Category Archives: Australia

As coronavirus restrictions ease, here’s how you can navigate public transport as safely as possible

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Hassan Vally, La Trobe University

As coronavirus restrictions continue to ease, one of the key challenges we face is how to deal with people moving around a lot more.

In particular, as more of us start to head back to school and the office in the coming weeks and months, more of us will be getting on buses, trains and trams.

So what is public transport going to look like as we relax restrictions, and how can we navigate this safely?



Read more:
To limit coronavirus risks on public transport, here’s what we can learn from efforts overseas

Workplaces can help

Victorian premier Daniel Andrews has emphasised working from home will be one of the last measures the state will ease.

But even when restrictions are relaxed, do we all need to go into the office as much as we used to?

Working from home has become the “new normal” for many of us, and we’ve learnt a lot about how to do this successfully. Employers have adjusted too, with some indicating they will encourage increased remote working moving forward.

So one of the obvious things we can do to reduce the numbers of people using public transport is to continue to work from home where possible.



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If more of us work from home after coronavirus we’ll need to rethink city planning

Another option is for workplaces to implement flexible start times. If we can reduce the numbers of people using public transport during peak times, this will make a significant difference in reducing crowding.

Public transport providers and governments

State governments have introduced additional cleaning practices on public transport networks. These will continue, and may even be increased, as more people return to public transport.

Although increased cleaning is important, physical distancing remains the key to safely moving large numbers of people again. Governments will need to consider some changes to ensure people can keep a safe distance from others on their commute.

Many people touch the same surfaces on public transport.
Shutterstock

As we’ve seen with the easing of restrictions, different states will take different approaches.

For example, New South Wales has imposed limits on how many people can board a bus or train. A maximum of 32 people are allowed in a train carriage (normally one carriage holds 123 passengers), while buses are limited to 12 passengers (capacity is normally 63).

Further, markings on the seats and floors of buses and trains indicate where people can sit and stand.

Marshals are also being stationed around the public transport network to ensure commuters are following the rules.

In a similar move, the South Australian government revealed they will remove seats from Adelaide trains.



Read more:
Coronavirus recovery: public transport is key to avoid repeating old and unsustainable mistakes

In contrast, Queensland is not imposing any passenger limits, instead asking commuters to use their common sense. The government says there is plenty of room on public transport in Queensland at present, and the risk of virus transmission is low given the small number of active cases.

Similarly, Victoria has not imposed passenger limits. But the government has indicated commuters will be able to access information about which public transport services are the least crowded to assist travel planning.

Some states have flagged extra services may be needed to avoid overcrowding, though the extent to which this will be possible is dependent on resources.

In addition to extra services, NSW has indicated it will boost car parking and enhance access for cyclists and pedestrians.

What can you do?

The main responsibility around keeping virus transmission suppressed as we relax restrictions rests with us as individuals to behave sensibly and responsibly.

The same principles apply when we use public transport as when we navigate all public spaces.

Maintaining physical distance from others and washing our hands regularly are possibly even more important when we’re using public transport, given we potentially come into contact with a lot of people in an enclosed space.

We know SARS-CoV-2, the virus that causes COVID-19, is more likely to spread indoors than outdoors. We also know prolonged contact with someone infected with the virus increases the risk of transmission, as compared to a passing encounter.

So public transport commutes have the potential to pose a significant risk of virus transmission, especially if you’re sitting next to an infected person on a long journey.

Masks are a hot topic.
Shutterstock

Taking hand sanitiser when you use public transport is a good idea so you can clean your hands while travelling. You may be touching contaminated surfaces, for example the bars and handles for balance.

In addition, washing your hands thoroughly with soap as soon as you arrive at your destination should become a part of your routine.

Importantly, if you’re sick you should not be leaving the house, let alone taking public transport or going to work.

What about masks?

Wearing a mask on public transport is an issue of personal preference.

But if you choose to wear a mask, it’s important to understand a couple of things.

First, masks need to be put on and taken off correctly so you don’t inadvertently infect yourself in the process.

And while masks potentially offer some additional protection to you and others, it’s still critical to follow physical distancing and other hygiene measures.



Read more:
Who’s most affected on public transport in the time of coronavirus?


The Conversation

Hassan Vally, Associate Professor, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics

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Easypads

Brendan Coates, Grattan Institute

Scott Morrison’s new housing stimulus package is straight-out retail politics.

HomeBuilder offers homeowners (including first home buyers) a grant of A$25,000 to build a new home worth less than $750,000 or to spend between $150,000 and $750,000 renovating an existing home.

The scheme is limited to owner-occupiers with reported incomes below $125,000 for singles and $200,000 for couples.

Giveaways to home buyers are wildly popular. And who wouldn’t want their house renovated on the public dime? The trouble is it’s bad economics.

Take the new grants for home owners wanting to renovate.

To be eligible, they have to sign a contract with a builder by the end of the year.

