The Australian government opens a coronavirus super loophole: it’s legal to put your money in, take it out, and save on tax



Helloquence/Unsplash, CC BY-NC

Robert Breunig, Crawford School of Public Policy, Australian National University and Tristram Sainsbury, Crawford School of Public Policy, Australian National University

How would you feel if you were having a Zoom meeting with your accountant and they asked “how would you like to save more than $5,000 in income tax over the next six months?”

While probably a bit sceptical (did I hear right? Maybe this technology is faulty? What’s the catch? Surely this is too good to be true?) you might be intrigued. You might even turn up the volume to make sure you hear the next bit.

What about if they followed up with, “It’s completely legal. The Australian government will be picking up the tab as part of the stimulus packages! Plus, you can do it mostly risk-free. But you do have to rearrange your financial affairs a bit, and deal with some bureaucratic hurdles.”

What the accountant would be referring to is a generous incentive that is on offer now over the next six months.

It is linked to the decision to temporarily allow the early release of A$10,000 in super this financial year and $10,000 the next.

When parliament approved the Coronavirus Economic Response Package Omnibus Bill 2020 last week, they put no new restrictions on how people could contribute into super.

This means that it’s possible to voluntarily contribute $10,000 of your pre-tax income into super over the next three months, and also apply to withdraw a $10,000 lump sum from super tax-free at some point before June 30.




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You still end up with $10,000 in your pocket. But if you contribute through a salary sacrifice arrangement with your employer and stay within the concessional contributions limits, your voluntary contributions will be taxed at 15% rather than your marginal personal tax rate.

When you pull out the funds from super, the withdrawal is tax free. And, you will be able to do the same thing again between July 1 and late September.

In a working paper released by the ANU’s Tax and Transfer Policy Institute, we described these kinds of situations – where people assume a different legal form in order to receive a lower marginal tax rate – as “tax arbitrage”. They are completely legal, and widespread.

Like other tax arbitrage opportunities, there are sizeable tax savings available from the pursuing of the super equivalent of the Hokey Pokey.

This chart illustrates the sums involved.


Potential tax saving in one specific scenario associated with salary sacrificing up to $10,000 into super and withdrawing it in the same financial year

Personal income tax calculations include the Low Income Tax Offset, Low and Middle Income Tax Offset and the Medicare Levy.


It applies to a very specific scenario: a working age individual who is on 9.5% compulsory super contributions, has an annual salary below $158,000, has made no previous voluntary contributions to super in 2019-20, and who elects to make a “simultaneous” (within 2019-20) pre-tax contribution to and withdrawal of the maximum possible $10,000 from super over the next three months.

It suggests that, as long as an individual in this situation has an annual income of approximately $30,000 or more, there is a prospective tax saving from rearranging his or her financial affairs over the next three months.

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The tax savings can be risk-free, if that’s what you want. If you were worried about the stock market falling further and taking away your contributions to super with it, you can direct your super fund to hold all new contributions purely as cash.

In all, its not a bad return for three (or six) month’s efforts – especially as it results purely from a change in legal fiction rather than any change in underlying economic activity.

Who can do it?

As always with these kinds of arrangements, the devil is in the detail, but there is a lot we already know.

First, the arrangements are targeted at those who have been adversely impacted by the coronavirus. On or after January 1, 2020 working hours (or turnover for sole traders) have to have been fallen by at least 20%.

And it benefits those willing to embrace the bureaucratic hurdles (or outsource the embracing to their accountant). Consistent with Australia’s self-assessment tax system, the onus is on the applicant to certify that they qualify. The Tax Office will then make a determination that the funds be released by the super fund.




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There appears to a fair bit of discretion left to the ATO as to what impacts from coronavirus will be considered sufficient.

One thing is that isn’t clear is what the base period for comparison is, although some examples provided by treasury compare outcomes over a month in 2020 against the average over the six months at the end of 2019.


Early access to super fact sheet, Commonwealth Treasury, March 2020

It seems quite straightforward if your workplace has cut back your hours or the business you own has had its trade (say) halved, but it is less clear cut if you have voluntarily scaled back your hours because of childcare or if you have returned from working overseas because of the virus.

The second key condition is you need to be fortunate enough to hold on to a job providing you with taxable income (or if you are self-employed, generating pre-tax income) of up to $10,000 over the next three, and maybe six, months. The new JobKeeper wage subsidy will help.

