Paul Komesaroff, Monash University; Ian Kerridge, University of Sydney, and Wendy Lipworth, University of SydneyIndia’s COVID-19 crisis has revived a longstanding debate about whether foreign governments should come to the aid of countries facing major economic or humanitarian challenges and, if so, what kind of help they should provide.
There’s a common assumption foreign aid produces undoubted benefits. But there’s actually limited evidence that it does. Increasing data suggests it may perpetuate existing inequities and inefficiencies, enable corruption, and generate adverse cultural and economic effects.
There are serious questions about the underlying causes of India’s crisis. There’s evidence the Modi government repeatedly ignored warnings from public health experts and refused to plan for the predicted increases in need. Instead, it pursued a public discourse of misinformation, promoted fake cures, withheld health data, intimidated journalists, and encouraged super-spreading events.
Government officials also continue to deny the existence of shortages of vaccines and other medicines. These facts suggest there are underlying structural obstacles, which aid contributions would be unlikely to reverse.
But the moral arguments about the obligations humans have to each other are well established. So is the principle that we should come to someone’s aid if they’re in need. We are also bound by mutually beneficial values such as equity, justice, solidarity and altruism. Consequentialist philosophers, who argue the only things that matter are outcomes (rather than principles, obligations or intentions), claim foreign aid generally provides more benefit than harm overall.
Unfortunately, the fact we have a moral obligation to rescue someone from harm provides little or no guidance about what kind of help or assistance is thereby required.
We should enter into discussions, led by the Indian people, about what kinds of support are likely to make a difference.
As imperfect as the outcome may be, Australia might genuinely be able to help in areas such as assisting the development of expertise and infrastructure, and advocating for the relaxation of vaccine patent restrictions.
Here’s how Australia can help
Last week, Australia committed to sending an initial support package of ventilators, oxygen, and personal protective equipment to India.
If we choose to act further, we should do so in a generous and compassionate manner, but also with prudence and circumspection. We should be realistic about the limited options available to us. Aid cannot be given with conditions attached — for example, that it be directed preferentially to those in greatest need.
What’s more, it cannot be contingent on the enforcement of a value system that’s contrary to those presently in authority. Foreign donors have no straightforward right to insist on the abolition of corrupt or counterproductive policies and practices in the countries they’re supporting.
However, there are options available to us that can ensure we actually make a difference — and some of these may appear to undermine our own interests.
Top health officials have suggested wealthy countries, which have contracted to purchase many more vaccine doses than they need, should urgently donate excess vaccines to middle- and lower-income countries such as India. Some people may argue that, because of our present lesser need, Australia could donate its entire stock of available vaccines. However, this wouldn’t likely be of much benefit given the logistical, political and structural impediments described above.
Instead, we should draw on our experience over the past year in developing effective processes for responding to the pandemic. We should offer to provide India with expertise about quarantine measures, hygiene, masks, and vaccine education campaigns. Our experts and policymakers could respectfully advise on appropriate economic and social policies.
What’s more, we could call for the relaxation of patent and other intellectual property restrictions. These have, since the late 1980s, imposed severe limits on the ability of poorer countries to produce vaccines and pharmaceuticals developed in the United States and Europe. Although India is the world’s largest vaccine producer, the current demand obviously exceeds supply.
What vaccines are available are much less likely to find their way to poorer sections of India’s population than wealthier ones. This is partly because of insufficient government support, but is also exacerbated by the refusal of rich countries (including Australia) to allow the relaxation of the strict patent laws that prevent state-of-the-art vaccines being manufactured cheaply and efficiently in developing countries.
There’s already a well-tested mechanism for suspending patent restrictions in an emergency, known as the “Doha Declaration”. This was negotiated in 2001 in response to the urgent need for increased access to newly developed HIV medications. This instrument is ready to use and could be implemented rapidly. Australia should announce its unqualified support for the immediate application of the Doha Declaration to COVID vaccine production.
