How to improve JobKeeper (hint: it would help not to pay businesses late)



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Danielle Wood, Grattan Institute and Nathan Blane, Grattan Institute

JobKeeper has been a lifeline for the economy.

Given the ferocity of the economic hit caused by COVID-19, the government was right to prioritise speed over perfection.

But the current review of the A$70 billion provides an opportunity to iron out some of its crinkles.

The biggest priorities should be moving to upfront payments, expanding the scheme to cover temporary workers and short-term casuals, and avoiding the looming government support cliff.




Read more:
That estimate of 6.6 million Australians on JobKeeper, it tells us how it can be improved


The government should also introduce a separate part-time payment rate, to better target the scheme and provide greater bang for buck.

The biggest barrier to the effectiveness of JobKeeper is the fact that the employer gets it in arrears, weeks after she or he has paid it to employees.

Stop paying businesses late

Businesses without the necessary cashflow have been encouraged to take advantage of government-backed loans, but for many the process has been too slow or unacceptably risky.

It might help explain why the take-up of the JobKeeper has been lower than expected.

Those cash-flow-constrained businesses that have been able to access finance have been forced to borrow on an ongoing basis in order to pay their workers.




Read more:
JobKeeper is quick, dirty and effective: there was no time to make it perfect


Given that the government now knows how much it needs to pay to businesses that are in the scheme, it would be very easy to switch to payment in advance by doubling up a payment – moving to being in step with, rather than behind, employers’ needs.

With government able to borrow so cheaply – at less than the rate of inflation – the fix would cost it little, and would add little to JobKeeper’s total cost.

The case for extending JobKeeper to temporary visa holders is clear cut.

Include more workers

Temporary visa holders can’t get safety net payments such as JobSeeker. And many of them are stuck here: there are no affordable options for them to return to their home country.

Leaving people without support does not do much for Australia’s reputation as a global citizen – many of the countries with which Australia normally compares itself have extended wage support to the wages of temporary residents.

It means JobKeeper is far less generous for businesses in sectors that rely on temporary visa holders, including the hard-hit sectors such as hospitality, retail, healthcare, and aged care.




Read more:
Why temporary migrants need JobKeeper


If temporary visa holders sign up to the scheme at the same rate as other residents, including them for six months would cost about $10 billion.

Short-term casuals – those who’ve worked for their employers for less than a year – have also been excluded, which has also left big holes in support for some of the worst-hit sectors and some of the lowest-income Australians.

Including short-term casuals would cost an extra $6 billion.

Pay part-timers less

JobKeeper pays all eligible workers at the same flat rate, regardless of the hours they worked before coronavirus hit or afterwards. More than 80% of part-time workers are believed to have received a pay rise under JobKeeper.

This means the scheme costs more than it needs to. It also raises questions about fairness between employees within businesses, because a part-time worker gets as much as full-time worker.

No doubt the government chose a flat rate to make the program simple, but a simple way to adapt the scheme would be to follow New Zealand and introduce a lower rate for people working less than 20 hours a week.




Read more:
JobKeeper payment: how will it work, who will miss out and how to get it?


It could mean that full-time employees on JobKeeper continued to receive $1,500 a fortnight, while employees working less than 20 hours a week got $800.

The saving, more than $2 billion per quarter, could be used to fund some of the extensions to the scheme we propose.

Extend it for businesses not recovered

The universal September 27 cut off date is blunt. It does not recognise that social distancing constraints will continue to affect some businesses for many months and that different sectors will bounce back at different rates.

Pulling back assistance on businesses that are still significantly revenue constrained risks undoing much of the good work JobKeeper has done to preserve jobs.




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


Businesses currently receiving the payment should be required to re-test against the turnover requirement at the end of July and September. Where a business’s turnover climbs to higher than 80% of pre-crisis levels, support could be withdrawn with notice.

Businesses that remain below the recovery threshold in September should receive JobKeeper for an additional three months.

While the incentives would not be perfect – some businesses close to the threshold would have a short-term incentive to limit their recovery – it would be better than withdrawing support prematurely for scores of businesses.

JobKeeper is good, we can make it better

As well as being more effective in maintaining productive capacity, the approach we advocate would help cushion the “fiscal cliff” due at the end of September when all major coronavirus supports are due to come off at once.

Three months into its short life, JobKeeper is performing well. Now is the time to get it right.

Overall the proposed changes would cost a little more but they would better target the scheme and ensure it delivers on its promise of keeping Australians in jobs.The Conversation

Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute and Nathan Blane, Analyst, Grattan Institute

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

Businesses get extension for instant asset write-off



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Michelle Grattan, University of Canberra

In its latest move to spur business investment, the government will extend its $150,000 instant assets write-off until the end of the year.

The six-months extension, which will be legislated, will cost $300 million in revenue over the forward estimates.

As part of the government’s pandemic emergency measures, in March it announced that until June 30 the write-off threshold would be $150,000 and the size of businesses eligible would be those with turnovers of under $500 million.




Read more:
Free childcare ends July 12, with sector losing JobKeeper but receiving temporary payment


The government is battling a major investment slump. Bureau of Statistics capital expenditure figures show non-mining investment fell 23% in the March quarter and 9% over the year to March.

Spending on plant and equipment fell 21%, spending on buildings and equipment plunged 25%.

