Eden-Monaro focus groups: Voters want government to cushion pandemic recovery path


Michelle Grattan, University of Canberra

Eden-Monaro voters are calling for a compassionate and empathetic recovery process as Australia emerges from the pandemic.

In focus group research conducted this week, ahead of Saturday’s byelection, the vast majority of participants favoured increasing the JobSeeker payment above the pre-COVID level, extending the JobKeeper wage subsidy scheme, and providing targeted help for areas hit hard by the summer fires and the impact of the coronavirus.

More surprising, almost all participants were willing to pay more tax to assist the economic and social recovery effort. Many were concerned about leaving debt for future generations.

This was the second round of online research by the University of Canberra’s Mark Evans and Max Halupka. Two groups, with 10 and nine participants respectively, were held on Monday and Tuesday. All but three participants had taken part in the research’s first round. Drawn widely from the diverse electorate, participants included aligned and swinging voters.

Focus group research taps into voters’ attitudes rather than being predictive of the outcome.

Both Scott Morrison and Anthony Albanese have been very active in the seat as voting day nears, although over the campaign as a whole Albanese has been on the ground much more than the PM. But the Liberals have invested heavily in an effort to wrest the seat – which is on a margin of under 1% – from Labor and increase the government’s parliamentary majority.

There was only marginal change in participants’ views on the key issues.

Top issues are: action on climate change, the federal government’s response to the bushfire crisis, job creation, better access to public health care, and addressing the high cost of living.

Climate change action continued to receive the greatest support when people were asked to nominate the one most important issue to them. Most participants saw a link between the bushfire crisis and the need for climate action.

People continued to be aggrieved at the Morrison government’s handling of the fire crisis, which they thought suffered from poor federal leadership, inadequate preparation and insufficient collaboration between federal and state government.

In the second round discussion, there was greater concern over economic recovery issues. “The economy looks weak so we will need good economic management and that tends to come from the Coalition,” a retired Coalition voter noted.

But there was some cynicism over the extra support the government has promised.

People saw Morrison’s announcement in Bega of a $86 million package for the forestry industry, wine producers and apple growers hit by the bushfires as “guilt money”. “It’s an obvious bribe – which might well work,” said a middle-aged hard Coalition supporter, while a female Greens voter described it as “a shameful example of logrolling”.

Most participants thought there would still be a bushfire backlash against the Coalition, despite Morrison’s announcement.

The government is hoping Morrison’s performance on the pandemic negates criticism of his handling of the fires.

Since their first discussion, people have cooled in their views of leaders’ management of the virus crisis. Morrison is now seen as the best performer, followed by NSW premier Gladys Berejiklian, a reversal from the first round.

Berejiklian’s poorer performance is attributed to general annoyance with the states and the perception they are acting “selfishly”. The vast majority of participants think Morrison “is handling the coronavirus outbreak competently and efficiently.” But people are worried by a second wave and cautious about re-opening too quickly.

Albanese is a distant third (the question about him was whether he was doing a good job holding the PM to account); his performance was rated more poorly in the second discussion compared with the first. He wasn’t impacting on the core political agenda: “he hasn’t got a plan,” said one participant.

The vast majority of participants, however, did not believe any party was offering a clear COVID-19 recovery plan and were surprised there hadn’t been a national conversation on the issue.

COVID-19 has constrained the usual forms of campaigning, and has led to a very high demand for postal votes. Participants perceived the Coalition had run a very traditional campaign using “old media”, while they thought Labor had run a “new media” campaign with more emphasis on social media platforms.

Both the major candidates are seen positively. Fiona Kotvojs (Liberal) was considered an “excellent” candidate even by Labor supporters. But several people suggested the intervention of senior Coalition figures in the campaign (Morrison and Payne) may have “reduced her community standing”. Labor’s Kristy McBain was considered a “really hard working” and a “very well liked” candidate by Coalition supporters.

But McBain was regarded as having run the better campaign.

When people were asked who they would vote for, the responses suggested a Labor victory and strong support for McBain. However there had been some attitudinal changes over the campaign.

There appeared to be a marginal increase in support for Cathy Griff (Greens) as the campaign neared its end and two independent candidates emerged from the woodwork – Narelle Storey (Christian Democratic Party) and Matthew Stadtmiller (Shooters, Fishers and Farmers) – during the discussion. That suggested the possibility certain soft Coalition voters might be exercising a protest vote against the government.

Some soft Coalition and Green voters might have moved to Labor and some soft Coalition voters to the Greens, but hard Coalition, Green and Labor voters looked to be remaining loyal.