But that’s not all
India’s huge pharmaceutical industry has previously provided vaccines and medicines to developing countries — many of them in Africa — largely funded by the World Health Organization. The Indian crisis has left these countries vulnerable, through no fault of their own.
Rather than merely responding to the crisis in India, largely self-inflicted by its own government, we should also turn our attention to the increasingly urgent needs of those countries that now face their own major emergencies as a consequence.
Regardless of what anyone does, many people will still die. All that’s open to us is to act ethically in accordance with our own values, informed by knowledge about the complexity of the multiple forces at work.
Paul Komesaroff, Professor of Medicine, Monash University; Ian Kerridge, Professor of Bioethics & Medicine, Sydney Health Ethics, Haematologist/BMT Physician, Royal North Shore Hospital and Director, Praxis Australia, University of Sydney, and Wendy Lipworth, Senior Research Fellow, Bioethics, University of Sydney
Pradeep Taneja, The University of Melbourne and Azad Singh Bali, Australian National UniversityIndia reported 314,000 new cases of COVID-19 on April 22, the highest-ever infection tally recorded by any country on a single day.
Many hospitals across the country are unable to cope with the unprecedented demand for life-saving necessities. Family members are scrambling to buy oxygen cylinders and medication for their loved ones in hospitals, often paying exorbitant prices in the black market.
Around the world, several countries such as the UK, Australia, New Zealand, Canada and Pakistan, have imposed new restrictions on travellers from India, including flight bans.
While many countries around the world have faced multiple waves of infections, what has led to this massive — and sudden — spike in India?
Complacency is certainly to blame. But so, too, is the government’s feckless handling of the crisis, particularly Prime Minister Narendra Modi’s ineffective leadership in recent weeks.
Perhaps nothing illustrates this more clearly than Modi’s televised address this week in response to the growing crisis, when he sought to use his personal appeal to encourage Indians to practice COVID-safe behaviour.
He offered little in the form of concrete measures to contain the surge in infections, and counselled the state governments against using lockdowns. Unlike Modi’s public addresses during last year’s first wave, there was little that appeared to resonate across society.
Pandemic fatigue sets in
India was one of the first countries to enforce a nationwide lockdown when infection rates started to rise in March 2020, and this response, along with public vigilance, appeared to be successful in bringing cases under control. New cases peaked at nearly 100,000 in mid-September to under 10,000 in early February.
As case numbers declined, Modi’s popularity soared. And since late last year, businesses, government offices and ordinary people have returned to their pre-COVID routines, with many defying guidelines on wearing masks or practising social distancing. Some did so out of necessity to enable them to work, while others simply flouted norms out of arrogance or sheer ignorance. It was as if COVID-19 was no longer a major concern.
The complacency and pandemic fatigue evident in society was echoed in the actions of the Modi government. The government dropped its guard and started to boast about its success at controlling infections and India’s low mortality rate compared to many other countries.
Following a win for his party in the elections in the populous state of Bihar in November, Modi claimed the
results have endorsed the way we have tackled the coronavirus crisis situation in the country.
However, the situation in the country now is looking increasingly grim. So, what did the government get wrong?
Conflicting messaging and a botched vaccine roll-out
First, the government did not prepare the country for the possibility of COVID-19 returning with a vengeance, as had happened in other parts of the world.
Despite rolling out a national vaccination drive, it did very little to shore up capacity in hospitals to handle a sudden surge of infections and hospitalisations. This has led many hospitals across the country to panic, struggling to meet the growing demand for oxygen.
Second, even as the virus spread like a wildfire, Modi and his cabinet ministers kept campaigning in state elections in five states, addressing massive rallies and praising the crowds for turning out in large numbers.
This resulted in conflicting messaging. It mattered little to the government that pandemic protocols were being flagrantly violated by those organising and attending the rallies. As cases continued to soar, Modi was forced finally to call off election rallies in the state of West Bengal.
Third, the second wave of infections has been fuelled by one of the world’s largest religious festivals, the Kumbh Mela, held in the holy city of Haridwar every 12 years. It became a super-spreader event.