An extra six months

Apart from giving businesses generally more time to claim the write-off, the government says the extension will help those which have been hit by supply chain delays caused by the pandemic.

The write-off helps businesses’ cash flow by bringing forward tax deductions. The $150,000 applies to individual assets – new or secondhand – therefore a single enterprise can write off a number of assets under the concession.

With rain breaking the drought in many areas, farm businesses are getting back into production, so the government will hope the extension will encourage spending on agricultural equipment.

About 3.5 million businesses are eligible under the scheme.




Read more:
Morrison’s coronavirus package is a good start, but he’ll probably have to spend more


The instant asset write-off has been extended a number of times over the years, and its (much more modest) thresholds altered.

On the government’s revised timetable, from January 1 the write-off is due to be scaled down dramatically, reducing to a threshold of $1000 and with eligibility being confined to small businesses – those with an annual turnover of below $10 million.

But there will be pressure to continue with more generous arrangements, to head off the danger of a fresh collapse in investment.

In a statement, treasurer Josh Frydenberg and small business minister Michaelia Cash said the government’s actions “are designed to support business sticking with investment they had planned, and encourage them to bring investment forward to support economic growth over the near term”.The Conversation



Commonwealth Government

Michelle Grattan, Professorial Fellow, University of Canberra

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

Morrison government invites unions to dance, but employer groups call the tune


Anthony Forsyth, RMIT University

Prime Minister Scott Morrison this week proposed a new deal in industrial relations, bringing together the government, employers and unions to agree on reforms to create jobs and lift the economy in the post-CIVD-19 pandemic recovery phase.

“”We’ve booked the room, we’ve hired the hall, we’ve got the table ready,” he said on Tuesday. “We need people to get together and sort this stuff out.”

Comparisons have been made with the “accords” of the Hawke and Keating Labor years between 1983 and 1991.

It’s not the same.

The Morrison government is simply recasting an agenda that business groups have pushed for the past decade, and inviting unions (and other stakeholders) into the room.

The Hawke-Keating accord era

This is a long way from the seven accords agreed between the Hawke-Keating governments and the Australian Council of Trade Unions.

The agreements secured union support for the government’s economic reform program by promising improvements in the “social wage” in exchange for unions curbing claims for pay rises.




Read more:
Australian politics explainer: the Prices and Incomes Accord


As a result, landmark social improvements, including the establishment of Medicare and guaranteed employer contributions to superannuation, were achieved for all Australians.

As the accords wore on, though, unions paid a heavy price as “efficiency” became an element in deciding the merits of claims for higher wages. The last accord, for example, ended centralised wage-fixing and ushered in enterprise bargaining. This did more for business productivity than for employee gains.

The WorkChoices era

The election of John Howard in 1996 buried the accord era. His government embraced an overtly anti-union posture, culminating in the 2006 “WorkChoices” legislation that allowed individual workplace agreements. Howard championed this as giving flexibility to both employers and employees. But it really shifted the balance in favour of employers. The backlash helped end Howard’s reign in 2007.

The Labor government of Kevin Rudd then brought in the Fair Work Act, which reinstituted union-centred collective bargaining.

Since then the business lobby has fought back on two fronts: continuing to campaign for deregulation, and developing strategies (including through litigation) to enable employers to sidestep the Fair Work Act’s collective bargaining provisions.

The success of this approach for many employers largely explains the ACTU’s “Change the Rules” campaign before the 2019 election.




Read more:
Where to now for unions and ‘change the rules’?


Industrial relations has therefore remained hotly contested. Prior to the COVID-19 crisis it was almost like a war of attrition. The Coalition’s Ensuring Integrity Bill exemplifies its aggressive agenda. It would have enabled union officials to be removed from office, and unions deregistered, for minor breaches of workplace laws.




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‘Louts, thugs, bullies’: the myth that’s driving Morrison’s anti-union push


Lay down your guns

Now the prime minister wants everyone to put down their weapons.

In fact this has already occurred in the past two months, with the government, businesses and unions co-operating over emergency measures to deal with the pandemic.

Unions have agreed, for example, to the removal of award restrictions, enabling changes to business operations and work-from-home arrangements. They pushed hard for the JobKeeper wage subsidy scheme.

But how much more will union leaders be prepared to concede when it comes to considering permanent changes to workplace regulation?

Battleground issues

The scope for consensus is limited, especially given four of the five items on the government’s agenda align with that of business organisations such as the Australian Industry Group.

First, casuals and fixed-term employees.

This will be the most hotly fought area. The federal government is likely to address business concerns about the Federal Court ruling last week that “permanent casuals” have a right to paid leave as well as their casual loading. The likely outcome is a new statutory definition of “casual” to prevent this.

For unions, the court decision shuts down the ability of employers to treat workers as casuals long-term. A possible compromise might involve ensuring casuals have a legal right to convert to permanent employment after 12 to 18 months.

Second, “greenfields” agreements for new projects.

Employers in the resources and construction sectors have long complained they are compelled to negotiate with a union for new project agreements. Unions are unlikely to be willing to give this up.

Third, enterprise bargaining.