But renovations costing $150,000 or more take time to plan.



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Why the focus of stimulus plans has to be construction that puts social housing first

The plans need to be drawn up, finance approved, and any building and development approvals secured.

Which means that anyone who signs a contract with a builder today was already planning to renovate.

And chances are that many who sign contracts over the coming months have already planned to renovate.

The new grants will also encourage the in-demand tradies to raise their prices.

They’ll add up to a lot of spending for few jobs saved.

Not many more homes

The grants for buying new homes are more likely to support construction jobs. They will encouraging buyers to bring forward purchases.

It’s why in 2008, in response to the global financial crisis, the Rudd government tripled the first home buyer grant to $21,000 for new homes.

There’s no doubt the coronavirus crisis has hit construction hard: in the past three months almost 7% of the industry’s workforce have lost their jobs.

But most industry forecasters expect at least 110,000 homes to be built (and sold) in Australia anyway next fiscal year.

And most of those first home buyers will be eligible for the grants

About 83% who had recently bought their first home in 2018 paid less than $750,000 for it. Of those, about 90% would have satisfied the income tests for the new grants.

That’s a lot of homes that will have to be funded first before HomeBuilder funds the construction of any extra homes.



Read more:
Government to give $25,000 grants to people building or renovating homes

And stiff competition among prospective buyers of homes selling below the $750,000 price cap will force up the prices of those homes.

That’s a big win for developers selling house-and-land packages on the urban fringe.

Perhaps the best that can be said for the scheme is that it probably won’t cost much.

The grants are uncapped, but the government expects it to cost about $688 million for roughly 27,000 grants. And since many of those homes would have been built anyway the scheme won’t support many construction jobs either.

What’d be better

It’d be better to fund the states to build new social housing or refurbish existing homes, as the Rudd government did during the global financial crisis.

Many have forgotten about that scheme because it attracted so little controversy, unlike other of Rudd stimulus programs.

Public residential construction approvals spiked within months of the announcement, and more than half of the homes built went to tenants at risk or already homeless.

Building 30,000 new social housing units today would cost between $10 billion an $15 billion. it would support the building industry, and as important, would help many of the 116,000 Australians who are homeless on any given night.

It might not make for good retail politics, but it would help people who need it. And it would be good economics.The Conversation

Brendan Coates, Program Director, Household Finances, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Our needlessly precise definition of a recession is causing us needless trouble

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DAVID CROSLING/AAP/RBA

John Hawkins, University of Canberra

Later today we’ll know what the bushfires and the coronavirus did to the economy in the three months to March: whether gross domestic product grew (as is usual) or whether it shrank (as is rare, and heralds a recession).

Gross domestic product (GDP) is an imperfect measure of everything that’s produced in the three months (and also everything that’s spent and earned).

Imperfect or not, it is measured the same way every time, which is why changes in it give us a good idea of changes in what we produce and earn.

Most likely it will tell us that what we produced and earned shrank.



Read more:
Australia’s first service sector recession will be unlike those that have gone before it

There is a minority view, held by five of 25 economists surveyed by Bloomberg, that it could tell us the economy grew, perhaps because of panic buying of toilet paper and the like in March, although much of the demand will have been satisfied by running down inventories in March rather than producing more.

This has led to headlines saying Australia might avoid a recession.

It would come as a surprise to those who have lost their jobs, had no work or closed their businesses. It reflects the media’s common, but flawed, definition of a recession as two consecutive quarterly falls in real GDP.

The ‘technical’ definition is wrong

This is sometimes referred to this as a “technical” recession, which is an odd distinction given that no-one refers to a “generic”, an “artistic” or a “lay” recession.

The inadequacy of the definition is illustrated by looking at the Australian economy’s response to the 1973 oil shock and subsequent global economic slowdown.

Quarterly change in GDP, seasonally adjusted 1960 – 2000


ABS 5206.0

Real GDP contracted in only one quarter of 1974, but by a massive 2%, the biggest plunge on record, and enough to mean that less was produced in the last quarter of 1974 than in the last quarter of 1973.

The unemployment rate more than doubled in the space of year. Consumer confidence plummeted.

Any reasonable person would have concluded that during 1974 the Australian economy was deep in recession.

So what is a recession?

Probably the most reputable source is the US National Bureau of Economic Research which has been studying business cycles for a century, and in the United States is regarded the arbiter of when recessions begin and end.

It defines a recession as

a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales

Note that there is nothing in this definition that limits a recession to (or requires) two quarters of sliding GDP in a row.

A “depression” is a very severe recession.

The newspaper article that sparked talk of ‘technical’ recessions.
New York Times

An elephant would still be an elephant if it didn’t have a trunk. As with a recession, there are many ways of defining an elephant, but we know what one is when we see one.

The narrower two-quarters-in-a-row definition was introduced in a 1974 newspaper article by Julius Shiskin, an economist then serving as the US Commissioner of Labor Statistics.