From April 10–14, over 2,000 people who attended the festival tested positive for the virus. By the time Modi appealed to the religious leaders in a tweet on April 17 to keep the Kumbh Mela “symbolic” — meaning not to attend in person — the festival had already been going for more than two weeks. Two prominent Hindu seers had also died of COVID.
Finally, this week, religious leaders decided to wind down the festivities.
And the fourth misstep of the government has been in its handling of the vaccine rollout. While nearly 10% of India’s population has received the first dose, many vaccine distribution centres have in recent weeks run short on supplies.
This is partly a result of the Modi government prioritising its vaccine diplomacy initiatives rather than vaccinating its own people. According to the Indian Express, India had exported more vaccines (60 million doses to 76 countries) by late March than it had administered to its own citizens (52 million doses).
As India is one of the world’s largest manufacturers of vaccines, it could have used this as an opportunity to vaccinate a greater share of its population while simultaneously addressing the fault lines within the health system that have been exposed by the second wave of infections.
But the government didn’t take this approach — and now India is paying the consequences. Perhaps the Modi magic is finally beginning to wear off.
Pradeep Taneja, Senior Lecturer in Asian Politics, School of Social and Political Sciences, The University of Melbourne and Azad Singh Bali, Senior Lecturer in Public Policy, Australian National University
The COVID epidemic in Papua New Guinea has significantly accelerated, judging by the available reports of case numbers.
Since its first case was diagnosed 12 months ago, PNG has avoided a large number of reported cases and corresponding deaths. That situation has changed dramatically over the past fortnight. A crisis is now unfolding with alarming speed and the response must quickly match it.
Australia can be proud of its preparations to support PNG and the region in responding to COVID-19, especially its preparations to support vaccination in the region. These include contributing A$80m to COVAX, $523m to the Regional Vaccine Access and Health Security Initiative, and $100m towards a new one billion dose COVID-19 vaccine initiative together with the United States, India and Japan (the “Quad” group of nations).
As good as they are, these plans are unlikely to be fast enough to stop this current surge before enormous damage is done. There’s simply no time to waste in responding.
Why the urgency?
Reported COVID-19 testing rates remain critically low, with just 55,000 taken from an estimated population of nine million people. This means we don’t yet have a precise picture of the scale of the epidemic.
The reported numbers are highly concerning. In the first week of March, 17% of all people who were tested throughout the country were positive to COVID-19, with over 350 newly confirmed cases. This is the highest number of cases in a single week in PNG since the start of the pandemic. Over half of PNG’s 22 provinces reported new COVID-19 cases in that week.
There are other indicators of a potential large scale outbreak, such as reports of increased cases among health-care workers. What’s more, the total number of documented COVID-19 deaths in PNG has nearly doubled in the past fortnight alone.
Low testing rates, combined with reports of high daily case numbers, means there are likely many thousands of current cases in Port Moresby and widespread seeding and spreading of infections throughout the country.
PNG’s hospitals and front-line health-care workers remain particularly vulnerable. With limited public health controls in place and an effective vaccination program yet to be initiated, and with last week’s huge commemoration ceremonies for Grand Chief and former Prime Minister Michael Somare, there’s every chance the current outbreak will continue to grow exponentially for some time yet.
The people of PNG now face dual health emergencies: death and disease from COVID-19 itself, and a likely increase in existing major diseases barely held in check by the nation’s already stretched health system. These indirect effects, such as potential rises in malaria, tuberculosis, HIV, cervical cancer, vaccine-preventable diseases and poor maternal and newborn health, are likely to be even worse than the direct impact of COVID-19.
Australia and PNG’s vital partnership
This health crisis should be reason enough for Australia to respond urgently in support of PNG. But there’s another reason too. High levels of circulating SARS-CoV-2 in the Asia-Pacific region are a recipe for generating mutant coronavirus variants that might spread more readily, evade immunity more easily, and/or cause more serious disease. A regionally coordinated effort to combat COVID-19 will help ensure protection for everyone, including going a long way to help preserve Australia’s own vaccine program.