Employer groups complain the Fair Work Commission’s strict approach to the “better off overall test” and other technical requirements make reaching enterprise agreements too difficult. The unions contend some employers have perverted enterprise bargaining through tactics such as getting carefully selected employees to vote for substandard agreements. There is little room for common ground here.

Fourth, award simplification.

Employer groups have argued that wage-theft scandals are really due to awards being too complex. Yet we have gone from several thousand federal and state awards to 122 awards (one for each industry).




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It is hard to see unions agreeing to (for example) removing leave entitlements from awards when they are arguing in a case before the Fair Work Commission for pandemic leave to be included in awards.

Fifth, compliance and enforcement.

This is the one area where employee gains might be achieved, if the government makes good on its commitment to make systemic underpayment of workers a criminal offence.

Overall, however, the Morrison government’s agenda is skewed towards the reform ambitions of the business community without offering any equivalent of the social wage benefits of the original accord.

Unions may well regard his peace proposal as a request to surrender. They won’t, of course, and will try to ensure their concerns about wage stagnation and exploitation of workers in the gig economy form part of the coming discussions.The Conversation

Anthony Forsyth, Professor of Workplace Law, RMIT University

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

Morrison wants unions and business to ‘put down the weapons’ on IR. But real reform will not be easy.



Lukas Coch/AAP

Ray Markey, Macquarie University

In a bid to repair the economy, Prime Minister Scott Morrison has announced an industrial relations overhaul.

Business groups and unions will be brought together to try to change a system that Morrison says is “not fit for purpose”.

This is a positive step after years in which industrial relations has substantially divided interested parties. As Morrison told the ABC on Wednesday, “we’ve got to put down the weapons”.

But reaching meaningful agreement will not be simple or straightforward.

Accord 2.0?

Morrison’s move has invited comparisons with the Accord between the Labor Party and the ACTU when Bob Hawke became prime minister in 1983.

This was the basis for economic reform built on wide consensus between employers, unions and government.

However, there are many differences between the special circumstances of the Accord and now, which may indicate the chances of success for the current initiative.




Read more:
Australian politics explainer: the Prices and Incomes Accord


Hawke had the advantage of high levels of trust from both unions and employers, based on his years as a successful negotiator as ACTU president and industrial officer.

While Morrison talked positively about to the “constructive approach” between unions and employers during the coronavirus pandemic, he does not have any such record of trust to build on.

Another difference with the Accord is that in the 1980s, the industrial relations system was more centralised. So, employer organisations and the ACTU enjoyed greater coverage and authority among their own constituents to bring them to an agreement.

One indication of that difference now is the recent Jobs Protection Framework negotiated between the National Tertiary Education Union and the Australian Higher Education Industrial Association.

It has fallen over as a sectoral agreement because many universities have refused to participate and it has attracted criticism among some union members.

What needs to be fixed in 2020

Unions, business and government all agree that reform of the current system is needed. Finding common ground on what those changes are will be more difficult.

ACTU secretary Sally McManus says she wants to make jobs more secure for workers.
Joel Carrett/AAP

Morrison has announced five working groups, to be chaired by Industrial Relations Minister Christian Porter. The groups will look at award simplification, casual and fixed-term employment, greenfield projects, and compliance and enforcement for wages and conditions.

Most of the working group topics relate to employer groups’ reform agenda.
The Business Council of Australia has advocated for greater flexibility and simplification of the award system for the economy to successfully rebuild.

Employment relations professor David Peetz warns that this is code for shrinking the award safety net. Unions are likely to interpret this similarly.

Unions may be more interested in simplification of the enterprise bargaining system to benefit workers. They are concerned with the ease with which employers have increasingly terminated agreements and moved employees onto lower paid awards.

Casual workers

The casual workforce is likely to be a contentious area for discussion.

The Australian Industry Group has called for tighter legislative definition of casual worker status, after recent court decisions granted leave for long-term casuals.

Ai Group chief executive Innes Willox is concerned about the definition of workers.
Lukas Coch/AAP

Meanwhile, the ACTU has long sought a general right of conversion to permanent employment for long-term casuals of six to 12 months standing, whom they consider to be exploited.




Read more:
Australian economy must come ‘out of ICU’: Scott Morrison


Notwithstanding the casual loading for casual workers, they earn less on average than permanent employees.

There may be grounds for agreement on this issue. Employers would need to concede a formula for long term casuals’ easy conversion, if they choose, to permanent employment. Unions would need to concede no leave entitlements for employees who choose to remain casuals.

Greenfields sites

Greenfields sites – which involve a genuine new business, activity or project – have been a battleground in the Fair Work Commission for years.

Greenfields agreements on large construction sites have enabled employers to reach enterprise bargaining agreements with a small number of employees before most workers are hired. Workers who are hired when the project gets fully underway are then bound by the agreement.

Compliance and enforcement

There may be more common ground over improved compliance and enforcement for wages and conditions. Employers and unions have condemned major cases of underpayment recently uncovered by the Fair Work Ombudsman.

However, better compliance may be difficult to reconcile with the government and employers’ desire for less regulation.

Where to now?

Unions and employers have indicated willingness to participate in good faith, despite the huge challenges they face. But the omens are poor.

There is already disagreement over the Fair Work Commission’s annual minimum wage decision, due in July.

The ACTU is arguing for a 4% increase, angering business groups.

