How the help today comes with a cost tomorrow


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Only last year Morrison was mocking Labor as a party of socialists – “their problem is they run out of other people’s money” – but his spending is more than double the Labor stimulus during the global financial crisis.

Morrison is right to put a premium on every job still viable. If the old mantra was that the best form of welfare was a job, the new one is that the best form of welfare is anything that can sustain a job.

Every measure is meant to be temporary but temporary is impossible to define when there is no clarity about how long it might take to suppress the virus until we gain a vaccine.

Morrison said on Thursday the key principle was that his measures do not have a “long tail” of expenditure that runs into the future.

“There are not structural changes here,” he said.

“There is a snap back there, a snap back to the previous existing arrangements on the other side of this.”

The world has been turned upside down by the COVID-19 virus. State premiers become autocrats who rescind personal rights to order people home. Morrison becomes a temporary socialist in the hope that everyone can “snap back” to the way things were.

While this is a necessary and targeted approach, the deadlines are utterly unknown.

The surge in unemployment will last longer than the virus and the government is unlikely to gain a quick agreement to undo the temporary doubling in the JobSeeker benefit to $1,100 a week.

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In the same way, the JobKeeper payment of $1,500 for those in work will be hard to cancel in six months when the economy remains in shock.

One avenue will be to write sunset clauses into each bill so that everything passed must end at a date agreed by Parliament, which means an agreement from Labor as well as the Coalition.

The childcare pledge costs about $1.6 billion and comes on top of the $130 billion for wage subsidies, the $17.6 billion in the first stimulus package, $25 billion for small business and $21 billion in income support.

Excluding loans and loan guarantees, the government is spending $196 billion and will probably have to spend more.

This does not include federal government loan guarantees worth tens of billions of dollars and the Reserve Bank’s $90 billion package to help the finance sector.

The burden will be severe. The budget deficits in this year and next appear likely to equal a quarter (or more) of total commonwealth revenue.

Nobody can be sure of the scale of the shock, but government’s annual revenue will certainly not reach the $511 billion it forecast last December.

Australia can bear this burden. Naming the problem is not scaremongering on debt. But voters have to recognise the alarming cost and accept what it means when the crisis ends.

This is a transaction between generations.

The parents who gain from free childcare, as well as the society that benefits from helping essential workers, will be asked to carry the cost in the future or pass it on to their children.

This is the way nations are meant to function and the way budgets are meant to work. The crisis is urgent and unavoidable. It is daunting all the same to leave such as a massive repair job for the next generation.

The wage subsidy is the right response to a chronic problem but it is an enormous intervention that cannot be repaid from the surpluses of a few good years, even if the commodities boom one day returns. The most likely scenario is that the debt stays on the books for decades until inflation whittles it away.

While the debt stays on the books, the interest bill could be more than we spend on big welfare programs.

Is this fair? The question is impossible to answer at the height of the crisis because we do not know if Australia is on the path that led Italy into the darkness of one thousand deaths a day.

It is worth every cent to make sure we are not.

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