Kotvojs’s well-resourced campaign appeared to be losing some momentum. But the participants continued to think the election – a straight Labor-Liberal battle despite a field of 14 candidates – would be very close.

This is a byelection where even seasoned watchers are wary of chancing their arm in advance of Saturday night.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.

‘We are in a bubble that is set to burst’. Why urgent support must be given to domestic violence workers



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Dr Naomi Pfitzner, Monash University; Jacqui True, Monash University; Kate Fitz-Gibbon, Monash University, and Silke Meyer, Monash University

During lockdown, we have seen an increase in demand for domestic violence services in Australia and around the world.

The United Nations recognised this problem in April, declaring a “shadow pandemic” of violence against women and girls.




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How do we keep family violence perpetrators ‘in view’ during the COVID-19 lockdown?


But while we look at specific supports to victims, we cannot forget the people who work to help them.

Our research highlights how we risk losing the essential workers on the frontlines of our domestic violence response, as a result of overwhelming workloads and potential burn out.

Thousands of workers involved

While there is no national data on the Australian domestic violence workforce, in Victoria alone there are around 3,000 specialist practitioners and an additional 30,000 workers who provide core support for, or interventions to address, domestic and family violence.

These include workers from specialist domestic violence services, men’s behaviour change services as well as child and family services.

A 2017 Victorian family violence workforce census revealed that almost one third of specialist practitioners were considering leaving their job due to burn out.

Our new research demonstrates why this is likely to be exacerbated by the pandemic.

Our research

In partnership with the Queensland Domestic Violence Services Network and Monash University’s Melbourne Experiment, we have surveyed Victorian and Queensland practitioners responding to violence against women during the COVID-19 restrictions.

COVID-19 has seen domestic violence support being delivered from people’s homes.
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This included 166 workers in Victoria and 56 and 117 workers over two surveys in Queensland.

As shutdown commenced in March, many services moved to remote delivery, with 73% of specialist practitioners in Queensland reporting they now worked from home.

This change resulted in frontline workers providing crisis counselling and conducting risk assessments and planning with traumatised and abused women from their homes. Often they were doing this incredibly challenging work from their living rooms.

The ‘shadow pandemic’

According to our recent surveys, the incidence and severity of domestic violence has increased in Australia during the COVID-19 restrictions. Over 50% of workers in Victoria reported an increase in the frequency and severity of domestic violence. These findings were mirrored in Queensland, with 70% of practitioners observing an escalation in the violence experienced by women in May.




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The pandemic conditions have also made providing support to victims more difficult and more complex. The lack of face-to-face services and the constant presence of perpetrators in victims’ homes limits workers’ ability to respond to violence. As one practitioner explained

You can’t see the hole in the wall, the bruise on her jaw, the fear in the kid’s eyes when dad’s name is mentioned.

Our Victorian and Queensland survey findings also showed during COVID-19, perpetrators have adapted their abusive behaviours, finding new opportunities to control and isolate their victims.

Frontline workers told us in some cases perpetrators are using the pandemic to force women into residing in homes with their abusers where there are children involved.

Perpetrators have also pressured women to wash their hands to the point they are experiencing cracks and bleeding, and have used the threat of COVID-19 infection to isolate women from friends, family and other supports.

Flow on effect to the workforce

Queensland domestic violence workers reported a decline in their mental well-being during April and May. More than 40% of practitioners surveyed in April said working during the pandemic was causing additional pressure and stress.

They tended to attribute this to their challenging work coming into their homes.

Frontline domestic violence workers say it has been difficult working from home during COVID-19.
http://www.shutterstock.com

Queensland workers also revealed the transition to remote work alongside an increased demand for their services during COVID-19 has been harmful to their mental health.

I have already used a week of personal leave due to potential burn out. The impact on domestic violence workers needs to be considered by government.

Similar reports have emerged from Victorian workers. As one survey respondent explained

We are all working from home, which has been emotionally, extremely difficult. Having this work in my bedroom, my safe space, has been frankly awful and has wreaked havoc on my work/life balance and self-care routines. Most significantly of all, not being around my colleagues for support, guidance and debriefing has really been the worst.

Self-care strategies and well-being supports

Positively, some workers involved in the Queensland surveys talked about new self-care strategies developed during the lockdown. For example, many Queensland workers said their services had implemented regular online catch-ups and debriefing sessions to check in with staff and provide regular contact and support.