He set out some “useful guidelines” that could be used to guess at whether something was a recession while waiting for the formal declaration from the National Bureau of Economic Research.

One was “declines in real GNP for two consecutive quarters”.

It’s a rule of thumb…

The simplicity of the suggestion struck a chord, and it was widely adopted.

Australia has no institution comparable to the National Bureau of Economic Research to date recessions, but there is broad consensus we have had six:

  • the prolonged depression in the 1890s when the Federation drought coincided with the collapse of a speculative boom in Melbourne and weak global demand

  • the global great depression of the 1930s which followed the Wall Street crash and was exacerbated by tariff wars

  • the milder recession that followed a credit squeeze in the early 1960s

  • the mid-1970s recession also caused by a tightening of access to credit in the face of inflation and a sudden jump in oil prices

  • the early 1980s brought on a US recession and exacerbated by drought

  • the early 1990s “recession we had to have”, brought on by extremely high interest rates that caused the collapse of several Victorian financial institutions

During the 2008 global financial crisis, Australia’s economy performed better than almost all its peers, with no annual fall in GDP and a relatively small increase in unemployment.

When, after having fallen in the December quarter of 2008, real GDP climbed rather than fell again in the following quarter, Prime Minister Rudd said he had never been as elated.

It allowed him to claim he had avoided a “technical” recession.

…with real-world consequences

It is widely agreed that GDP will have fallen in the June quarter of 2020, the one following the March quarter.

So long as lockdowns do not need to be reimposed, the economy is likely to recover a bit in the September quarter, meaning that, unless GDP fell in the March quarter, Australia might be able to boast it has “technically” avoided a recession.

It would happen in the midst of what the Reserve Bank governor described this week as the biggest economic contraction since the 1930s.

It’ll turn on whether today’s figures show show a small rise (maybe 0.1%) or a small fall (maybe 0.1%) in March quarter GDP.

In other words, it’ll depend on nothing much.



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But the media definition of “technical” recession might be influencing policy design. When the government was concerned that the bushfires would lead to GDP contracting in the March quarter, its focus seemed to be on avoiding a second fall in the June quarter.

Its A$750 payments to income support recipients were rolled out only after March 31. Its increase in the instant asset write-off and cash flow assistance to small businesses were to end on June 30.

Once it became clear that GDP would fall in the June quarter, it appeared to shift its focus to avoiding a further fall in the September quarter, announcing JobKeeper and JobSeeker programmes that would run to the end of September.

It’s not the same as providing help when needed. It might be a consequence of our needlessly-precise definition of a recession.The Conversation

John Hawkins, Assistant Professor, School of Politics, Economics and Society, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Cases, deaths and coronavirus tests: how Australia compares to the rest of the world

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Molly Glassey/Pexels, CC BY

Sunanda Creagh, The Conversation

When it comes to coronavirus cases, deaths and tests, Australia is performing better than many other countries with comparable populations and geographies, a new COVID-19 data visualisation reveals.

Use the tool below, which uses data drawn from Our World in Data, to explore how each country compares on:

  • the total number of COVID-19 cases
  • the total number of cases per million people
  • the number of daily new confirmed cases
  • the number of daily new confirmed cases per million people.

On COVID-19 fatalities for each country, you can see:

  • the total number of deaths
  • the total number of deaths per million people
  • the number of daily new deaths
  • the number of daily new deaths per million people

And for tests performed by each country (except China, which Our World in Data says has limited publicly available data on testing rates nationwide), you can see:

  • the total number of tests performed
  • the total tests per thousand people
  • the number of daily new tests
  • the number of daily new tests per thousand people.
Data visualisation: Kaho Cheung https://observablehq.com/@unkleho/covid-19-bubble-chart-with-d3-render. Data source: Our World in Data https://ourworldindata.org. New deaths, cases and tests refers to new daily confirmed deaths, cases and tests. Countries with a population under 1 million not shown.

Hit the “play” button to show how the situation for each metric developed over time (noting the long period at the beginning for which COVID-19 cases appeared to be confined to China, and the lack of publicly available data for nationwide testing rates in China). You can read more here about the limitations of the data.

The Conversation asked Adam Kamradt-Scott, an expert on health security and pandemic preparedness, to reflect on what the data reveal at date of this article’s publication. Here’s what he told us:

Australia is doing well

Overall, the data show Australia is doing pretty well. It has conducted a high number of tests (currently about 58 total tests per thousand people), which is more than the US, Canada or South Korea have done per thousand. The comparison with South Korea, which has been widely praised for its handling of the pandemic, is especially notable and reflects well on Australia.

In Australia, the number of total cases, new cases and cases per million is low.

I hold some reservations about the speed with which social distancing measures are being relaxed around Australia, as there’s a risk we could see a surge of new infections if there are undetected cases.