Industrial Relations Minister Christian Porter will chair five working groups to try and overhaul the IR system.
Joel Carrett/AAP

The Australian Chamber of Commerce and Industry has argued the minimum wage should remain frozen until at least mid-2021. It has even cited a precedent of the 10% reduction awarded on the basis of capacity to pay during the Great Depression.

The fact that wages growth had been at record lows before the COVID-19 crisis will not help matters.




Read more:
View from The Hill: Can Scott Morrison achieve industrial relations disarmament?


There is also a serious question as to whether industrial relations reform is the right place to be looking to reboot the economy.

Former top public servant Michael Keating was head of the Employment, Finance and Prime Minister’s departments during the Accords era.

Writing last month, he said Australia’s industrial relations regulation was more flexible than that in the United States, and the reforms of the past 25 years have had little substantial impact on productivity, labour market adjustment, wages growth or industrial disputation.

Keating also warned that industrial relations reform is mainly “camouflage for lower wages, which is the last thing this economy needs right now”.The Conversation

Ray Markey, Emeritus Professor, Macquarie University

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

Hotel quarantine for returning Aussies and ‘hibernation’ assistance for businesses


Michelle Grattan, University of Canberra

All Australians arriving from overseas will be quarantined in hotels or other facilities under strict supervision for a fortnight, under the latest crackdown in the battle against the coronavirus.

Announcing the measure after Friday’s meeting of the national cabinet of federal and state leaders, Scott Morrison said people would be quarantined where they arrived, even if this was not their ultimate destination.

The current requirement has been for arrivals to self-isolate for two weeks.

The states will administer the quarantine and pay for it but the Australian Defence Force and Australian Border Force will assist, as the attempt to deal with imported cases tightens.

The ADF will bolster police efforts in visiting the homes of people who are in isolation and will report to local police on whether the person is at home.

But the ADF personnel will not have legal power to take action against people breaching conditions – that rests with state and territory police.

The ADF will be there “to put boots on the ground, to support [state authorities] in their enforcement efforts,” Morrison said.




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The government has made the move – starting from Saturday night – to strongly-supervised quarantine because incoming travellers present the highest risk.

Figures before the national cabinet showed about 85% of cases in Australia were overseas-acquired or locally acquired contacts of a confirmed case.

Numbers of people arriving in Australia are drastically down. For example on Thursday there were 7,120 arrivals at airports around the country. This compared with 48,725 a year ago.

Morrison also flagged a third economic assistance package – to be announced as early as Sunday or Monday – which would aim to have companies “hibernate” so they could recommence operations after the crisis has passed.

This “means on the other side, the employees come back, the opportunities come back, the economy comes back,” Morrison said.

“This will underpin our strategy as we go to the third tranche of our economic plan,” he said.

“That will include support by states and territories on managing the very difficult issue of commercial tenancies and also dealing ultimately with residential tenancies as
well.”

States are now moving to tougher restrictions at different paces. NSW, where the situation is most serious, is closest to a more extensive form of shutdown, with Victoria not too far behind it.

Victorian premier Daniel Andrews repeated that Victoria would at some point move from the present stage two to “stage three”.

There is not public clarity at either federal or state level precisely how the next stage would operate.

Morrison rejected the language of lockdown. “I would actually caution.
the media against using the word “lockdown”.

“I think it does create unnecessary anxiety. Because that is not an arrangement that is actually being considered in the way that term might suggest,” he said.

“We are battling this thing on two fronts and they are both important. We’re battling this virus with all the measures that we’re putting in place and we’re battling the economic crisis that has been caused as a result of the coronavirus.

“Both will take lives. Both will take livelihoods. And it’s incredibly important that we continue to focus on battling both of these enemies to Australia’s way of life.

“No decision that we’re taking on the health front that has these terrible economic impacts is being taken lightly. Every day someone is in a job, for just another day, is worth fighting for”, he said.

He said some businesses would have to close their doors and the government did not want them so saddled with debt, rent and other liabilities that they would not be able to reopen.

Morrison enthused about how Australians had responded to the tougher measures announced this week. “On behalf of all the premiers and chief ministers and myself, the members of the national cabinet, we simply want to say to you, Australia – thank you. Keep doing it. You’re saving lives and you’re saving livelihoods”.




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On schools, the states have now bypassed Morrison, who wanted children to keep attending them.

A statement from the national cabinet said: “We are now in a transition phase until the end of term as schools prepare for a new mode of operation following the school holidays.

“While the medical advice remains that it is safe for children to go to school, to assist with the transition underway in our schools to the new mode of operation we ask that only children of workers for whom no suitable care arrangements are available at home to support their learning, physically attend school.”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 case for a rent holiday for businesses on the coronavirus economic frontline


Danielle Wood, Grattan Institute; Kate Griffiths, Grattan Institute, and Nathan Blane, Grattan Institute

As the public health response to supress the COVID-19 virus ramps up, so to does the economic fallout. Shutdowns and enforced spatial distancing are necessary to try to prevent hospital intensive care units becoming overwhelmed.

But businesses on the economic frontline – those shut or soon to be shut down by the public health restrictions – need immediate help to get through.

The necessary temporary hit to business incomes need not become a permanent hit to productive capacity. We should not risk a large swathe of shops, cafes, pubs, hotels, gyms, and hairdressers going to the wall.