And you need to be able to handle the “cash flow” gap – between when you start salary sacrificing income (which reduces take-home pay) and when your super fund is able to release the income to you.




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But sole traders whose business is suspended and are ceasing earning income may not be able to do so. And salary sacrifice isn’t an option if you become unemployed and move on to a government welfare payment which doesn’t allow salary sacrifice.

The third key condition is you need to have enough assets in super to be able to withdraw $10,000 per quarter for the next six months. You can only make one application for an Australian Tax Office determination between now and June 30, and one application between July 1 and September 25.

What are we meant to make of it?

Taking it all together, a (probably unintended) consequence of the super changes has been to create a sizeable tax loophole for those who are relatively mildly impacted by the coronavirus, still earning taxable income, and have the financial capacity to salary sacrifice into super.

While it might initially sound like a niche opportunity, it could be of interest to a significant number of the estimated six million recipients of the JobKeeper payment.

The people who benefit will probably welcome their windfall. Some might, quite reasonably, point out that they should be expected to pay only the minimal tax legally applicable. They might even invoke the spirit of Kerry Packer.

At a system-wide level, though, this sort of tax planning is grossly unfair and leads to a tax system that is less efficient, more complex and less sustainable.




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Income tax is easily the most important source of Commonwealth government revenue. Loopholes in it feed through into company tax reveune through refundable imputation (something Labor tried to wind back in the 2019 election). There is no inheritance tax. And the main consumption tax is set at a low rate, is far from comprehensive and doesn’t fund Commonwealth government spending.

We ought to worry about actions that erode the collection of personal income tax.

The policy process has moved astonishingly quickly in the past three weeks. There were always going to be mistakes, and during a recession its often wise for decision makers to not let the perfect become the enemy of the good.

But equally, we must safeguard against details that are objectively bad.

Now we’ll see how the government responds to error.The Conversation

Robert Breunig, Professor of Economics and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University and Tristram Sainsbury, Research fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University

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

Regaining control: the case for a short, sharp lockdown (rather than the slow trickle we’ve had so far)


C Raina MacIntyre, UNSW; Louisa Jorm, UNSW; Richard Nunes-Vaz, Flinders University, and Timothy Churches, UNSW

Editor’s note: this is an edited version of a paper written in late March to outline the rationale for a short, sharp lockdown. The full version is here

The COVID-19 pandemic is unprecedented and may have long lasting global effects.

Until a vaccine is available, we have four main measures at our disposal:

  1. identifying every case rapidly with extensive testing, and isolating cases.
  2. tracking and quarantine of contacts
  3. travel restrictions
  4. social distancing (including lockdown) to reduce contact (and therefore spread of infection) between people.

Unlike countries such as South Korea, Australia has taken a slow trickle approach of phased, targeted restrictions to reduce social contact along with continued restricted testing.

We are in a partial lockdown state now, but it has been gradual. Different restrictions have been added on a rolling basis over a few weeks now, with schools still open. This is more of a slow trickle approach than a short, sharp, instant lockdown.

So far, Australia has not contained the epidemic as well as it could have, with a recent lapse in border control with the Ruby Princess cruise ship.

A silent epidemic may be growing, driven by mild or asymptomatic infections of people who did not meet our testing criteria.

A short, sharp lockdown for two to three incubation periods

The travel bans have been the most successful and strongest element of our approach. A phased approach of gradually increasing social distancing whilst keeping schools open will have some effect, but likely not enough.

It will leave us dealing with COVID-19 for much longer, with a slow trickle of new infections that keep feeding the epidemic. What’s needed is a short, sharp lockdown for two to three incubation periods (four to six weeks), combined with scaled up testing capacity and expanded testing criteria.

This strategy, similar to South Korea’s approach, would reduce the size of the epidemic substantially, spare the health system and give us a more manageable baseline from which to best protect Australia until a vaccine is available.

Epidemic growth is exponential, leaving little time for decision making. On March 1 we had 25 cases and now, nearly at the end of March we have over 4,700 cases.

While some of these are travel-imported cases, there is likely an as-yet undetected silent epidemic. In other words, there could be widespread community transmission of infections which restrictive testing and test kit shortages are preventing us from detecting.

We are concerned about the possibility of Australia losing control of the epidemic. We may well exceed health system capacity, increase the number of cases, experience health and economic losses, and a longer time to societal recovery.