PNG already has a coordinated national and provincial COVID-19 response and a vaccine technical working group that has begun planning for deployment of the first allocation of vaccines to front-line health-care workers.
Meanwhile, Australia is also playing a crucial role in supporting this effort, contributing generously to the COVAX vaccine access facility and to a A$500 million fund to support COVID vaccination in PNG and the wider Pacific.
However, these plans were developed on the basis there was substantially more time for planning, deployment and phased rollout than the current case numbers would suggest.
What action is needed?
Two considerations are now paramount. First, the response needs to be requested by — and, more importantly, led by — PNG itself. Second, the response needs to reflect the urgency and scale of the unfolding emergency.
This “emergency package” could conceivably involve:
immediate provision of masks in the community, appropriate PPE for health-care workers and increased support for widespread testing
a campaign to counter COVID-19 misinformation, which is rampant, and
a significant ramp-up of vaccination across PNG, with an ambitious target — perhaps a million doses before the end of the year, aimed at the most at-risk groups.
Arguably the most important element of this would be immediate vaccination for health-care workers in the most heavily impacted areas of the country. Ideally, all of PNG’s crucial health-sector workforce should be vaccinated within the next fortnight. Australia could provide around 20,000 vaccine doses for health-care workers without putting a significant dent in its own vaccine supplies, potentially making a profoundly important intervention in the course of the epidemic in PNG.
This is the moment for dialogue to occur between the two nations, so PNG can ensure Australia’s help with such an immediate and ambitious response.
PNG is Australia’s closest geographical neighbour, and our countries have a deep shared history of mutual support. An out-of-control COVID-19 epidemic in PNG would be a humanitarian and economic disaster for the nation itself, and a grave threat to the health of the region, particularly with shared borders to Solomon Islands in the east and Indonesia to the west.
Given this pandemic expands at an exponential rate, and with new variants of concern arising regularly in regions of high transmission, it’s the speed of a strong response that matters the most. A rapid public health intervention, to be supported and facilitated at the highest levels of government, would go a long way to mitigating what may well become a public health catastrophe.
Brendan Crabb, Director and CEO, Burnet Institute and Leanne Robinson, Professor, Program Director of Health Security and Head of Vector-borne Diseases & Tropical Public Health, Burnet Institute; Laboratory Head, Walter & Eliza Hall Institute; Adjunct Principal Research Fellow, PNG Institute of Medical Research, Burnet Institute
Two slippery and elusive phantoms seem to be escaping UK Prime Minister Boris Johnson and his Conservative government. The first is the fiendishly viral and deadly COVID-19 pandemic.
The number of covid-related deaths in the UK has passed 100,000, making it the first nation in Europe to pass this milestone. The UK now has the fifth-highest death toll in the world. The Johnson government has struggled to manage the crisis, and the human cost is higher than the total civilian casualties the UK experienced during the second world war.
As elusive for Johnson, who for so long has played arch-buffoon and joker, is political capital. The concept of “political capital” feels intuitive – popular politicians seem to have a lot of it, and unpopular ones seem to have none of it. Yet, political science has long wrestled with trying to define and understand it.
The notable sociologist Pierre Bourdieu was one of the first to grapple with the idea. The academic Kimberly Casey argues that political capital is analogous to a cake – it requires a number of ingredients and, crucially, not all of them were initially made by the baker. Richard French suggests political capital is made of up of:
[…] mostly intangible assets which politicians use to induce compliance from other power holders [such as business leaders].
After his emphatic 2019 election win, Johnson seemed to have stacks of it. He won a landslide majority of 80 seats and notably broke into Labour’s “red wall” (although the starkly majoritarian electoral system skewed Johnson’s victory margin).
Johnson has made a number of serious political misjudgements in responding to the pandemic. First, his government has repeatedly been slow off the mark to deal with the crisis. At the outset of the first wave, it played down the risks. In March 2020 he was arguing the UK would “turn the tide” in 12 weeks.