Most of these frontline businesses have seen their income dry up overnight. Some have temporarily closed, others are finding creative ways to make some money in online retail or takeaway services, for example, but most will replace only a fraction of their pre-crisis income.

Rent is the biggest barrier to survival

Staff layoffs, or more hopefully stand downs, are the only option for most of these business. Even substantial wage subsidies won’t entice business owners to keep staff on when the business has shut its doors.

For businesses on the economic frontline, most of their variable costs such as wages and stock can be suspended during the shutdown. But their fixed costs – particularly rent – are substantial.

The average retailer pays almost A$12,000 in rent a month; the average gym, $10,000. Cafes and hairdressers are losing $3,000 to $4,000 each month in rent.




Read more:
Which jobs are most at risk from the coronavirus shutdown? 


For most exposed businesses, rent sits at less than 20% of operating costs under normal conditions, but while they hibernate through coronavirus, that figure will reach somewhere between 80% and 95%.

Some schemes have already been announced to help these businesses. The Commonwealth’s is the largest, and will pay small and medium businesses 100% of salary and wages withheld for tax purposes up to $100,000. For businesses to qualify for the full amount, they will need to withhold the same amount, so will need to be paying staff.


2019 data.
Grattan Institute analysis of IBISWorld industry reports

State governments have announced partial relief of tax, rates and fees, and access to loans. This will help, but rent is the big unavoidable cost for most of the frontline businesses.

Exposed businesses will be losing thousands of dollars, or more, each month. Many will have some cash reserves, but for most a shutdown of three months or more will be very difficult to absorb.

A rent holiday, or at least a significant rent discount, would give these businesses a fighting chance at preventing a temporary shutdown becoming a permanent closure.

Market rates are close to zero

Most shopfronts can’t be put to other uses. That means the market price for retail, food, and accommodation services, and personal services shopfronts will be very close to zero during the shutdown.

Some landlords have done the right thing and given their tenants a rent holiday while these restrictions are in place.

This is smart: keeping their tenants in business will give these landlords the best chance of having a rented property when restrictions are lifted.

In normal circumstances, the market would work this through. But the danger here is it will happen too slowly. Some landlords refuse to accept renting out their premises for nothing.




Read more:
Why housing evictions must be suspended to defend us against coronavirus


In Melbourne, Chadstone retailers just wrote to Chadstone management asking for a rent holiday to “save our businesses”.

The response from management was no.

That mindset could send many thousands of shops, cafes, pubs, restaurants, hairdressers, gyms, cinemas, and tourism operators to the wall.

As of last week, more than 70% of businesses in these industries had already been hit by the COVID-19 crisis. That figure is expected to rise beyond 90% in the coming weeks.

“Closures” was the most common word used by business owners surveyed by the Bureau of Statistics about the future effect of COVID-19.


Source: ABS cat no. 5676.0.55.003 – Business Indicators, Business Impacts of COVID-19, March 2020

Preventing landlords from evicting commercial tenants, or requiring landlords to defer the rents, won’t help – businesses will still liquidate if they know they will be lumbered with many months of rent to pay back down the track.

While a short-term income hit for landlords isn’t insignificant, the damage to the economy will be much greater if a swathe of small and medium-sized businesses are lost.

Acting now will reduce the damage

The owners of some properties that need rental holidays still have to make monthly mortgage payments to banks. But the banks are offering loan holidays they might be able to take advantage of.

If there are gaps in the loan holiday arrangements, governments should work with the banks to ensure landlords are covered. Alternatively, governments themselves could offer partial compensation for lost rent.

Prosper Australia has suggested a uniform
subsidy that replaces 50% of lost commercial tenancy mortgage payments.




Read more:
We’re running out of time to use Endgame C to drive coronavirus infections down to zero


Right now, hundreds of thousands of businesses are crunching the numbers to see whether than can stay solvent. With rent on the expense side, those numbers won’t add up for long.

Every state and territory government ought to enact a rental holiday for the types of businesses on the frontline of this crisis. As the economic shockwave reverberates, state and territory ministers should have the power to add other vulnerable industries to that list.

The key is speed. For every day they wait, hundreds of businesses will fold.The Conversation

Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute; Kate Griffiths, Fellow, Grattan Institute, and Nathan Blane, Analyst, Grattan Institute

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

Senate kills tax cuts for big business as Dutton canvasses for second leadership bid


File 20180822 149475 36pn9.jpg?ixlib=rb 1.1
The Senate defeat ends months of wrangling by Senate leader Mathias Cormann to get the tax measure through.
AAP/Lukas Coch

Michelle Grattan, University of Canberra

The government has finally lost its bid to give big companies tax cuts, after the Senate rejected a desperate compromise that would have excluded the big banks.

With the Liberals in free fall over the leadership crisis and Peter Dutton admitting he is shaping up for another tilt at Malcolm Turnbull, the Senate defeat of the tax cuts, by 36-30, although long expected, was yet another blow to a reeling government.

Earlier Dutton, on 3AW, said of his campaign for the prime ministership: “I’m speaking to colleagues, I’m not going to beat around the bush with that.”

“If I believe that a majority of colleagues support me then I would consider my position”.




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Dutton said he did not think the government should persist with the business tax cuts to the election.