A sharp lockdown needn’t last six to 12 months

While the curve has flattened since March 24, this is likely the impact of the travel bans implemented between March 5-10 on Iran, South Korea and Italy.

It is too early yet to see an impact of social distancing, and lapses like the Ruby Princess cruise ship incident, together with lack of testing for asymptomatic high-risk people, may allow transmission to continue in the community.

Modeling shows that the greatest impact will be gained by the most comprehensive and immediate social distancing measures (such as lockdown), combined with enhanced testing and quarantine.

The argument that such measures need to be long-term (six to 12 months) is incorrect. China has demonstrated the feasibility of a short lockdown followed by phased lifting of restrictions.

A short, sharp, complete lockdown of four to six weeks will improve Australia’s control of the epidemic, reduce case numbers more rapidly and bring us to a more manageable baseline. From there, we can start to phase in lifting of restrictions safely. Economic recovery can begin.

The slow trickle approach, especially if schools remain open, may result in continued epidemic growth, potential failure of the health system, and a far longer road to recovery.

An explainer video by the Australian Academy of Science.

A more comprehensive lockdown buys time

A comprehensive lock-down also buys time to scale up required testing, capacity for rapid case identification and isolation, and for thorough tracking and quarantine of contacts.

Contact tracing could be aided by novel smart phone apps, deployed with great success in South Korea.

For lockdown to be successful in a short, sharp burst, it must be accompanied by scaled up testing. We must ensure every new case can be identified rapidly during the lockdown and in the follow-up phase, when restrictions are lifted.

We need greatly expanded testing including asymptomatic, high risk people (contacts, evacuees and people in enclosed outbreaks such as cruise ships, aged care facilities, prisons). And we must allow doctors to use their clinical judgement to order a test.

It’s time to scale up our capacity to produce test kits domestically, procure them from overseas or actively ask for help from other countries that have achieved testing at scale.

Without such an improvement in the public health response capacity, the coronavirus epidemic will almost certainly bounce back when even the current lockdown restrictions are lifted.

We have examples of countries which have failed and succeeded. We should allow these examples to guide our response.




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The Conversation


C Raina MacIntyre, Professor of Global Biosecurity, NHMRC Principal Research Fellow, Head, Biosecurity Program, Kirby Institute, UNSW; Louisa Jorm, Director, Centre for Big Data Research in Health, UNSW; Richard Nunes-Vaz, Adjunct Professor, Torrens Resilience Institute, Flinders University, and Timothy Churches, Senior Research Fellow, Health Data Science, UNSW

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

The coronavirus response calls into question the future of super



Brendel/Unsplash, CC BY-NC

Warwick Smith, University of Melbourne

Understandably, given we are in a crisis, the government has baulked at including superannuation contributions in the A$140 billion worth of $1,500 per fortnight wage top-ups it will be directing to six million Australians.

As the JobKeeper fact sheet puts it:

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.


Source: Australian Tax Office

This is in the middle of a treasury led Retirement Income Review that is considering, among other things, whether the current 9.5% of salary contribution should be increased to 10% and then to 10.5% and then in a series of annual steps to 12% by 2025.

In considering the idea (it is actually leglislated – if the government decided not to go ahead it would need to unleglislate it) it helps to go back to basiscs.

The blinding power of money

The trouble with money is most people are so busy looking at it they are blind to what’s going on in the real economy – by which I mean the production and distribution of goods and services.

Our current material standard of living depends almost entirely on our current ability to produce goods and services (assuming for a moment imports are funded by exports).

Similarly, our standard of living in 2050 will depend almost entirely on our capacity to produce goods at that time. This means it has little to do with how much money is in our superannuation accounts.

Part of the justification for superannuation is to get us more resources in retirement, and it will for those who have big super balances, but it won’t do much to change the total amount of resources available at the time.

The limits to saving

Often it’s put another way. We are told baby boomers need to fund themselves in retirement, instead of relying on pensions paid for by those who are still in the workforce.

But imagine a perfect scenario where every retired baby boomer has $1 million in super, freeing those still working from the tax burden of funding the pension.

When the boomers are using their super to buy services and goods, who are they going to take them away from?

You guessed it, those still working.

They’ll be giving up resources to support the retirement of boomers, whoever supplies the cash.