But as long as we are able to maintain a high level of testing and people follow the guidance after testing, we might be OK.

It’s interesting to see Australia compares favourably with Canada, which is broadly comparable to Australia in population size and geographical spread, given Canada also went through the 2003 SARS outbreak and so has more experience in handling a pandemic.

Total tests and tests per thousands

You’d have to say one of the standouts is Bahrain. Based on this data, it has done an average of about 190 total tests per thousand. That is pretty high, which can provide a measure of reassurance you are capturing the majority of cases.

So when we look at the overall number of tests, the US, Russia and Italy appear to be best but when you look at tests per thousand, Bahrain leaps ahead. (It’s worth noting, however, it’s a small and densely populated country, which puts it at an advantage when it comes to tests per head of population).

US president Donald Trump has said America has “more testing than anybody else”. This data currently show that while the US has the highest number of tests overall, it is bested by Australia, New Zealand, Russia, Bahrain, Italy and many other countries if you measure tests per thousand people (a better indication of how widespread testing is).

Deaths and deaths per million

Belgium is unfortunately a bit of a surprise, appearing in this data set to be suffering the highest rate of fatalities per million people. Quite a lot has been made of the UK and the number of fatalities there compared to other parts of Europe. But compared to others, Belgium is hardest hit when it comes to deaths per million, but this may have to do with the way they report data.

It’s worth remembering that in some countries, though, we’ll never really know how many people have really died of COVID-19. That’s because, in some cases, countries didn’t test people who died.

That’s a limitation of the data, which relies on what countries report. If some countries are simply burying people who have died without investigating the cause of death, then the picture can be skewed.

We will never know the full number of deaths in all countries from COVID-19, principally because it is very difficult to verify the cause of death in many parts of the world. You need the lab capacity and affordable access to testing, which many countries lack. In those circumstances, they can only make an educated guess.

Sweden, which has reportedly pursued a “herd immunity” strategy and eschewed many of the lockdown measures other countries have in place, is an interesting one. It is not as bad as Belgium, but it’s certainly up there with about 440 deaths per million. And if we look at new deaths per million, it also looks grim for Sweden (as well as the UK, Brazil and Peru).

The argument the Swedish government is reportedly making is that, in the long run, Sweden is going to be better off. But the Swedish strategy is an inherently risky one.

For example, if there’s a slight mutation or a new strain emerges the question would then be: to what extent does exposure to the previous strain confer immunity? If the answer is “not much” then Sweden could get hit with a second round of infections. That hasn’t happened and may not happen, but it highlights one of the risks.

At the same time, if we see a vaccine successfully developed, then one of the questions the Swedish government will have to answer is whether more lives could have been saved if they’d implemented lockdowns like many other countries did.

Unfortunately, only time will tell.The Conversation

Sunanda Creagh, Head of Digital Storytelling, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

4 ways Australia’s coronavirus response was a triumph, and 4 ways it fell short

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Stephen Duckett, Grattan Institute and Anika Stobart, Grattan Institute

Australia’s response to the coronavirus outbreak so far has been among the most successful in the world. From a peak of more than 400 cases a day, the rate has fallen to fewer than 20 new cases a day.

Australia has avoided the worst of the pandemic, at least for now. Comparable (albeit larger and more densely populated) countries, such as the United Kingdom and United States, are mourning many thousands of lives lost and are still struggling to bring the pandemic under control.

The reasons for Australia’s success story are complex, and success may yet be temporary, but four factors have been important.

Success 1: listening to experts

The formation of a National Cabinet, comprising the prime minister and the leaders of each state and territory government, was a key part of Australia’s successful policy response to COVID-19.

States and territories have primary responsibility for public hospitals, public health and emergency management, including the imposition of lockdowns and spatial distancing restrictions. The Commonwealth has primary responsibility for income and business support programs. Coordination of these responsibilities was crucial.

The National Cabinet was created quite late – in mid-March 2020 when cases were beginning to increase exponentially – but has proved an effective mechanism to resolve most differences as Australia’s dramatic and far-reaching measures were put in place.



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Explainer: what is the national cabinet and is it democratic?

Within a week of the National Cabinet being formed, Australia began to place restrictions on social gatherings. On March 22, ahead of a National Cabinet meeting that evening, Victoria, New South Wales and the Australian Capital Territory announced they were proceeding in the next 48 hours to shut down non-essential services. This helped push all other governments into widespread business shutdowns announced by Prime Minister Scott Morrison that night, to take effect the following day.

National cooperation was further enhanced by the Australian Health Protection Principal Committee (AHPPC), comprising Australia’s Chief Medical Officer Brendan Murphy and his state and territory counterparts. From the start of the crisis, this forum helped underpin Australia’s policy decisions with public health expertise, particularly with regard to spatial distancing measures. Murphy has frequently flanked Morrison at national press briefings.