“I would support that money being applied either to households or to a tax cut for small or micro businesses to allow them to grow”.

His stand on the big business tax cuts is part of the highly populist policy pitch he is putting forward, which includes removing the GST from electricity bills and having a royal commission into power companies.

“One of the things that we could do straight away in this next billing cycle is take the GST off electricity bills for families. It would be an automatic reduction of 10% off electricity bills,” he said.

“We could set up a royal commission into the electricity companies and into the fuel companies. I think Australian consumers for way too long have been paying way too much for fuel and for electricity and something just isn’t right with these companies.




Read more:
View from The Hill: Malcolm Turnbull struggling to shore up his border


“Like we’ve done with the banks, I think the royal commission has the ability to get to the bottom of what is fundamentally wrong in the system, and what could help ease some of that pressure on families and potentially small businesses.”

The Senate defeat ends months of wrangling by Senate leader Mathias Cormann to get the tax measure through. Those against, apart from Labor and the Greens, were crossbenchers from One Nation and Centre Alliance, as well as Derryn Hinch and Tim Storer.

The government has already legislated phased-in cuts for companies with turnovers up to $50 million annually. The defeated legislation would have phased down the corporate rate for the big companies from 30% to 25% by 2026-27.

The proposal to exclude the banks was put by the government as a last roll of the dice. The debate was strung out this week as Cormann tried to swing the critical crossbench votes.

Cormann told the Senate the government understood the politics in relation to the banks, but as for other big companies, it was critical for Australia to have a competitive tax rate. Hinch unsuccessfully promoted a proposal to impose a ceiling of $500 million turnover.

During Wednesday morning’s debate, Labor made merry with the Liberal leadership chaos.

Labor frontbencher Doug Cameron said “The question is when is Senator Cormann going to join his great mate, Peter Dutton? When is he going to join him and when is the end of this government going to actually happen? I hear that it’s on again.” On Tuesday, Cormann declared his backing for Malcolm Turnbull.

The Business Council of Australia said: “The Senate’s failure to support a modest company tax cut over the next decade leaves Australia with the third highest company tax rate in the developed world, and at risk of having the highest.

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The Conversation

“It is extraordinary that Senators representing states where business investment is so vital have walked away from this for pure short-term political reasons.”

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

A new study should be the final nail for open-plan offices



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Who can concentrate under these conditions?
Shutterstock

Libby Sander, Bond University

Open-plan offices have taken off because of a desire to increase interaction and collaboration among workers. But an innovative new study has found that employees in open-plan offices spend 73% less time in face-to-face interactions. Email and messaging use shot up by over 67%.




Read more:
Get out of my face! We’re more antisocial in a shared office space


The study is the first to track the impacts of open-plan offices using objective measures of communication. It used electronic badges and microphones to monitor interactions among employees and tracked changes in email use.

The findings build on previous research, which has found, for instance, open-plan work environments compromise employees’ ability to focus and concentrate on their work.

Why go open plan?

Theoretically there are good reasons to move to an open-plan office. Our social environment plays a big role in our ability to be proactive and motivated.

And success in modern workplaces is often driven by how well individuals interact with each other and with the organisation.

Research has shown that the time employees spend on “collaborative activities” has “ballooned by 50% or more” in the past two decades.




Read more:
Open plan offices CAN actually work, under certain conditions


Workplaces that facilitate more frequent and higher-quality contact with others have been shown to have improved communication and collaboration on tasks, job satisfaction and social support.

The design of the workplace significantly influences this, by supporting or detracting from interdependent work.

Building a strong sense of community has been a key factor in the success of the coworking space provider WeWork. This has been largely achieved through the physical work environment – clean spaces, narrow hallways, communal kitchens and the like.

Privacy and concentration are critical

But despite the pursuit of collaboration in workplaces, the need for concentration and focused individual work is also increasing.

And research shows that when employees can’t concentrate, they tend to communicate less. They may even become indifferent to their coworkers.

Knowledge work requires employees to attend to specific tasks by gathering, analysing and making decisions using multiple sources of information. When any of these cognitive processes are interrupted, inefficiency and mistakes increase.




Read more:
Open plan offices attract highest levels of worker dissatisfaction: study


Being able to focus on a task without interruption or distraction is an essential foundation for effective work.

But research suggests that poor design can have unintended consequences – increasing the cognitive load on workers through high density or low privacy, both of which increase distraction.

Why open plan doesn’t necessarily lead to collaboration

In many open-plan offices, the drive for increased interaction and collaboration comes at the expense of the ability to focus and concentrate.

When distraction makes it hard for employees to focus, cognitive and emotional resources are depleted. The result is increasing stress and errors, undermining performance.

When employees can’t concentrate on their work, their desire to interact and collaborate with others is reduced.

In addition, new research suggests that increased crowding in the workplace and low levels of privacy lead to defensive behaviours and strain workplace relationships.




Read more:
The backlash against open-plan offices: segmented space


Other aspects of workplace design, such as views of nature or access to daylight, can replenish cognitive resources even in the presence of distractions.

An aesthetically pleasing environment may provide an experience that is restorative.

Additionally, research has shown that aesthetically pleasing workplaces can help create trust within organisations.