Johnson’s government was slow to handle the second wave, attempting a relaxation of restrictions over the Christmas period. The government’s chief medical officer, Sir Patrick Vallance, asserted an earlier lockdown could have made a difference. More striking was this claim relating to the first wave by one of the scientists advising the government, Professor Neil Ferguson:
Had we introduced lockdown a week earlier we’d have reduced the final death toll by at least half.
Johnson also made of habit of either marginalising or just ignoring scientific advice. In tandem with handling the pandemic, Johnson was under immense pressure to deliver a Brexit deal while also dealing with the “economic emergency” of the crisis.
More damningly, there appears to be no overarching and clear strategy to deal with the COVID-19 crisis. Johnson’s government has had to make numerous and predictable policy U-turns on a range of issues.
Poor communication has also been a hallmark of the period. The government’s “stay alert” campaign last May was met with public bemusement. The belated introduction of a tier system in October also seemed to cause confusion and was followed by further England-wide lockdowns.
Johnson’s approach has been bedevilled by trying to meet the health challenges while simultaneously trying to rebuild the economy and manage the spiralling costs of the pandemic. The government’s “eat out to help out” scheme proved disastrous, with evidence it appears to have contributed to the devastating second wave.
Worse still were the complacency and apparent hypocrisy that are part of Johnson’s political calculus – not least his handling of the damaging trip made by his then-top aide Dominic Cummings to “test his vision”. Johnson’s own father Stanley has seemingly flouted lockdown rules, all while his government hectors the public. The double standards in Johnson’s approach give an impression of “one rule for us” and serve as a reminder of the levels of inequality in the UK.
There are systemic factors, beyond Johnson’s leadership, that help explain the flailing response to the pandemic in the UK. In a considered essay, Ferdinand Mount brutally reminds us of the systemic dismantling of the NHS and neo-liberal reforms under both Conservative and Labour governments, and the austerity measures that have left the system struggling. Mount’s judgment is:
The malign combination of an over-centralised system and a hopelessly narcissistic prime minister has been fatal.
Will Johnson be able to remake his political capital? If he manages to ride out the current crisis, he has a number of available strategies and systemic advantages.
First, he stuffed his cabinet full of loyalists, many owing their political careers to his backing – even when they break ministerial codes. Johnson is now trying to get on the front foot, expressing “deep sorrow” for the mounting death toll, and a change in advisers is resetting his political strategy. He is adept at downplaying criticisms with the “benefit of hindsight” argument.
The vaccine roll-out in the UK has also been hailed as a great success, and the government is still performing relatively well in the polls.
Crucially, the UK is not scheduled to head to the polls until 2024. If the vaccine strategy works, Johnson knows future elections are not often decided by a government’s record in the early part of a term.
It has been rightly described as a humanitarian crisis and a modern form of forced labour.
In the early months of 2020, stranded cruise ships became a stark symbol of the COVID-19 global pandemic. Now it is seafarers stranded on cargo ships.
Before the coronavirus crisis, about 100,000 of these crew changed over each month, typically after serving contracts capped at 11 months under the United Nations Maritime Labour Convention. But since March, border closures and other restrictions have prevented this for many seafarers, forcing them into indefinite service, unable to even take shore leave.
And their work has never been more important to the rest of us. Before the pandemic cargo ships carried about 80% of all global trade. With the curtailment of international air travel reducing air cargo capacity by about 20%, shipping has become even more crucial to the global economy.
But the personal costs are enormous. Working on a cargo ship is taxing as the best of times. Now the work is even harder, with no respite.
Stuck at sea
Their plight is one to which I can personally relate.
In early March I boarded a two-masted schooner, the Avontuur, one of the few cargo ships operating under sail, as part of my research into decarbonising the shipping industry. I planned to be on board for a three-week voyage from Tenerife in the Canary Islands to Guadeloupe in the Caribbean.
I ended up being on board for five months.
By the time we reached port at Point-à-Pitre in Guadeloupe, Caribbean nations were restricting air travel and closing borders due to COVID-19. On March 24, after extended negotiations, we were allowed to briefly dock to take provisions. But no one was allowed ashore.
