measuring our progress against those yardsticks.
BENNETT: Thank you so much, Jim. And just a big welcome to everyone from Jim's home state of Queensland. I've got people on the line here that I can see from the Gold Coast and upwards from there, so welcome. And welcome to everyone else from across the country who is joining us. We're currently here sitting on 2,411 participants. I'll have to check but I think this makes this webinar, Jim, the most popular event that the Australia Institute has ever held, certainly the biggest, so congratulations. Thank you very much everyone for tuning in and thank you for that really excellent opening of all the issues that we're currently facing Jim.