In the main, saving can’t create resources

If there was no superannuation and the government instead taxed current workers in order to fund retiree consumption, the real cost to workers would be the same. That cost is the provision of goods and services to retired people instead of workers.

Individuals can indeed save for the future by foregoing some goods and services today in order to have more of them later. Financial planners refer to it as consumption smoothing.

But an entire society can’t save for the future through consumption smoothing.

If Australia as a whole consumes fewer goods and services in one year, it is likely to reduce rather than increase its future wealth because it is fully utilised labour and capital that drives investment and productivity.




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That’s what lies at the core of misunderstandings about the superannuation system. Foreign investment aside, it can’t allow an entire society to save for the future to support itself in retirement.

It can skew the distribution of resources in future years, away from those of working age and those with low super balances towards those with (tax concession subsidised) high super balances.

Boosting productivity can help

If our goal is an adequate and sustainable income in retirement for all Australians, our main priority ought to be ensuring that those remaining in the workforce are productive enough to support themselves, their children, those without work and those who have retired.

In other words, if you’re worried about the economic impact of our ageing population on our material standard of living (and there are reasons not to be worried) you would want our focus to be on productivity, rather than retirement savings.




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To the extent retirement savings are used for productivity enhancing investment, that’s good. The reality is much of our retirement savings are funnelled relatively unthinkingly into an already bloated financial system where they expand speculative bubbles.

Elsewhere I’ve referred to it as Australia’s first compulsory Ponzi scheme.

Like most important economic questions, the best retirement income system is not, at its core, solely an economic question, it is also a moral and political question about distribution and inequality.

So, with that in mind, here’s what my personal moral (plus economic) analysis tells me would be the best retirement income system.

We could give the money back, slowly

The best way would be to get rid of compulsory superannuation, give all the money back to account holders (slowly to avoid too much inflation), mandate a 9.5% pay rise in its place and redirect the tens of billions of dollars we currently spend on superannuation tax concessions toward rent assistance, a higher Newstart allowance and a higher pension.

With retired renters better looked after, a moderate (say 20%) increase in the pension, and continued indexation of the pension to wages, no retired Australian would be living in poverty.

It’d be sustainable so long as we ensured sufficient worker productivity, primarily through full employment, appropriate infrastructure investment and well-supported education, training and research.

There, problem solved.The Conversation

Warwick Smith, Research economist, University of Melbourne

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

For public transport to keep running, operators must find ways to outlast coronavirus


Yale Z Wong, University of Sydney

Minimising health risks has rightly been the focus of discussion during the coronavirus outbreak. This includes efforts to protect both frontline public transport employees and the travelling public. But we should also be concerned about the strategic, financial consequences for transport operators and their workforces.

We have already seen the struggles of the aviation industry. The COVID-19 pandemic also has major financial implications for the public transport sector. While it has been declared an essential service, fears about coronavirus, widespread work-from-home directives, cancellations of major events and potential city-wide lockdowns will result in massive drops in patronage.

Railways are a high fixed-cost industry (like airlines) and are particularly vulnerable to demand volatility.




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The Chinese experience has been that people preferred to use private cars and services like taxis and ride hailing rather than public transport. In New York, we have seen a surge in cycling as people seek to avoid the subway crowds.

What are the impacts on revenue?

Developments like these appear inevitable. However, the loss of revenue for transport operators depends very much on the design and specifications of their contracts with government.

Most urban public transport systems in Australia are “gross cost” regimes. This means operators are paid on a per kilometre basis regardless of the number of passengers carried. These operators are much less susceptible to changes in demand.

Transport operators who work off “net cost” contracts – meaning they keep their fare revenue – are facing huge financial pressures. This in turn has implications for the cash flows of their suppliers, including vehicle manufacturers and consultancies.

Hong Kong rail operator MTR (which has businesses in Melbourne and Sydney), already battling almost a year of protests, has been forced into significant service reductions. In Japan, some Shinkansen services are being suspended as patronage plummets. Many Asian operators have diversified revenue streams from property developments, but large falls in patronage also affect the ability to collect rents (such as from retail).

We are also seeing US transit agencies calling for emergency funding as demand drops. Major service cuts are on the horizon – suggestions include running a weekend schedule on weekdays. This is likely to reduce patronage further as the service becomes less useful for the travelling public.




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Any service reduction has major ramifications for public transport workforces. Permanent staff may have their work hours reduced, while casual staff will struggle to get rostered. This will add to the psychological impacts on staff.