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Other well-being supports shared in the Queensland surveys included dedicated counsellors to provide individual counselling services to workers and their families during the pandemic.

We need to protect these essential workers

Historically, there has been limited attention paid to the support needs of the domestic and family violence workforce, beyond a general emphasis on self-care in social work training.

Our research shows why this must change moving forward.

As Australia navigates the easing of restrictions in some locations, funding and resources must be increased to ensure the sector can meet the demands of the increasing number of women seeking help from violence.

Victoria and Queensland have already provided multi-million dollar emergency funding packages, to address increased demand on the sector and the scarcity of short-term accommodation for victims fleeing violence.

Equal investments are now needed to ensure the health and well-being of support workers now and into the future.

The specifics of what this entails should be decided in close consultation with the sector, but we note workers said they benefited from counselling for themselves and their families and flexible working conditions, including additional leave days.

Without dedicating the resources needed to support practitioners, we run the risk of seeing an exodus due to burn out in the coming months and years. As one practitioner warned

I feel like we are all in a bubble that is set to burst very soon, in terms of capacity. And when it does burst, I don’t know what it will look like but I know who will pay the ultimate price – victims.


If you or someone you know is impacted by sexual assault or family violence, call 1800RESPECT on 1800 737 732 or visit http://www.1800RESPECT.org.au. In an emergency, call 000.The Conversation

Dr Naomi Pfitzner, Postdoctoral Research fellow with the Monash Gender and Family Violence Prevention Centre, Monash University; Jacqui True, FASSA, Professor of Politics and International Relations, Director Monash Gender, Peace and Security Centre, Monash University; Kate Fitz-Gibbon, Director, Monash Gender and Family Violence Prevention Centre; Senior Lecturer in Criminology, Faculty of Arts, Monash University, and Silke Meyer, Associate Professor in Crimninology; Deputy Dircetor Monash Gender and Family Violence Prevention Centre, Monash University

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

Forget JobSeeker. In our post-COVID economy, Australia needs a ‘liveable income guarantee’ instead



Kelly Barnes/ AAP

John Quiggin, The University of Queensland; Elise Klein, Crawford School of Public Policy, Australian National University, and Troy Henderson, University of Sydney

There are now less than three months to go before the expanded JobSeeker payment is due to end.

As a result, there is a growing political debate about what should happen to the unemployment payment that was roughly doubled in April.




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


While the government is reportedly considering a revamp of both the JobSeeker and JobKeeper payments, we believe a much broader rethink is needed of the way we provide income support to people without a market income.

Instead of an unemployment payment – or the dole – we need a liveable income guarantee.

‘Snapback’ is not going to happen

It’s increasingly clear a “snapback” to the pre-pandemic way of doing things is not realistic.

Unemployment has jumped under coronavirus.
Stefan Postles/AAP

The recent upsurge in coronavirus cases reminds us the new normal will see all sorts of economic and social activity constrained and subject to sudden lockdowns.

As a June Grattan Institute report has also shown, we need more fiscal stimulus, not a return to pre-pandemic fixations on debt and deficits.

On top of this, we have also seen grim announcements of job cuts at Qantas, the sale of Virgin and other well-known brands collapsing. Many smaller businesses will follow their lead.

Thousands of hardworking Australians, many of whom have never been unemployed before, will be thrown out of work – some of them for a long time.

We need a new unemployment system for a new reality

The system of unemployment benefits that was in place before COVID-19 worked on the assumption there were plenty of jobs for anyone capable of filling them.

Unemployment was therefore seen as reflecting personal defects – either unwillingness to work or, more charitably, a lack of particular skills needed for “job readiness”.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


This assumption was clearly untrue, even before the pandemic. As the long history of booms, busts and economic crises have shown us, all workers are vulnerable to losing their job through no fault of their own.

There aren’t jobs for everyone

The failure of labour markets to provide full employment is also seen in the increasing levels of underemployment, particularly among young people.

Underemployed workers are, by definition, willing and able to work, and ineligible for unemployment benefits. But they are nonetheless unable to secure a full-time job.

Young people are increasingly underemployed.
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For an unacceptably high proportion of young people, the experience of the labour market has been one of stringing together part-time gigs, while trying unsuccessfully to start a career. Official measures of youth unemployment hit 16% in May. A further 25.8% of young Australians between 15 and 24 years old were underemployed.

We need to do something different

Even before coronavirus, there was a pressing need to reform the way we support unemployed people.