Success 2: international border closures and quarantine

Australia’s decision to close its borders to all foreigners on March 20, to “align international travel restrictions to the risks” was a turning point. The overwhelming number of new cases during the peak of the crisis were directly linked to overseas travel, and overseas sources account for nearly two-thirds of Australia’s total infections.

A week after closing the borders, Australia instituted mandatory two-week quarantine for all international arrivals. Together, these measures gave Australia much more control over the spread of the virus.



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Is it time to reopen our borders? For states still recording new cases, it’s too soon

Success 3: public acceptance of spatial distancing

Australia’s rapid adoption of spatial distancing measures reduced the risk of community transmission.

Perhaps galvanised by images of Italy’s health system on the brink of collapse, Australians quickly complied with shutdown laws. In fact, many people had already begun reducing their activity before the restrictions were imposed.

Australians’ compliance is demonstrated by the low number of community transmissions, despite having less strict lockdown laws than some other countries such as France and New Zealand.

Success 4: telehealth

One of the federal government’s early moves was to radically expand Australians’ access to telehealth. This allows patients to consult health professionals via videoconference or telephone, rather than in person.

Australians have enthusiastically embraced telehealth, with more than 4.3 million medical and health services delivered to three million patients in the first five weeks. A survey of more than 1,000 GPs found 99% of GP practices now offer telehealth services, alongside 97% offering face-to-face consultations.



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Unfortunately, Australia has also had failings, and it might have been in an even better position today if it had acted more decisively. Although it eventually “went hard”, the federal government spent the early weeks of the crisis mired in uncertainty.

Failure 1: the Ruby Princess

About 2,700 passengers from the Ruby Princess cruise ship were allowed to disembark freely in Sydney on March 19, despite some showing COVID-19 symptoms. The ship has become Australia’s largest single source of infection. About 700 cases (10% of Australia’s total) and 22 deaths (about 20% of Australia’s deaths) are linked to the ship.

Failure 2: too slow to close borders

While Australia was comparatively quick to ban foreign nationals coming from China, it was slow to introduce further travel restrictions as the virus began to spread throughout the rest of the world.

It took more than six weeks after Australia’s first confirmed case for the federal government to introduce universal travel restrictions. Before this, restrictions were targeted at specific countries, such as Iran, South Korea and, belatedly, Italy – despite other countries such as the US posing similar or even greater risks.



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Coronavirus has seriously tested our border security. Have we learned from our mistakes?

Failure 3: too slow to prepare the health system

Australia was too slow to ready its health system for the prospect of the virus spreading rapidly. When cases began to rise exponentially, Australia was ill-prepared for a pandemic-scale response.

This was particularly evident in the testing regime. At first, some people with symptoms went to community GP clinics and hospitals, without calling ahead, putting others at risk. On March 11 the federal government announced 100 testing clinics would be established, but this was only completed two months later, once the peak of the crisis had passed.

The result was that as cases began to increase in mid-March 2020, Australia suffered supply shortages for testing.

Australia also struggled to meet the rising demand for personal protective equipment (PPE). Australia’s stockpile of 12 million P2/N85 masks and 9 million surgical masks was not sufficient, and neither had it stockpiled enough gowns, visors and goggles to cope with the crisis. GPs complained of inadequate supplies hampering their work.

Eventually, on March 26, elective surgeries were curtailed so PPE could be diverted to the pandemic frontline.

Failure 4: shifting strategies and mixed messages

The lack of a clear, overarching crisis strategy has resulted in a reactive policy approach, featuring confusing messages.

At first there was confusion about exactly which businesses or events (such as the on-again then off-again Melbourne Grand Prix) should be shut down. There were also inconsistencies between the Commonwealth’s position and the states’. For example, most states closed or partially closed their public schools around Easter and began reopening them when cases went down more than a month later. Despite concerns raised by some state governments, Prime Minister Morrison repeatedly insisted there was no risk in sending children to school. Childcare centres remained officially open throughout.



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We’ve known about pandemic health messaging since 1918. So when it comes to coronavirus, what has Australia learnt?

The mixed messages have been particularly pronounced on Australia’s approach to the virus itself. The federal government initially talked about “slowing the spread”, but some states argued for a “stop the spread” strategy. This tension increased confusion about how far Australia’s lockdown restrictions should go. Debate raged between people who argued that “herd immunity” was Australia’s only realistic option, and those who pushed for “elimination” of COVID-19 in Australia.

Confusion reigned for too long. Even an April 16 statement from Morrison, designed to clarify the long-term strategy, conflated two different strategies by declaring Australia was continuing to “progress a successful suppression/elimination strategy for the virus”.

In the end, the case count provided its own answer. Several states began to record multiple days and weeks with no new cases, showing that elimination may indeed be possible.