The global collapse in oil prices is another factor as the lower cost of fuel makes driving more attractive.

Beyond government-contracted public transport there are many intercity coach operators and small-to-medium-sized charter operators (many family-owned). These operators serve the school, tourist, airport, hotel and special-needs markets. They are all private commercial operators.

Many charter operators have already seen a massive reduction in bookings due to the summer bushfires and travel bans. The loss of international tourism and cancellation of school excursions and extracurricular activities will bring even greater pain to charter operators and their workforces. Chinese tours have been a large part of the charter market.

On the other side of the ledger are increased costs arising from enhanced cleaning efforts and changes in operational practices to reduce the risks of COVID-19 infection for as long as the crisis lasts.




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A major issue in these circumstances is how to provide incentives for transport operators to go above and beyond what is required as part of their usual remit. Do operators merely “comply” with their contract specifications, or do they see an opportunity to extract value from proactively deploying, for instance, an enhanced disinfection regime? Should the contracted operator bear the extra costs, or should government share these costs?

Reshaping the industry

COVID-19 brings enormous unknowns for the public transport sector. Cost and revenue pressures may lead to transport operators fighting for survival. The result could be market consolidation and less competition in the industry.

In the longer term, how can future contract design for both transport services and transport assets ensure resilience to “black swan” events and encourage a proactive, rather than reactive, response? Too often, a myopic focus on cost reduction has governed these discussions.

Finally, is there a way to protect commercial operators from huge swings in demand?

The coronavirus pandemic demands an urgent operational response by our public transport systems. But it should also encourage a strategic rethinking of our institutional structures and how public services are procured. Let us create an opportunity for longer-term reform out of the crisis.The Conversation

Yale Z Wong, Research Associate, Institute of Transport and Logistics Studies, University of Sydney

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

Why closing our borders to foreign workers could see fruit and vegetable prices spike



Dave Hunt/AAP

Michael Rose, Australian National University

One aspect of the COVID-19 crisis that has so far escaped widespread public attention in Australia is its potential impact on our food security.

We haven’t seen supermarket shortages of fruit and vegetables like toilet paper and pasta because, being perishable, they are not easily stockpiled and therefore less prone to demand-side spikes.




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But being perishable also makes them more susceptible to supply-side shocks, such as we’re seeing with higher prices now for the likes of broccoli due to the impact of drought and bushfires.

The major variable in whether the coronavirus crisis will hurt fruit, vegetable and nut supplies (and prices) depends on how they are picked while the nation’s border remains closed to the foreign seasonal workers on which Australian farmers depend.

Foreign muscles, Australian fruit

Rural Australia’s dependence on the muscles of tens of thousands of backpackers and workers on temporary working visas is sometime minimised by official statistics.

More than one-third of peak seasonal jobs on horticultural farms are filled by overseas workers, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.

But anyone in direct contact with the industry knows most direct harvest labour in Australia is done by foreigners.

Official statistics about agricultural workers are rubbery. The Australian Bureau of Statistics, for example, can only estimate the total number of workers at between 240,000 and 408,000.

The vagueness is due to three reason. First, the data is based on a single month (in this case August 2016) and picking work is seasonal, with less workers employed in winter. Second, workers move around, so double-counting can occur. Third, overseas workers and contract workers provided by labour hire companies are not included in labour force surveys.

What immigration data tells us, however, is that in 2017-18 about 31,000 backpackers did at least 88 days of farm work to be eligible to extend their visas for a year. (There are no numbers for the number of backpackers working on farms for other reasons.)

A further 8,500 workers from Pacific Island nations and Timor-Leste worked on farms for up to six months on visas issued under Australia’s Seasonal Worker Programme. This increased to about 12,000 in 2018-19.

Domestic restrictions

The indefinite closure of Australia’s borders to non-resident foreign nationals jeopardises this supply of farm workers.

The question is whether the spike in domestic unemployment will see Australian workers (and other foreign workers) displaced from other sectors flocking to rural areas to take up those jobs.

Possible complications are travel restrictions, with states closing borders and city dwellers being told to stay away from Australia’s country towns, and the Australian government’s income assistance measures.

As migration researcher Henry Sherrell notes of the job seeker allowance being doubled to A$550 a week, “that’s a pretty decent week if you’re on picking piece rates”.




