The Federal government is proving itself to be a pretty poor manager in a time of crisis. Last month I wrote that the government had a pandemic plan (of mostly platitudes) in search of a strategy. I wrote that its logic was internally inconsistent had no exit strategy and was predicated on dubious modelling.
Having vacated the field of decision-making (i.e. their job) and deferred instead to a panel of Chief Medical Officers motivated by the precautionary principle, what started off as measures to prevent the hospital system from collapsing morphed into eliminating the virus (which is next to impossible) and saving every life regardless of cost.
At the time the stage three lockdowns were introduced it should already have been apparent to government that Australia was not heading for a Milan or New York type scenario and epidemic model forecasts of between 5,000 and 17,000 people in ICU were never going to happen.
Active cases had arguably already peaked before the end of March (i.e. discounting the bulk processing of recoveries on April 5 and 6 which had presumably recovered earlier). It was already known that Australia’s cases were directly linked to international travel and by closing the borders and quarantining returning travellers (good and timely measures by government), with robust testing and tracing procedures, we had already prevented a mass break out of the virus.
The government therefore didn’t need to panic but that is exactly what they did throwing evidenced-based and proportionate policy-making under a bus contrary to the national plan. Some will argue that it would have been courageous (in the Sir Humphrey sense) of the government at that time to have adopted a wait and see approach. If the virus had got out of control, a failure to have acted decisively would have been political death.
I disagree with this supposition because the high economic and associated longer-term political cost was always known whereas the pandemic risk was always highly uncertain and speculative, but in any event, based on Australian data / evidence at the time, looked well under control and hence buying us time to better assess. Hence, from a policy risk perspective it was always smarter to ramp up hard and fast if and when the metrics turned for the worse rather than pre-empt the evidence on doomsday scenarios and commit to added economic catastrophe.
Being even handed I will accept it wasn’t completely irrational (politically) to consider a worse case scenario than Australian data suggested, given the medical and virology uncertainties involved and the rapid deterioration in hotspots like Northern Italy and New York.
What I cannot understand however, is why government refused to adapt when the evidence was overwhelming that we were not facing a northern Italy or New York type catastrophe and the health system was never about to be swamped. It is one thing (barely) to excuse an initial over-reaction, it is quite another to excuse the duration (in fact, intensification) of that over-reaction when all evidence pointed to the contrary.
When the tsunami of COVID-19 patients failed to wash up at our public hospitals (much less the empty private hospitals that were nationalised) in early April the government should have immediately eased off the restrictions it arguably should never have implemented in the first place. That failure has contributed to hundreds of thousands of job losses.
Instead, our political leaders doubled down and shifted the narrative from hospital capability to the absurd notion that every life must be saved, in keeping with the CMO’s preferred narrative of one COVID death is one too many, regardless of the cost or collateral damage in trying to save it. This has led to the dilemma whereby absent a vaccine or cure there is no way out, but if we don’t get out life as we know it is doomed (probably already).
Which leads us to where we are today are with the embarrassing phased opening up of the economy that should arguably never have been closed (to the degree) in the first place. The timing or metrics of why we are opening up are completely unknown and /or random. What is the material difference today versus two, three or four weeks ago? Active cases have been in steady decline since the beginning of April with recoveries outstripping new infections.
Moreover, what is the rationale for a phased approach given such a low level of active cases? I can only presume it is to see if infections start to take off thereby triggering another lockdown and/ or the prevention of subsequent phases of re-opening the economy (hardly a boost for business confidence and planning).
Yet Morrison has said he hopes we can move through all 3 stages by July. Given the incubation period of the virus and speed at which Morrison hopes to progress he may as well have junked a phased re-opening. At the very least we should moved straight to phase two given how minimal the easing of restrictions are in stage one. For most businesses it would hardly be worth the effort. It will be undetectable in epidemic models even if you ignore how useless they have been in the first place.
To say this is farcical is an understatement. What took minutes to shut down apparently takes months to re-open, this despite every month delay allegedly wiping $16b from the Australian economy, taking with it businesses and jobs that will never return. But the politicians are absolutely in no rush. Quite the contrary. We need to protect ourselves against a second wave ignoring the fact we never had a serious first wave.
Then there is the sheer arbitrariness of it all. You have to love the precision of our CMO’s and Treasury officials that managed to come up with 10 people and 5 visitors for phase one. On what scientific basis are those numbers based on? Apparently, those are the magically safe numbers we can live with for two weeks thereabouts, but sadly they don’t add up in any logical sense. For example, Justinian’s family numbers five. So if both sets of grandparents pop over for Sunday lunch we will be under the threshold of ten and also meet the criteria of no more than five visitors to Justinian’s home. If the same nine people congregate at one of the grandparents abode they will have broken the law because there were seven visitors. Go figure. Same nine people sharing lunch but at the wrong house they are endangering lives and face the prospect of police fines or worse.