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We may well be able to eliminate coronavirus, but we’ll probably never eradicate it. Here’s the difference

As restrictions unwind, a new norm will set in. The risk of COVID-19 emerging again means Australians’ way of life will have to fundamentally change. Significant risks remain, particularly for states that ease restrictions too fast. Continual monitoring will be required to prevent further outbreaks or a second wave.The Conversation

Stephen Duckett, Director, Health Program, Grattan Institute and Anika Stobart, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economic snap-back? Not so fast

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Steven Hamilton, Crawford School of Public Policy, Australian National University; Bruce Preston, University of Melbourne, and Chris Edmond, University of Melbourne

With the virus on the back foot, it’s tempting to declare victory. Provided we stay vigilant on the public health front, we do have a good chance of keeping the pandemic at bay. But there’s another enemy still to defeat.

The public health measures have worked so much better and faster than expected that calls to reign in the economic measures have already begun. The prime minister has said he wants to get the patient out of the intensive care unit as quickly as possible.

But these calls take for granted an economic snap-back that is far from assured.



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The economy in 7 graphs. How a tightening of wallets pushed Australia into recession

Last month’s stunning revelation that the JobKeeper wage subsidy will cost A$60 billion less than expected has been taken by many as good news.

But this might not be because there is no need for further aid but rather because there are too many barriers to accessing it, or business owners have decided it is futile.

Even with this underspend, JobKeeper is propping up the wages of a quarter of the workforce. An extra half a million Australians have lost their jobs. While JobKeeper has saved many businesses, still thousands have failed.

It’ll be a three-step recovery

Reserve Bank Governor Philip Lowe said last week it would be a mistake to withdraw the fiscal stimulus too quickly.

If the economy picks up more quickly, that can be withdrawn safely, but, if the recovery is very drawn out, then it’s going to be very important that we keep the fiscal support going.

We see the battle plan for a full recovery progressing through three phases: (i) shutting down the economy until the pandemic is under control, (ii) bringing the economy out of the ensuing deep recession, and (iii) putting the economy back on a strong growth path.

If we’re lucky, we’re nearing the end of phase one.

We’re ready for step two

This crisis is unusual. We deliberately engineered an enormous decline in activity in order to achieve the social distancing required to bring the pandemic under control.

During this first phase, conventional stimulus would have been of limited help and could have been counterproductive. We needed tools such as JobKeeper to freeze much of the economy with the hope it would thaw once the pandemic was under control.

The second phase is the more conventional vicious cycle of workers who lose income spending less causing other workers to lose income.

It is best dealt with by fiscal stimulus.

Broad-based cash transfers to households, like those implemented in the United States, would be a powerful complement to existing measures. They could paper over cracks in JobSeeker and JobKeeper over the coming months, and help prevent any relapse as those schemes expire.



Read more:
How will the coronavirus recession compare with the worst in Australia’s history?

Economists widely acknowledge the role of the cash stimulus component of the Rudd government’s response to the 2008 global financial crisis in helping Australia avoid recession. The Morrison government could pick the best part of that response while avoiding the less effective parts.

Some worry about heightened levels of government debt.

These concerns are unwarranted. Australia went into the crisis with low debt by international standards, and can borrow at historically low fixed interest rates.

It can borrow for ten years at a rate close to 1%, less than the rate of inflation.

More debt, sooner, can cut debt

The more successful we are at getting the economy out of recession, the less we’ll spend on programs like JobKeeper and JobSeeker.

Provided we keep the pandemic at bay, the quicker the economy recovers the sooner earnings and taxes will pick up and the sooner the budget will be back in black.

A turn to austerity triggered by debt and deficit concerns of the kind seen in Europe after the global financial crisis could deliver us a slower rather than a faster recovery in our debt to GDP ratio.



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Memories. In 1961 Labor promised to boost the deficit to fight unemployment. The promise won

Phase three in our recovery is the search for programs to increase the productive capacity of the economy. They can help make up for lost time, getting the economy back to where it would have been without the crisis. And they can help deflate away the debt.

How best to set our economy up for the decades ahead is an important debate. We look forward to it.

But let’s not get ahead of ourselves. Now is the time to use the best recession-fighting tools we have to get the economy back on the path to recovery.The Conversation

Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University; Bruce Preston, Professor of Economics, University of Melbourne, and Chris Edmond, Professor of Economics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why even the best case for jobs isn’t good. We’ll need more JobKeeper

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Jeff Borland, University of Melbourne

When it comes to the outlook for employment, there’s good news and bad news.

To begin with the good news: with a bit of luck, the next few months will see the fastest expansion of employment in Australia’s history.

The bad news? Well, there’s virtually no chance it will be enough to get employment to where it was in March, before the COVID-19 shutdown.

In fact, even on a best-case scenario it’s likely by the end of September we will only be back to the worst points of the 1980s and 1990s recessions.

The best-case scenario

Other Bureau of Statistics data suggests that between mid-March and mid-April employment fell 1.3 to 1.6 million.

Treasury estimates that the planned reopening of the economy will result in a bounceback of 850,000 jobs.