On April 10, we reached Puerto Cortés in Honduras, to load a cargo of green coffee. Stevedores came aboard to load the bags, but we were prohibited from going ashore. A week later we loaded cacao in Belize City, but again were refused permission to step on land.
So my trip extended port after port.
We spent ten days off the Mexican port of Veracruz, waiting for cargo, repairs and favourable winds. Again authorities did not allow us to step ashore. It wasn’t until late June, after more than 120 days on board, in Horta, that we were able to go ashore for a few days on the Azorean island of Faial. But given travel restrictions, we continued on for another three weeks to Hamburg.
The routine of work on a sailing ship occupied our time. Everyone worked eight hours a day in three different watches (four hours on, eight hours off).
But my ordeal was limited. I had confidence that in Hamburg I would be able to disembark and return to Australia. This is something many seafarers do not have. For many, there is still no light at the end of the tunnel.
Crew change possible, but difficult
Cargo ship crews need to keep watch and maintain the vessel at all times. They work 12 hours a day. Without weekends. Without seeing family or friends. Shore leave is increasingly rare, due to tight turnaround times in port, and often confined to docks.
Labour unions and seafarers initially accepted crew change limitations due to COVID-19 border closures as “force majeure” – an issue beyond anyone’s control. As a result, flag states, unions, and port state authorities allowed ship owners to extend contracts beyond Maritime Labour Convention rules.
Since May, many organisations have been appealing to governments to recognise seafarers as “key workers” and permit them to cross borders. Ship owners have also been under fire for not doing enough.
In early September the head of the International Maritime Organisation, Kitack Lim, said progress was being made by many countries in allowing for crew changes, but not at a rate to keep pace with the backlog.
Most nations now permit seafarers to cross borders, but the process is hampered by bureaucracy, screening and quarantine requirements, limited and hugely expensive air travel, and changing rules due to new waves of COVID-19. So while travelling home is technically possible, many seafarers remain stuck at sea.
The consequences, Kitack Lim warned, are dire:
Seafarers cannot remain at sea indefinitely. In addition to the humanitarian crisis that has been caused by keeping seafarers effectively trapped on their vessels, the safety issues that arise from requiring overly fatigued and mentally exhausted seafarers to continue operating vessels are a matter of great concern.
These concerns have been echoed by the Consumer Goods Forum, comprising the top executives of about 400 multinational retailers and manufacturers, which wrote to United Nations Secretary-General António Guterres calling for action to end a situation that had “inadvertently created a modern form of forced labor.”
The International Transport Workers’ Federation called the shipping industry “a ticking timebomb”, with its survey of seafarers showing 60% believed they or crew mates were more likely than not to be “involved in an accident that could harm human life, property or the marine environment due to tiredness or fatigue”.
United Nations call for action
Where I live, the Australian Maritime Safety Authority announced last month it would end interim arrangements permitting seafarers to serve longer than 11 months on ships from 28 February 2021.
But as the International Transport Workers’ Federation noted – welcoming the decision while also expressing disappointment at the unnecessary delay – this is only the start of action needed from port states to help resolve the crew change crisis.
On December 1, the United Nations General Assembly passed a resolution calling on all governments to promptly take steps to facilitate crew changes, including by expediting travel and repatriation efforts and ensuring access to medical care.
A key step is designating seafarers as essential workers, with permission to cross borders, priority access to international flights, and to vaccinations when they become available.
The urgency is clear: the global economy depends on the work of seafarers.
When we celebrate Christmas with family and friends, feasting on imported delicacies and exchanging gifts shipped in from overseas, let’s not forget the ordeal of the hundreds of thousands stranded far from home who made that possible.
Australia’s response to the health and economic impacts of the COVID-19 pandemic is rightly considered one of the world’s best. At their best, our federal and state politicians have put aside the sterile games dominating politics for decades.
It seemed possible these efforts might last, as politicians sought to find common ground and make real progress on issues such as climate change, industrial relations and inequality as part of the coronavirus recovery.
