Treasurer Frydenberg promises more pandemic pain

July 26, 2020
Only a massive increase in government investment will create the sort of permanent and sustainable jobs we need to boost the economy.

Federal Treasurer Josh Frydenberg said on July 24 that he would “take inspiration from Margaret Thatcher and Ronald Reagan” to kick start the economy after the COVID-19 shutdown. His outline of the government's economic “vision” is not only inadequate, it foreshadows a major attack on working people.

Frydenberg said industrial relations “flexibility” would be at the centre of the recovery. “There is no doubt that our industrial relations system is overly complex and rigid and for the system to deliver more jobs, it will need to evolve to meet the jobs challenge the country faces.”

While claiming that the government would not embrace “austerity”, Frydenberg nevertheless indicated that it wants to make changes to the “supply side”, to allow businesses subsidised by JobKeeper (at least) to reduce employees' work hours, redeploy workers and generally raise uncertainty. He also promised changes to the tax system, having previously foreshadowed bringing forward personal tax cuts for higher income earners, scheduled for 2022 and 2024.

Bosses are demanding the government go further.

The Australian Chamber of Commerce and Industry is clear on the “reforms” it wants national and state governments to pursue: “Payroll tax, which is nothing short of a tax on jobs, should be high on the to-do list for National Cabinet, and red tape that stops projects and industrial relations rules that make it too hard to manage the workforce should be in their sights, too.”

The Australian Industry Group described the Treasurer’s speech as “heartening”, but demanded more: “IR reform has a vital role to play in encouraging employers to retain existing employees and to take on the hundreds of thousands of workers who have lost their jobs in the past few months,” Innis Wilcox, AIG CEO said on July 24.

“Now is not the time for tired old arguments in opposition to IR reforms. Sensible and fair reforms are essential to boost employment, productivity and growth during the recovery from the pandemic,” Wilcox said.

The long-term threat to working people’s wages and conditions is growing.

Income support slashed

On July 21, Prime Minister Scott Morrison announced the government plan for the JobKeeper and JobSeeker income support programs, which were due to end on September 27.

While extending JobKeeper until the end of March, the rate of the subsidy would be slashed from $1500 a fortnight for all workers covered by the scheme, to $1200 a fortnight between September and December and again to $1000 a fortnight from January to March 2021. JobSeeker, the dole, will be cut from $1100 a fortnight to $815 to the end of December, with no indication what the rate will be for 2021 and beyond. Payments for part-time workers would be reduced even further.

Eligibility for JobKeeper will be restricted, with firms expected to prove ongoing financial hardship, in October and again in January. The government also refused to extend the income support to sectors previously excluded from the scheme, including universities and the arts. Neither was the scheme extended to cover short-term casuals.

Unemployment to bloom

The unemployment rate for June was 7.4%, according to the Australian Bureau of Statistics (ABS). But senior economist with the Centre for Future Work Alison Pennington said the real figure is much higher. “Add 230,000 ‘employed’, but who worked zero hours [supported by JobKeeper], 920,000 fewer hours than normal and 400,000 who left the labour market since March”, Pennington tweeted on July 16. She estimated the real unemployment rate to be 19%.

Guardian Australia economics correspondent Greg Jericho also saw the downside in the official unemployment statistics. “While total employment grew, full-time employment actually fell 38,000 – off the back of the two biggest drops in full-time employment ever recorded. All up there are 375,900 fewer people working full-time now than there were in March,” Jericho said. “And there are 660,700 fewer people working at all.”

Morrison announced that the government expects official unemployment to rise to 9.25% by December, with a further 230,000 people likely to lose their jobs over the next five months. The effective rate is likely to be much higher.

Nevertheless, Morrison has claimed that the higher rate of JobSeeker is discouraging workers from taking extra shifts. “What we have to be worried about now is that we can’t allow the JobSeeker payment to become an impediment to people going out and doing work, getting extra shifts,” Morrison told Radio 2GB on June 29.

“And we are getting a lot of anecdotal feedback from small businesses, even large businesses where some of them are finding it hard to get people to come and take the shifts because they’re on these higher levels of payment.”

Unsurprisingly, the Treasury review of the first three months of the JobKeeper and JobSeeker system also found that the rates of income support were a “disincentive” to workers pursuing new jobs or taking on extra hours.