Suppose that a decrease of 1.3 million turns out to be the trough and recovery is uninterrupted.

Employment at the end of September would then be 440,000 below where it was in March, 3.4% lower.



Read more:
The economy in 7 graphs. How a tightening of wallets pushed Australia into recession

The turnaround would be a considerable achievement.

But even if it happens, we will have only recovered to around the worst points of the 1980s and 1990s recessions, where employment decreased by about 4 per cent.

Employment won’t recover fully in this best-case scenario because some parts of the economy will still be shut down (including international travel) and COVID-19 will continue to cause many consumers to spend less than usual.

That best case is unlikely

There are several reasons to worry about whether the best-case can be achieved.

First, job gains from reopening businesses are likely to be offset by losses in employment in other industries suffering from reduced consumer demand and business investment.

While cafes and restaurants may start up again, Bureau of Statistics data shows that employment has begun to decline in large industries such as construction and professional services.



Read more:
Were it not for JobKeeper, unemployment would be 11.7%, up from 5.2% in one month. Here’s how the numbers pan out

Second, the effects of reopening may not be all we expect. Labour hoarding – where businesses retain more workers than needed during an economic downturn – might mean that reopening doesn’t translate into as many new jobs as expected.

This is likely to be particularly acute given that JobKeeper has effectively paid employers to subsidise labour.

Third, impacts from longer-run structural changes in the economy might begin to cause employment losses, especially as JobKeeper is partially unwound.

So what are we to do?

Even under the best-case scenario employment will be substantially lower than before COVID-19 well into the future. And we can’t presume the best-case will happen. A compelling case exists for substantial ongoing economic stimulus post-September 2020.

The labour market will not have fully recovered by then. To remove stimulus would only set back recovery. The question therefore should not be: is stimulus needed, but rather, what size and type of stimulus is needed.

Continuing JobKeeper beyond September 2020 could have an important role in providing income security to affected workers and macroeconomic stimulus.

It is a known policy, it operates effectively, and it appears to have community support. Replacing it with an alternative type of stimulus could risk harming confidence and the recovery.

We can’t simply end JobKeeper

An extra (and considerable) advantage of continuing JobKeeper is allowing time for a staged transition away from it. Stopping it will inevitably push up unemployment.

A staged transition would spread out that adjustment rather than creating a shock in September.

A transition from JobKeeper could be done via stepped decreases in the size of payment or progressively restricting eligibility as industries or businesses recover. The transition could begin at the end of September, or earlier if it is judged that employment is likely to have already recovered substantially before then.



Read more:
We need to plan for life after JobKeeper now. We need to make it portable

An objection to retaining JobKeeper is that it is preventing adjustment in the labour market, and disrupting the normal process of businesses starting up and failing.

There are two responses.

First, the question is not about whether JobKeeper should be permanent, but about the timing of its removal.

Whenever it is (or starts to be) removed, labour mobility will return and any firms on life support will disappear. Having this happen via a staged transition is better than having it happen all at once.

Second, the potential economic losses from unemployment in a depressed economy swamp the potential losses from having inefficient firms operating for longer.

Our number one priority has to be maintaining and restoring employment.The Conversation

Jeff Borland, Professor of Economics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government to give $25,000 grants to people building or renovating homes

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Michelle Grattan, University of Canberra

The Australian government will provide eligible owner-occupiers with a grant of $25,000 to build a new home or extensively renovate an existing one.

The scheme – estimated to cost up to $688 million – will not be limited to first home buyers.

Contracts must be entered into between now and the end of the year, with work to begin within three months of the contract date, to maximise the stimulus to an industry set to take a big hit from the pandemic crisis.

The means-tested HomeBuilder scheme will be available to individuals with income up to $125,000 and couples whose combined income is up to $200,000.

It will not be available to companies or trusts, those who are not Australian citizens or people under 18 years of age. Owner builders will not be eligible, nor can the scheme be used for investment properties.

New builds must be for a principal place of residence with a cap on the combined value of house and land of $750,000.

Those renovating their existing home as a principal place of residence will have to be making changes valued between $150,000 and $750,000, with the dwelling worth not more than $1.5 million before the renovation.

The renovation must be “to improve the accessibility, safety and liveability” of the home. It can include a combination of work, such as a kitchen and bathroom renovation.

It can’t be for unconnected additions, such as detached sheds or garages, or for swimming pools, tennis courts or outdoor spas and saunas.

It must be under the supervision of a registered or licensed builder.

Sensitive to comparisons with the Rudd government’s stimulus grants in the global financial crisis, notably the controversial pink batts scheme, the government has listed differences including the limited term of the program, tighter eligibility criteria and expert supervision.

The latest package comes as Wednesday’s national accounts showed the Australian economy went backwards by 0.3% in the March quarter. Annual growth was 1.4%.