JobSeeker (or its predecessor, Newstart), had not been increased in real terms since 1994. Business, community groups and researchers were among the loud chorus pushing for an increase to the payment which, on average, is about A$45.50 a day.




Read more:
When the Coronavirus Supplement stops, JobSeeker needs to increase by $185 a week


But to respond to the post-pandemic era, we need to make more comprehensive changes to the way we support unemployed and underemployed Australians, that acknowledge the scarcity of jobs.

A liveable income guarantee

Moving forward, we should adopt the concept of a liveable income guarantee or living wage. The living wage is closely linked to the idea of participation – starting from the principle everyone has a right to a liveable income and a responsibility to contribute to society.

Ideas of this kind, under names including “universal basic income”, “guaranteed minimum income” and “participation income” have been discussed since the 1960s.

They have attracted more attention in recent years as the failure of the current economic system to deliver full employment and broad improvements in living standards has become more apparent.

How would a liveable income guarantee work?

Many people already productively contribute to society in different ways, such as caring, but their work is largely obscured by the narrow measure of formal employment.

The social security system only partially supports those unable to work due to age, disability, unemployment, or caring needs. And support for all of these categories has been cut back and subjected to conditionality under successive governments, operating on the ideology of market liberalism.




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Vital Signs: COVID-19 recession is different – and we need more stimulus to deal with it.


There are many possibilities of what contributions could be included and “paid for” under a liveable income guarantee. Most of them have some precedent, but have not been considered as part of a comprehensive program of social participation. The options include:

  • volunteering in support of organisations and causes
  • work on grant-funded community projects
  • support for beginning small businesses
  • ecological care projects
  • artistic and creative activity
  • full-time study.

All of these productive activities should be given the same terms, income and assets test as the pension.

Including supplements, a single pensioner currently receives up to $944.30 per fortnight. This is paid to the aged, people with disability and carers.

Without the Coronavirus Supplement, a single person on the JobSeeker Payment receives $574.50 a fortnight (including the Energy Supplement).

How to pay for a living wage

We estimate the annual cost of a policy along the lines suggested above would be less than $30 billion. About $10 billion a year would be needed to set all benefits equal to the age pension. The cost of expanded eligibility for the liveable income guarantee is harder to estimate, but unlikely to be more than $20 billion a year.

Most of this could be financed simply by forgoing the tax cuts for high income earners legislated by the Morrison government after it won the 2019 election.

The welfare system should be more like the tax system

When it comes to government checks on people’s participation in their chosen community activities, we need to look to the tax system.

Currently the welfare system imposes strict compliance rules to prevent cheating at the outset. By contrast, the tax system is operated on the basis of self-assessment.

Taxpayer declarations are assumed to be true in the first instance, but subject to auditing. The liveable income guarantee should operate like this, where people submit their own participation declaration, as we do with our tax returns.

The welfare system could operate more like the tax system when it comes to self-reporting.
James Gourley/AAP

Looking ahead, we need to focus on cooperation rather than competition.

This means giving everyone the opportunity to contribute to society, whether or not they generate a market income. A liveable income guarantee will be a crucial step towards this goal.


This article was the product of discussion among a group that also included author Tim Dunlop, Western Sydney University emeritus professor Jane Goodall and QUT senior lecturer Dr Jenni Mays.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland; Elise Klein, Senior Lecturer, Crawford School of Public Policy, Australian National University, and Troy Henderson, Lecturer in Political Economy, University of Sydney, University of Sydney

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

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Coronavirus and university reforms put at risk Australia’s research gains of the last 15 years



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Andrew Norton, Australian National University

Education minister Dan Tehan will be meeting with university vice-chancellors to devise a new way of funding university research. They will have plenty to talk about.

Australia’s universities have been remarkably successful in building their research output. But there are cracks in the funding foundations of that success, which are being exposed by the revenue shock of COVID-19 and the minister’s reforms announced this month, which would pay for new student places with money currently spent on research.

I estimate the gap in funding that needs to be filled to maintain our current research output at around $4.7 billion.

The funding foundations crumble

The timing of Dan Tehan’s higher education reform package could not have been worse for the university research sector.

The vulnerability created by universities’ reliance on international students has been brutally revealed this year. Travel bans prevent international students arriving in Australia and the COVID-19 recession undermines their capacity to pay tuition fees.




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Australian universities could lose $19 billion in the next 3 years. Our economy will suffer with them


Profits from domestic and international students are the only way universities can finance research on the current scale, with more than A$12 billion spent in 2018.