But as soon as the virus seemed to be receding, politics returned to the old “normal”. Policies are again being put forward on the basis of ideological reflexes rather than an analysis of the required response to our new situation.
Those cuts will benefit high-income earners the most. They include replacing the 32.5% marginal tax rate on incomes between A$45,000 and A$120,000, and the 37% rate on incomes between AA$180,000, with a single 30% rate up to A$200,000.
This is being proposed while the government begins to wind back income-support measures, such as free child care, with much more serious “cliffs” fast approaching.
This economic crisis is different
One of the most striking features of Australia’s initial response to COVID-19 was the speed at which the Morrison government abandoned a decade of rhetoric denouncing the Rudd Labor government’s response to the Global Financial Crisis.
In mid-March the government was floating the idea of a tightly limited response with a budget of A$5 billion. By the end of the month this had been abandoned in favour of the JobSeeker and JobKeeper schemes, estimated to cost A$14 billion and A$70 billion respectively. Other schemes brought the total to A$133 billion.
Despite the close resemblance to the Rudd stimulus packages, there was one crucial difference.
The GFC caused a collapse in the availability of credit, potentially choking off consumer demand and private investment. This was the classic case needing demand stimulus.
By contrast, the COVID-19 pandemic caused a shock to the production side of the economy, which flowed through to incomes. Millions of workers in industries such as tourism, hospitality and the arts were no longer able to work because of the virus.
The crucial problem was to support the incomes of those thrown out of work, and keep the businesses employing them afloat until some kind of normality returned. There were problems with the details of eligibility and implementation of the JobSeeker and JobKeeper programs, but the response was essentially right.
Have cash, will buy luxury car
The primary rationale for early tax cuts is that they will stimulate demand. But the economy’s real problem is not inadequate demand – particularly not on the part of high-income earners.
On the contrary, the problem for high-income earners is having a steady income even as many of the things they usually spend on (high-end restaurant meals, interstate and overseas holidays) have become unobtainable.
Among the results has been a splurge on luxury cars. Compared to June 2019, sales of Mazdas, Hyundais, Mitsubishis, Kias, Nissans and Hondas last month were all down. But Mercedes-Benz, BMW, Audi and Lexus were all up.
As Jason Murphy notes, this rush to buy fancy cars isn’t definitive proof the wealthy are looking to ways to spend all the money they’re saving. “But it is suggestive. Eventually the money has to go somewhere.”
The worst possible course of action
The continuing problem with the pandemic is the loss of income faced by millions of workers. By definition, anyone in a position to benefit from a high-end tax cut doesn’t have this problem. Equity would suggest that, far from receiving more income, they should be sharing more of the burden, if not now then in the recovery period.
When the federal government legislated its tax-cut schedule in advance, critics including Reserve Bank governor Philip Lowe and Access Economics partner Chris Richardson pointed out the danger of promising future tax cuts based on projected growth. The same policy had failed ignominiously in the 1990s when the Keating government legislated tax cuts to be introduced after the 1993 election. After declaring the cuts “L-A-W”, Paul Keating was forced to withdraw half of the tax cuts when the budget deteriorated.
These criticisms have now been vindicated.
The decade of strong economic growth, starting this year, that was supposed to make big tax cuts affordable has disappeared. We will be lucky if per capita GDP is back to its 2019 levels by 2024-25, when the tax cuts are slated to kick in regardless of circumstances.
Once that happens, we will need all the tax revenue we can get to bring the budget back into balance and deal with the continuing expenditure needs the pandemic has created.
The government now seems to be headed for the worst possible course of action – cutting support for those hit hardest by the pandemic while pouring money into the bank accounts of the well-off.
The inevitable result of such a policy will be a surge of personal and business bankruptcies, mortgage defaults and evictions. That will bring about the kind of demand-deficiency recession the tax cuts are supposed to prevent, superimposed on the continuing constraints created by the pandemic.
So far we have all been in this together. For high-income earners that means forgoing tax cuts promised in happier times and contributing more to the relief of those who need it most.