Getting the balance right

Emerging research has shown that individuals view similar work environments differently. Rather than a one-size-fits-all approach, as is traditional in open-plan design, work environments should provide various options that support employees working effectively.

Evolving models of workplace design are seeking to achieve this, by providing different zones for different types of work and different needs.

However, the effect of shared desk arrangements in these types of environments requires further investigation.




Read more:
The research on hot-desking and activity-based work isn’t so positive


Many employers are heavily focused on driving collaboration and interaction at the expense of privacy and concentration. This has negative outcomes for both productivity and work relationships.

Organisations should focus on providing workplaces that support the requirements for privacy and focus, as well as interaction and collaboration.

The ConversationTo achieve this, greater emphasis needs to be placed on both visual and auditory privacy, particularly the use of acoustic treatments, as well as the layout and appearance of the workplace as a whole.

Libby Sander, Assistant Professor of Organisational Behaviour, Bond Business School, Bond University

This article was originally published on The Conversation. Read the original article.

Labor would quash tax cuts for businesses with $10-$50 million turnover


Michelle Grattan, University of Canberra

Bill Shorten has said a Labor government would repeal already-legislated tax cuts for companies with an annual turnover between A$10 million and $50 million, but left its position up in the air for those between $2 million-$10 million.

The decision, announced in response to questions at a news conference on Tuesday, does not appear to have gone through shadow cabinet. Nor did Shorten mention it when he addressed caucus on Tuesday morning.

It opened the opposition leader to immediate attack from the government and business.

Finance Minister Mathias Cormann said it was Shorten’s “captain’s call”.

Treasurer Scott Morrison said there were 20,000 businesses between $10-50 million turnover, with an average of 75 employees in those businesses.

“This is terrible news for 1.5 million Australians who work in those businesses that will have to face higher taxes under Labor if Labor is elected,” Morrison said. Shorten had turned former leader Mark Latham’s “ladder of opportunity” into “the snake of envy”, Morrison said.

The Australian Chamber of Commerce and Industry CEO, James Pearson said Labor had sent a “very bad signal to business today”.

The opposition has had a long-standing policy of leaving the cuts in place for the smallest businesses – with turnovers less than $2 million. But by failing to clarify its position for companies up to $10 million, Shorten has left uncertainty for many smallish businesses.

A spokesperson for Shorten said: “We’ve never supported these tax cuts for big businesses – we voted against them and we haven’t changed our position.

“We’ve always supported tax cuts for small businesses.

“As Bill said, we’re considering a threshold of $2 million or $10 million turnover. That will be decided by the shadow cabinet, in the normal way.”

Shorten’s announcement comes days after the speech by frontbencher Anthony Albanese in which he advocated the Labor strike a better relationship with business. The speech was seen as Albanese differentiating himself from Shorten on a number of fronts and positioning on leadership ahead of the Super Saturday byelections.




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Anthony Albanese sets out his blueprint for Labor


Asked about the decision apparently not having gone to shadow cabinet, ALP sources argued it had been generally known that a Labor government would not leave in place company tax cuts above the $10 million threshold.

But shadow treasurer, Chris Bowen, asked in May how long Labor was going to wait to give certainty to middle-level companies, said for companies above $2 million turnover “it is right and proper that we take some time to carefully work that through. We will be announcing our position, which will be crystal clear, not only to the voters but to the businesses of Australia,” Bowen said.

Labor earlier committed to repealing the tax cuts for big business, now before the Senate, in the event the government manages to legislate them. There is still no indication it can do so.

Whether a Labor government could get any repeals through would depend on the attitude of the Senate of the day.

Shorten’s announcement also comes as he faces criticism over Labor’s controversial advertisement, running in the byelections, that targets Malcolm Turnbull’s personal wealth and how he would benefit from the tax cuts for large companies.




Read more:
Labor makes company tax fight all about Malcolm Turnbull’s money


Shorten doubled down on the attack in the caucus meeting, saying that Turnbull “has no clue about how people actually live, and I do believe his wealth is connected to that”.

The ConversationHe also told caucus that the Longman byelection was very close and Braddon was “very difficult”.

Business size in Australia.
Australian Taxation Office, Taxation statistics 2015/16

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

A closer look at business cases raises questions about ‘priority’ national infrastructure projects


Glen Searle, University of Sydney and Crystal Legacy, University of Melbourne

Infrastructure Australia’s latest infrastructure priority list has been criticised for being “too Sydney-centric” and for giving Melbourne’s East West Link, cancelled in 2014, “high priority” status. The cancelled Roe 8 project in Perth was removed from the list.

So how does a project get onto Infrastructure Australia’s list? This requires submission of a full business case, which then needs to be “positively assessed” to be given priority status.

But our research, yet to be published, has found these business cases leave out highly significant costs. This article looks at three prominent projects – the WestConnex and East West Link motorways in Sydney and Melbourne respectively, and Cross River Rail in Brisbane – to illustrate how business cases submitted to Infrastructure Australia do not follow its requirements in key respects. This casts serious doubt on the business cases used to justify major motorway projects, as well as on how priority projects are selected.


Read more: FOI reform needed in Victoria amid East West Link fallout

Read more: Roe 8 fails the tests of responsible 21st-century infrastructure planning


What do business cases assess?