Based on a Deloitte Access Economics analysis of teaching costs, universities make a surplus of about A$1.3 billion on domestic students. Universities use much of this surplus to fund research.

Tehan’s reform package seeks to align the total teaching funding rates for each Commonwealth supported student – the combined tuition subsidy and student contribution – with the teaching and scholarship costs identified in the Deloitte analysis.

On 2018 enrolment numbers, revenue losses for universities for Commonwealth supported students would total around $750 million with this realignment. With only teaching costs funded, universities will have little or no surplus from their teaching to spend on research.




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The government is making ‘job-ready’ degrees cheaper for students – but cutting funding to the same courses


International student profits are larger than domestic – at around $4 billion. Much of this money is spent on research too, and much of this is at risk. The recession will also reduce how much industry partners and philanthropists can contribute to university research.

Australia’s Chief Scientist estimates 7,700 research jobs are at risk from COVID-19 factors alone. Unless the Commonwealth intervenes with a new research funding policy, its recent announcements will trigger further significant research job losses.

Combined teaching and research academic jobs will decline

Although less research employment will be available, the additional domestic students financed by redirecting research funding will generate teaching work.

More students is a good thing in itself, as the COVID-19 recession will generate more demand for higher education.

But this reallocation between research and teaching will exacerbate a major structural problem in the academic labour market. Although most academics want teaching and research, or research-only roles, over the last 30 years Commonwealth teaching and research funding has separated.

After the latest Tehan reforms, funding for the two activities will be based on entirely different criteria and put on very different growth trajectories.

An academic employment model that assumes the same people teach and research was kept alive by funding surpluses on domestic, and especially international, students. With both these surpluses being hit hard, the funding logic is that a trend towards more specialised academic staff will have to accelerate.

We can expect academic morale to fall and industrial action to rise as university workforces resist this change.




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More than 10,000 job losses, billions in lost revenue: coronavirus will hit Australia’s research capacity harder than the GFC


The funding squeeze will also undermine the current system of Commonwealth research funding. This funding is allocated in two main ways. In part, it comes from competitive project grant funding, largely from the National Health and Medical Research Council and the Australian Research Council.

Academic prestige is attached to winning these grants, but the money allocated does not cover the project’s costs. Typically, universities pay the salaries of the lead researchers and general costs, such as laboratories and libraries.

Universities are partly compensated for those expenses through research block grants, which are awarded based on previous academic performance, including in winning competitive grants. But because block grants do not cover all competitive project grant costs, the system has relied on discretionary revenue, much of it from students, to work. It will need a major rethink if teaching becomes much less profitable.

The stakes are high

University spending on research (which was over $12 billion in 2018), has nearly tripled since 2000 in real terms.

Direct government spending on research increased this century, but not by nearly enough to finance this huge expansion in outlays. In 2018, the Commonwealth government’s main research funding programs contributed A$3.7 billion.

An additional $600 million came from other Commonwealth sources such as government department contracts for specific pieces of research.

In addition to this Commonwealth money, universities received another $1.9 billion in earmarked research funding from state, territory and other (national) governments, donations, and industry.

These research-specific sources still leave billions of dollars in research spending without a clear source of finance. Universities have investment earnings, profits on commercial operations and other revenue sources they can invest in research.

But these cannot possibly cover the estimated $4.7 billion gap between research revenue and spending.

With lower profits on teaching, this gap cannot be filled. Research spending will have to be reduced by billions of dollars.

We are at a turning point in Australian higher education. The research gains of the last fifteen years are at risk of being reversed. The minister’s meeting with vice-chancellors has very high stakes.The Conversation

Andrew Norton, Professor in the Practice of Higher Education Policy, Australian National University

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

Cutting unemployment will require an extra $70 to $90 billion in stimulus. Here’s why



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Brendan Coates, Grattan Institute; Matthew Cowgill, Grattan Institute, and Tony Chen, Grattan Institute

After managing the first stage of the COVID-19 crisis so effectively, the government now faces a bigger challenge: getting us back to work.

The official employment figures indicate the scale of what’s needed. In the past two months number of Australians with a job has fallen by 835,000. Millions more are in jobs kept on life support by JobKeeper.

Employed Australians, total

Includes Australians regarded as still employed because they are on JobKeeper.
ABS 6202.0

The Reserve Bank’s latest public forecast has the unemployment rate peaking at 10% and then falling to 6.5% (baseline scenario) or 5% (optimistic scenario) by mid-2022.

In Grattan Institute’s latest report, The Recovery Book, released this morning, we argue this isn’t ambitious enough.