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“In theory, Australians laid off in the many sectors now facing recession could head for the countryside and start picking fruit,” he argues in an article co-authored with Stephen Howes, an economics professor at the ANU Crawford School of Public Policy.

In practice, it is just not going to happen. The work is difficult, and farms often geographically isolated. It would take years not months to change the reality that farm work is just not in the choice set of most Australians – who, after all, live in one of the most urbanised and richest countries in the world.

An exemption for seasonal workers

Allowing backpackers and seasonal workers in Australia to extend their visas is an obvious first step. On top of any measures to encourage foreign workers to stay, the longer term may require making an exception to the ban on their entering the country.

The entry of seasonal workers from the Pacific and Timor-Leste already requires medical checks before they travel. Exempting those with seasonal work visas from our closed border policy would not be unreasonable. Canada, which runs a similar guest worker program, has already done so.



With Australian help, workers could be tested for COVID-19 before they fly. On arrival here they would be quarantined for 14 days like everyone else.

The government would need to step in and pay for suitable accommodation, catering and medical services. It would also need to ensure arrangements so workers can get home. But there are there a number of benefits to justify the cost.




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It contributes not only to Australia’s food security but also its national interest, maintaining and deepening its bonds with its island neighbours.

If there is a silver lining to the current grim situation, it may be that it could serve to make real the rhetoric that our relationship with the Pacific (and Timor-Leste) is one defined by partnership, in which we help ourselves through helping each other.The Conversation

Michael Rose, Research fellow, Australian National University

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

New OECD estimates suggest a 22% hit to Australia’s economy



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Brendan Coates, Grattan Institute

New Organisation for Economic Co-operation and Development estimates paint a grim picture of the direct economic costs of public health measures to contain the spread of COVID-19, and the need for more government support to cushion the blow.

The estimates cover the economic hit to business that rely on face-to-face contact such as airlines, accommodation and food services, tourism, retail services, arts and recreation and even real estate agents.

Assuming that some sectors see only partial shutdowns, the lockdowns could see 22% of Australia’s economy shut down, marginally less than in other major economies.


Source: Evaluating the initial impact of Covid containment measures on activity, OECD March 2020

The estimates assume

  • full shutdowns in arts, entertainment, recreation. transport manufacturing and other personal services

  • declines of three quarters in all the other output categories directly affected by shutdowns including hotels, restaurants, air travel and retail and wholesale trade

  • declines of one half in construction and professional service activities.

These estimates don’t account for any of any potential offsetting impact on employment of additional demand for workers in expending sectors, such as in healthcare and other essential services. Nor do they factor in the impact of fiscal stimulus measures adopted by governments to date, although these measures are unlikely to prevent job losses in directly affected sectors.

Others may be harder hit

It is worth noting that social distancing measures in Australia remain less stringent than those adopted in many European countries, reflecting the slower advance of the virus in Australia to date. And the economic impact of social distancing measures may play out slightly differently across countries, depending on exactly what the rules are and how they are enforced.

But more stringent measures are coming, with both NSW and Victoria flagging even more stringent social distancing measures as the pace of community transition accelerates.

The ultimate hit to annual gross domestic product in Australia will depend on how long the measures remain in place, and how Australian governments respond.




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The OECD’s estimates suggest that each month the severe lock downs continue could shave roughly 2 percentage points off Australia’s annual GDP.

These figures suggest the direct impacts of a three-month lockdown could reduce annual GDP by around 6% of GDP; a six-month lockdown would involve a 12% hit (albeit spread over two financial years).

Australia’s worst recession on record

On these figures, a six-month lockdown could provoke Australia’s worst recession since World War II, if not the Great Depression.

And the estimates ignore second-round impacts of shut downs.

It’s hard to imagine that there would be no further hit to economic activity, beyond these direct measures, even with the stimulus measures announced and about to be announced by the government.

Firms shutting down will have flow on impacts on their suppliers, while laid-off workers will tighten their belts as their incomes fall.




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And given the uncertainty over the potential duration of shut downs – the Morrison government has flagged many measures may need to remain in place for six months or more – even firms and households not initially affected by the public health measures will inevitably scale back discretionary spending to preserve cash flow in the face of an extended downturn.

And those second-round effects are likely to be larger the more that firms and households are forced to absorb the costs of an extended shutdown via their own balance sheets.