Ensuring business cases are completed before investment decisions are finalised is critical to “good planning”. Part of Infrastructure Australia’s remit is to head off concerns that projects are committed to before business cases are fully evaluated. This can help minimise “optimism bias” and ensure investments deliver community benefit.




Read more:
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But we must also examine what the business case is actually showing us. The main part of each business case is the cost-benefit analysis. This compares the money value of project benefits and project costs. Economically viable projects should have a benefit-to-cost ratio above 1:1.

Infrastructure Australia requires project business cases to consider non-monetised benefits and costs, including community impacts. These benefits and costs are required to be quantified in some other way, or at least described. The basis used to estimate “external costs” must also be provided.

The cost-benefit methodology requires any significant positive or negative impacts on third parties – externalities – to be included. Examples include air quality, carbon emissions, noise, biodiversity and climate adaptation.

Social impacts to be covered include equity or the distribution of benefits (which Infrastructure Australia says need to be identified since cost-benefit analysis does not explicitly take these into account), and affected local communities and other individuals/groups. The non-monetised benefit and cost categories listed as relevant are: social impacts, cultural impacts, visual amenity/landscape, biodiversity and heritage impacts.

In support of monetary estimates, proponents must “describe and provide supporting material that demonstrates how land use, population and employment projections are modelled”.

The guidelines stress that the supporting conditions for expected land use impacts will be in place – for instance, necessary infrastructure investment where densification is assumed. Factors that can hinder the realisation of such benefits (such as local opposition to increasing density) must also be included.

This process would seem to produce a rational prioritisation of national infrastructure projects. The problem is that the business cases submitted to Infrastructure Australia do not follow its requirements.

High-priority projects with problematic business cases

To illustrate this, we analysed the business cases of three projects designated as “high priority” for Commonwealth funding:

  • East West Link, to which the Commonwealth allocated A$1.5 billion before the new Victorian government cancelled the project

  • WestConnex, which has been allocated A$3.5 billion

  • Cross River Rail, which is yet to receive funding.

A key problem in these business cases is that significant project cost items have not been monetised. These include costs relating to environmental effects such as noise and visual amenity and to other impacts on businesses, households and property values.

For example, none of the three cases includes a valuation of the costs of lost business and disruption to household travel and amenity during construction. (This is a big issue with Sydney’s southeast light rail project.)

There is also no costing of the loss of property values along motorways, especially around exhaust emission vents. The East West Link and Cross River Rail business cases make some allowance for this by including the value of general changes in amenity from noise, urban landscape and visual amenity. None of these are costed in the WestConnex case.

Another significant omission relates to the costing of land use impacts. The WestConnex and East West Link business cases both forecast more, and longer, road trips across the network as a result of the projects.

The WestConnex scheme will increase vehicle kilometres by 600,000 per day and make outer suburbs more accessible relative to the inner city. The potential extra costs from greater sprawl are high, estimated at A$4.99 billion for Sydney over 25 years from 2011 if greenfield housing was 50% of new dwellings rather than 30%.

The opposite is the case for Cross River Rail. Increased higher-density development around rail stations would produce infrastructure savings, but the business case does not give these a value.

Furthermore, the valuation of changes in transport mode resulting from each project is inconsistent.

The Cross River Rail business case includes savings resulting from motorists switching from road to rail after the line is built.

The WestConnex project will have the reverse effect, with 45,000 public transport trips per day being switched to the motorway. But the business case does not put a value on the costs of this. These include bus and train revenue losses, or reduced service frequency and increased waiting time to reduce losses.

Debatable ‘wider economic benefits’

The most contentious business case component is wider economic benefits. These are productivity improvements arising from increased central city job density as a result of the projects improving access.

These benefits needed to be included to lift the East West Link benefit-cost ratio above one. But this is only achieved through sleight of hand – public transport improvements into central Melbourne are included as part of the full project cost. As the public transport component of the business case had low costs compared to its benefits, including these wider economic benefits was enough to push the overall ratio above 1.

Similar benefits are part of the WestConnex cost-benefit analysis. However, these benefits are to be achieved from extra car trips to the centre. This takes no account of the disincentives of road congestion and lack of parking.

Current central Sydney planning controls allow a maximum of one new parking space per 75 square metres of floor area for not-so-tall offices – or one space for about five new workers – and even fewer spaces relative to floor area for higher buildings. This means most increased job density will not come from people driving to work.

By contrast, the wider economic benefits of the Cross River Rail resulting from increased job density in central Brisbane are not valued for inclusion in the cost-benefit analysis.




Read more:
Brisbane’s Cross River Rail will feed the centre at the expense of people in the suburbs


Rethinking the business case

Our work points to several real concerns:

  • a lack of consistency in what is included in business cases
  • questions about how cases can be reasonably compared across projects
  • discretionary inclusion or exclusion of critical items that bias results in favour of projects.

The ConversationWe need more holistic and integrated analysis of projects. This will take into account not only the “nation-building” aspects – the jobs and growth projects might inspire – but also the disrupting and displacing effects they produce across transport modes, land uses and people’s experiences of the city.

Glen Searle, Honorary Associate Professor in Planning, University of Queensland and, University of Sydney and Crystal Legacy, Senior Lecturer in Urban Planning, University of Melbourne

This article was originally published on The Conversation. Read the original article.