The government has also sought to tighten so-called “mutual obligations” for those receiving JobSeeker. From August 4, unemployed workers must accept any offer of a job, whether or not it meets their skill set,or risk losing their JobSeeker payment entirely.

CEO of the Australian Council of Social Service Cassandra Goldie condemned the cut to the JobSeeker payment. “The decision to reduce the JobSeeker payment in September will hurt millions of people just keeping their heads above water. It means from 25 September, a person on JobSeeker will lose $300 per fortnight or $150 per week, and face the prospect of a further cut just after Christmas,” she said on July 21.

“People need financial security and certainty at this anxious time. Today’s announcement gives them neither.”

Wage growth to collapse

Since the Global Financial Crisis, wage growth in Australia has been insipid. From average annual increases of more than 4% in 2009, annualised wage growth slipped to about 2.2% in the five years of LNP government to the end of 2018. On the back of the COVID-19 recession, ANZ expects nominal wage growth to fall to 0.7% in the first quarter of 2021. Taking inflation into account, real wages are expected to fall.

The situation is not made any better by the federal government and several state governments imposing a wage freeze on public sector workers. In April, the federal government deferred all pay rises for Commonwealth public servants for six months.

The Queensland government has frozen pay rises for public sector workers until 2022. "We recognise and deeply appreciate the hard work and dedication of Queensland's public sector workers, especially those working on the frontline to fight against COVID-19," said the shamefaced industrial relations minister Grace Grace in June.

The NSW Coalition government is seeking a 12-month pay freeze for public sector workers. Having failed to obtain agreement for the wage cut from the Legislative Council, however, it is now seeking to impose its will via the NSW Industrial Relations Commission.

Bucking the trend, the Victorian government agreed to a 3% wage rise for all public sector workers on July 21. “Governments have a responsibility not only to manage the employment of their staff responsibly as an employer, but also as a demonstrator to the community at large about how, within the limits of capability, we should be all seeking to grow our economy," Treasurer Tim Pallas said on July 23.

“I think the worst thing we could possibly do at the moment is start to create a level of insecurity in the labour market … by effectively trying to drive down wages.

“If we try to stifle consumption by reducing disposable income, that has an amplifying effect upon the economy and we don't see that government should do that.”

Alternative to austerity

While claiming to reject “austerity”, Frydenberg’s embrace of “fiscal discipline” will have a similar impact on the lives of working people.

Under the leadership of Britain's Conservative Prime Minister Margaret Thatcher, Frydenberg’s hero, poverty increased, pay inequalities increased, public spending fell and unemployment ballooned. United States President Ronald Reagan’s legacy is similar. Not to mention their signature attacks on unionised workers: the Miners’ Strike and Wapping disputes in Britain and the wholesale sacking of striking air traffic controllers in the US in 1981. Hardly encouraging heroes for working people.

There are alternatives, however. But they require increased government spending and deficits well in excess of the $184.5 billion Frydenburg expects for the 2020–21 financial year.

On July 20, the Australian Council of Trade Unions launched its plan for economic construction after COVID-19. It contains a range of measures to boost jobs, the economy, women’s participation and environmental outcomes.

The plan was developed in concert with the Centre for Future Work and includes five immediate steps including:

  • Free, publicly funded, quality childcare;

  • Free TAFE and a redirection of federal and state investment into TAFE;

  • Expansion of JobKeeper wage subsidy provisions to include arts and entertainment workers;

  • A National Reconstruction Investment Plan, including a massive boost to government investment; and

  • A sustainable manufacturing strategy, including incentives for high-energy users to transition rapidly to using renewable energy.

To come to fruition, the plan would require a massive redirection in government spending priorities, including dropping the unrealistic expectation that the market will provide.

As the economy enters its first recession in almost 30 years, a return to growth, at least in real jobs and incomes, is not inevitable.

While the federal government’s budget update assumes that the economy will continue to strengthen in 2021 and beyond, wages and transfers received by working people are predicted to fall, or stagnate at best.

Only a massive increase in government investment, taking the opportunity to strengthen the social welfare system, accelerate the transition to environmental sustainability and create ongoing, full-time employment will turn the situation around.

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