Treasurer Josh Frydenberg admitted Australia is already in recession, given the June quarter is expected to be horrendous. A common definition of a recession is two negative quarters.

Frydenberg also announced the government’s promised economic and fiscal update has been delayed, from June until July 23.

He said it would include the response to the review of JobKeeper, which is currently under way. He again flagged the government could cut the $1500 a fortnight payment for those earning less than that before COVID.

Shadow treasurer Jim Chalmers said the delay was a disgrace in these uncertain times.

The government says the housing scheme will help support 140,000 direct jobs and another 1,000,000 related jobs in the residential construction sector.

The sector has lobbied for special assistance, saying it expects new dwelling starts to fall by half by the end of this year.

The government expects competition for work will keep prices contained.

Frydenberg said that “with dwelling investment expected to decline by around 20% through the June quarter, the HomeBuilder program will support residential construction activity and jobs across the industry at a time when the economy and the sector needs it most”.

The scheme will be implemented through the states and territories, which will monitor compliance. The grant will be paid to people when they make their first progress payment.

Prime Minister Scott Morrison said: “Our JobKeeper support has helped the construction sector weather the crisis, now we’re helping fire it up again.

“This is about targeted taxpayer support for a limited time using existing systems to ensure the money gets used how it should by families looking for that bit of extra help to make significant investments themselves.”

Housing Minister Michael Sukkar said “HomeBuilder will not only support the jobs of carpenters, plumbers, bricklayers and electricians on our building sites, it will also support the timber mill workers who produce the frames and trusses and the manufacturing workers who make the glass, brick and tiles for our homes”.

Some days ago, Labor’s housing spokesman Jason Clare said the housing industry was “expected to go off a cliff” and a stimulus package was urgently needed. Labor has also said stimulus should be given to social housing.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The economy in 7 graphs. How a tightening of wallets pushed Australia into recession

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Peter Martin, Crawford School of Public Policy, Australian National University

A go-slow on spending sent the economy backwards 0.3% in the first three months of this year, only the fourth such decline since Australia was last in recession in the early 1990s.

Treasurer Josh Frydenberg says Treasury has told him the next three months, the June quarter that we are in at present, will see a “far more severe” contraction, one private sector forecasters believe could be as high as 10%.

Asked whether that meant Australia was already in recession, he said it did.

Quarterly GDP growth since 1990


ABS 5206.0

Most unusually for an economic downturn, incomes rose throughout the quarter, pushed higher by a 6.2% increase in government payments related to COVID-19 and the bushfires, and an 11.1% increase in insurance payouts as a result of bushfires and hailstorms.

Household incomes even rose in per capita terms, by 0.1% after abstracting for population growth.

But rather than spend more, Australian households dramatically increased saving in the quarter, pushing the household saving ratio up from 3.5% to 5.5% and pushing down household spending 0.2%.

Household savings ratio


Commonwealth Treasury

Spending on goods actually increased over the three months as Australians stocked up on essentials including toilet paper in March.

The production of “petroleum, coal, chemical and rubber products” surged 8.1% as consumers stocked up on cleaning and disinfectant products.

But spending on services plummeted, led down by dramatic falls in spending on transport and hotels, cafes and restaurants.

Household consumption, March quarter


Commonwealth Treasury

Spending on transport services (airlines and the like) fell 12.0%. Spending on hotels, cafes and restaurants fell 9.2%, each the biggest fall on record.

“Production” in these industries fell 4.9% and 7.5%. Profits fell 6.8% and 14.2%.

Spending fell on ten of the 17 consumption categories.

Household consumption by category, March quarter


Commonwealth Treasury

Most of the changes took place at the very end of the March quarter.

A new index of the “stringency” of COVID-19 containment measures released with the national accounts shows these ramped up only in the final two weeks.

Most have been in place for the entirety of the June quarter to date, suggesting the impacts on spending and production will be a “lot more substantial”, in the words the treasurer used in the national accounts press conference.

ABS stringency of containment measures index


ABS 5206.0

Were it not for government spending, which has climbed 6.2% throughout the year, the plunge in March-quarter GDP would have been much more severe.

Calculations of the Bureau of Statistics suggest it would have been twice as severe, a March quarter decline of 0.6% rather than 0.3%.

General government expenditure


Commonwealth Treasury

The treasurer described Australia as “on the edge of the cliff” in the March quarter, facing “an economist’s version of Armageddon”.

The treasury had been contemplating a fall in gross domestic product of 20% in the June quarter. Australia has avoided that fate by acting on health and the economy early.

Its fall in GDP of 0.3% in the March quarter was one-third the OECD average.

International comparisons, real GDP growth, March quarter


Commonwealth Treasury

The treasurer has scheduled an economic update for July 23 which will include the result of a review of the JobKeeper program.

Asked whether it could be referred to as a mini-budget, he said it could be.



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Our needlessly precise definition of a recession is causing us needless trouble


The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.