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The OECD’s estimated impacts are likely to be larger once flow-on impacts to other sectors are included.

Public health measures are needed to save lives, but of course they come at an economic cost.

The size of the shock Australia faces points to the need for substantial further support from governments to cushion the blow.The Conversation

Brendan Coates, Program Director, Household Finances, Grattan Institute

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

‘Go now, go hard and go smart’: the strategy Group of Eight universities experts urged the government to take


Misha Ketchell, The Conversation

You might have seen recent media reports in various outlets of a paper, commissioned by the federal government, reporting the coronavirus advice of a group of experts from Group Of Eight universities.

Dated March 22, the letter said “we support the stronger decisions being now taken by government and what we term as the ‘go now, go hard and go smart’ strategy.”

As demand grows for greater transparency around the advice informing government measures aimed at fighting the coronavirus spread, The Conversation is publishing the letter in full below.

The four key recommendations in the paper are that:

  1. Australia without delay implements national stronger social distancing measures, more extensive banning of mass gatherings, school closure or class dismissal.
  2. Australia urgently seeks mechanisms to enable a much-enhanced and coordinated regime of COVID-19 testing without delay. This should include community testing to estimate the rates of disease in the population – and this should guide further decision making.
  3. Strengthen the messaging around the importance of people complying with all of the requirements of isolation or quarantine and having increased compliance monitoring and support to allow them to do so (estimated that around 20-30% will not comply).
  4. Social distancing, especially when introduced vigorously across so many areas of life, will have significant costs for individuals and groups in society. These consequences will impact unequally. Governments should plan for this and ensure flexible and supportive policy responses for all who may be disadvantaged.

Some of these recommendations informed stronger measures enacted last week. However, schools in some states remain open but parents are being urged to keep children home where possible.




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The Conversation


Misha Ketchell, Editor & Executive Director, The Conversation

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Morrison has rescued childcare from COVID-19 collapse – but the details are still murky



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Jen Jackson, Victoria University

Prime Minister Scott Morrison has announced free childcare for more than one million families, with a funding boost that aims to keep more than 13,000 childcare services across Australia open.

In doing so, the government has backed its earlier recognition of early childhood education and care being an essential service.

Estimates suggest about 650 early childhood education and care services have already closed in Australia due to falling enrolments.

The government plans to pay 50% of the sector’s revenue up to the existing hourly rate cap, based on the enrolment numbers before parents started withdrawing their children because of the COVID-19 pandemic.

It will only do this so long as services remain open and do not charge families for care.




Read more:
Free child care to help nearly one million families, especially workers in essential services


The funding will apply from April 6 based on the number of children who were in care during the fortnight leading into March 2, whether or not they are attending services.

The plan will cost A$1.6 billion over the coming three months.



What this means

Today’s announcement is a much needed lifeline for the early education and care sector, which was on the brink of collapse.

By last week, drops in occupancy at childcare centres were estimated to be between 15% and 50%.

Normally, the childcare subsidy is paid directly to early childhood services, which then pass it on to families as a fee reduction. Today’s announcement effectively increases the fee reduction to result in zero fees.




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Quality childcare has become a necessity for Australian families, and for society. It’s time the government paid up


Last month, the government also increased the time families can stay away from childcare without losing their access to subsidies, from 42 days to 62 days. The new plan waives gap fees, so families don’t face costs for keeping children at home.

Previously, families would face fees even when their child was absent from childcare, so services could keep operating. While this made sense in the pre-COVID world, many families discontinued enrolment when they were not sure when their children would return to care.

Federal education minister Dan Tehan said families that discontinued their enrolment since February 17 were encouraged to re-enrol their child:

Re-starting your enrolment will not require you to send your child to child care and it certainly won’t require you to pay a gap fee. Re-starting your enrolment will, however, hold your place for that point in time when things start to normalise, and you are ready to take your child back to their centre.

Finding a place in quality childcare remains a struggle for many Australian families, so support to stay enrolled is a significant benefit.

The funding boost means many centres can stay open and early childhood educators (including the 72% who are part-time or casual workers) will be able to keep working.




Read more:
COVID-19: what closing schools and childcare centres would mean for parents and casual staff


JobKeeper payments will be available for those who cannot keep working. This is welcome respect from government for the importance of these workers, who are risking their health to give children continuity of care.

Where are the gaps?