Moreover, despite Morrison’s yearning for a return to semi-normal in July there is no guarantee his National Cabinet colleagues (for that is what they now are – colleagues – not stakeholders or political foes) will follow the script. Dan Andrews in particular threatens to upset the applecart and refuses to open cafes or restaurants in Victoria, while Steven Marshall and Mark MacGowan show no sign of easing the 14 day quarantine on domestic travel that effectively closes these states off from the rest of the nation. Goodbye AFL!
The creation of a National Cabinet has allowed the tail to wag the dog. Morrison is in huge political danger of being owned by the state premiers and as a consequence owning their economic failures. This will become especially apparent during the recovery / stimulus phase. Morrison no doubt believed a National Cabinet would elevate his stature as Prime Minister – the national leader in a time of crisis – and probably thought such a structure would buy political cover through a bipartisan decision-making framework.
However, as the debacle over school closures show, he never contemplated the downside of this approach notably, that the state premiers would be elevated to his level, but given the constitution would be able to call most of the shots, leaving Morrison owning all the downstream adverse political and economic consequences.
The only thing the National Cabinet has achieved politically thus far is raising Morrison’s personal brand (from bushfire lows) to a level below that of Dan Andrews, but with a primary vote still below the last election and a two party preferred vote tied with Labor. Having failed to build a buffer throughout the crisis Morrison is facing electoral annihilation if the recovery falls flat and stalls over the next 2 years, which according to the RBA’s economic assessment is a distinct possibility.
Which brings us to Treasurer, Josh Frydenberg. Its bad enough the government hasn’t had a strategy for managing the virus but not having a strategy for fiscal and economic recovery is even worse. This seems to be the key take away from the Treasurer’s speech to parliament on Tuesday.
The Treasurer’s speech was completely hollow and offered nothing new to the high level speeches and opinion pieces he had already delivered more than a week before. What was meant to be an economic update on the day the Treasurer should have handed down the budget, he delivered a political excuse that was totally devoid of content.
The speech was little more than a shopping list of expensive measures the government has put in place to “cushion” the very people it has belted. Frydenberg was unbelievably arguing these measures were necessary to buy time and build capacity for a hospital system without any patients, while simultaneously implying that an increase in cases at 20% per day meant the virus was spreading uncontrollably and had nothing to do with the ramp up in testing and tracing.
Adam Creighton in The Australian gave a scathing critique of Frydenberg’s speech to parliament that was spot on. It was little more than spin hoping to deflect criticism that the government has seemingly panicked and its budget and economic narrative (such that it had one) is now in ruins.
If it thinks it can return to surplus by simply slowing the rate of spend while running historically high rates of tax (receipts to GDP) going forward it is delusional. What are the new spending priorities? How will funding be reallocated? How will the APS be restructured? Where are the savings to fund the new cost pressures? How aggressive will be the target to return to surplus? Will it be tax or spend dominated?
The new narrative is apparently building a “bridge to recovery” (seemingly discrediting the independence of the RBA not funding fiscal policy) but given the absence of any policy, fiscal or economic substance going to any of the questions above it looks destined to be a bridge to nowhere: a world of flowery rhetoric, cliched slogans and worthless platitudes.
That there is no strategy for economic recovery was made plain when Frydenberg reaffirmed Morrison by conceding they were: “not about to announce a shopping list of reforms. We are in the harvesting phase, during which we will look at new and old reform proposals with fresh eyes.”
This says it all really. Not only do they not have a strategy (i.e. a business case for reform and recovery) but the process to get one involves dusting off old proposals they previously ignored or failed to implement. Simply, incredible. Presumably many of these will hark back to when the Treasurer’s was the Parliamentary Secretary to the Prime Minister in charge of the government’s deregulation agenda that went nowhere.
The 6.8 million people either now on Jobseeker or Jobkeeper payments – over half the 13 million people that made up the labor force in February – deserved a lot more than a puff piece about Coalition “principles” and “money trees” from a government that has hasn’t managed to get spending under 25% of GDP (on average) over the past six years and is significantly higher than that under the much maligned Whitlam Government.
Unbelievably, with government having largely wiped out much of the private sector the Treasurer had the temerity to shift the burden of job growth back on to the private sector his government had decimated. While I do not disagree that the private sector needs to do the heavy lifting, the problem is that lifting is pretty hard to do when you are weighed down by the heavy hand of big government (never more so than during the inept handling of the crisis). On this the Treasurer had nothing of substance to say.
The Morrison Government seems shell shocked and in denial about the situation it is facing and clueless about the economic-political disaster it has unleashed . While it cannot be blamed for a bad situation, it can be blamed for making a bad situation worse which every decision after travel bans and quarantine imply.
If the Morrison Government fails to quickly develop a coherent economic narrative going forward (i.e. a business case for economic, fiscal and monetary reform that relates to everyday Australians and gets people back into work with meat on the bones) and fast, it will end up one more coronavirus victim that no amount of ventilators will be able to breathe political life into.