The case for ambition

The bank and the government ought to aim for something better, closer to 4.5%.

This is the rate it has previously identified as “full employment”, the lowest Australia can sustainably achieve without stoking inflation.

It would mean bringing unemployment down 1.5 percentage points further than it might otherwise fall over the next two years – to somewhere between 4% and 5%.

Projected unemployment with and without extra fiscal stimulus

RBA forecasts linearly interpolated between 6-month intervals. ‘Full employment’ corresponds to the RBA’s pre-COVID estimate, plus and minus one standard error band.
Grattan calculations, RBA May 2020 Statement on Monetary Policy; Lucy Ellis, 2019 Freebairn Lecture in Public Policy

The bank has passed the baton

With the bank’s cash rate already cut to 0.25%, conventional monetary policy (cutting the cash rate) has run out of steam.

Unconventional policy will help.

The Reserve Bank is advancing cheap money to private banks for onlending to businesses, buying government bonds to keep the three year bond rate near 0.25%, and has pledged to keep the cash rate at 0.25% for the next three years.

The bank can and should do more, but the rest will have to be done by government spending and tax measures, so-called fiscal policy, of the kind that has already been proved effective in suppressing unemployment.

We’ll need $70 to $90 billion

We estimate that reducing unemployment by 1.5 percentage points by mid-2022 would require additional stimulus of A$70 billion to A$90 billion over the next two years, equivalent to between 3% and 4% of GDP.

This is on top of the more than $160 billion committed to JobKeeper and other coronavirus supports to date.

Here’s how we make the calculation.

First, to reduce unemployment by that much we estimate that real gross domestic product needs to grow by about 4 percentage points more than forecast over the next two years.

The estimate is based on previous work by economist Jeff Borland. Jeff kindly updated his calculation with us for this article, finding that each one percentage point increase in annual GDP growth reduces the unemployment rate by around 0.38 percentage points.




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


Second, we assume each dollar of stimulus in a particular year increases GDP in that year by between 80 cents and one dollar (some of the rest is saved and some leaks overseas).

This estimate of “fiscal multiplier” is slightly higher than that used by treasury during the global financial crisis but is in line with recent academic work finding that stimulus measures are more effective when monetary policy is out of ammunition.

If the fiscal multiplier isn’t as high – or if the recovery is more sluggish than expected, more stimulus might be needed.

There’s little risk of overkill…

A few weeks ago Reserve Bank Governor Philip Lowe raised the possibility that the crisis had pushed the minimum sustainable rate of unemployment higher, from 4.5% to nearer 5%, on the face of it making a case for less ambition.

His concern was “scarring” – the risk that some of the people who lose their jobs will become so damaged they become unsuitable for future employment, meaning that employers looking for staff would rather bid up the wages of existing workers than employ them, fuelling inflation.

But, if anything, his concern is a powerful argument for spending more, and more quickly, in order to avoid scarring. There’s good evidence sustained high unemployment hurts the economy in the long term.




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The charts that show coronavirus pushing up to a quarter of the workforce out of work


And if the extra spending did fuel inflation, it mightn’t be such a bad thing.

Inflation has been below the bank’s target for years. If it gets above it and becomes a problem, the bank can dampen it by raising rates.

…and little time to lose

The extra stimulus will need to be announced soon: on or well before the federal budget scheduled for October. Fiscal measures take time to have their biggest effect.

We are facing a “fiscal cliff” when measures including JobKeeper and the enhanced JobSeeker payment are withdrawn at the end of September. To escape it, they will need to be wound down more gradually, as the international Monetary Fund warned last week.

There are plenty of ways to maintain support including further cash payments to households, along the lines of those in the global financial crisis showed were effective in boosting spending, as well as spending on things such as social housing, roads and school maintenance.

Fear of debt needn’t hold us back

Extra stimulus will mean extra government debt. But the Australian government can now borrow for 10 years at a fixed interest rate below 1%. Adjusted for inflation, that’s a negative real interest rate, making debt more affordable than it has been in living memory.

There will naturally be concerns that further debt will place a burden on younger generations. But they are the generations that will be lumbered with the costs of worse than necessary unemployment, some of it very long term unemployment, unless we act.

In the worst case, they’ll ask why we didn’t do more.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


The Conversation


Brendan Coates, Program Director, Household Finances, Grattan Institute; Matthew Cowgill, Senior Associate, Grattan Institute, and Tony Chen, Researcher, Grattan Institute

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