The announcement caused initial confusion about whether free childcare would apply to all families. Education minister Dan Tehan asked that services prioritise vulnerable families and those who can’t care for their children safely at home.

The Prime Minister said “working parents” would be prioritised, not just those working in the most critical jobs.

Tehan later clarified that the support applies to all families who have an existing relationship with a childcare centre.

While families struggling to care for young children while working from home will welcome this announcement, it still leaves uncertainty about how “prioritisation” will occur.

It is also not clear whether the call for prioritisation was expected to limit the number of families using childcare services, to allow educators to implement strategies like extra cleaning and physical distancing to protect children and staff from infection.

Benefits for children’s learning are also largely missing in the political spin. The Prime Minister is right that “children need as much familiarity and continuity as we can help provide”, but early childhood services do more than provide familiar spaces for children.

When it comes to school education, the global focus has remained on keeping children learning, even for those not at school. But research shows learning is even more important in the early years, so governments also need a plan to support educators and families to keep early education going.




Read more:
Preschool benefits all children, but not all children get it. Here’s what the government can do about that


Another glitch is that Goodstart Early Learning, Australia’s largest early childhood service provider, is technically ineligible for the government support announced so far. The company’s annual revenue is just above the A$1 billion eligibility limit for access to the new package.

Goodstart itself was born from the last major crisis in Australian childcare, when ABC Learning went bankrupt, placing more than 1,000 services at risk of closure. Goodstart, a not-for-profit social enterprise, was created from a consortium of community organisations and government support, to provide a new model of childcare that prioritised learning over profit.

It would be a cruel twist of fate if the solution to the last childcare crisis was left out of the solution to the current one.

Beyond the band-aid

Education minister Dan Tehan has described today’s reforms as “turning off the old system” of childcare funding. When Australia reaches the other side of the crisis, governments will face tough decisions about whether the clunky pre-COVID system – with childcare funding pieced together from a complex mix of government funding and vastly variable fees – should ever be turned back on.

A broken system will crumble to pieces at the first sign of crisis. Australia has seen childcare come close to the brink of collapse twice now in just over a decade. Governments owe it to children and families to never let it happen again.The Conversation

Jen Jackson, Education Policy Lead, Mitchell Institute, Victoria University

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

Free child care to help nearly one million families, especially workers in essential services


Michelle Grattan, University of Canberra

The government will provide free child care in a move aimed at ensuring parents, especially in essential services, are able to keep working.

More than 945,000 families with 1.3 million children will benefit.

The new arrangement will scrap, after Sunday, the present funding system – including the means test and the activity test – and instead the government will pay half the sector’s revenue up to the existing hourly rate cap.


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The plan will cost the government $1.6 billion over three months – compared with $1.3 billion if current revenues and subsidies had continued, based on the existing system and the big reductions in enrolments that have taken place.

The funding will be paid direct to the centres, with the condition they remain open, so parents do not have the disruption of having to seek out another provider. There are some 13,000 childcare and early leaning services. The new arrangements will also extend to after school and school holiday services.

Priorities will be set for access, with the first in line being working parents, vulnerable and disadvantaged children, and parents with existing enrolments.

Centres should “re-engage with those parents who have taken their children out of care, to see whether they can be accommodated as necessary as well,” Education Minister Dan Tehan said.

“But there is a clear priority list that we want centres to take into account, and the most important of those are those essential workers and the vulnerable children.”

Scott Morrison said: “In this ‘new normal’ that we’re living in, it’s no longer about entitlement. It’s about need.

“And we’re calling on all Australians to think about what they need, and to think about the needs of their fellow Australians who may have a greater need when it comes to calling on the many things that are being provided.”

For parents who have removed their children from childcare, centres can waive the gap fee, dating back to March 23.

The payment to centres will start to be made in a week’s time, and will run initially for three months, after which it may be extended.

Morrison and Tehan said in a statement the plan would provide “planning certainty to early childhood education and care services at a time where enrolments and attendance are highly unpredictable”.

Childcare centres can also get assistance under the JobKeeper program announced this week and the cash and loan schemes also available for businesses.

The Australian Childcare Alliance, the peak body for early learning services, welcomed the announcement as “extraordinary”. It said an overnight survey it had done had shown 30% of providers “faced closure this week due to as massive, shock withdrawal of families – either from fear or unemployment – and another 25% were not sure they could ever recover, even once the virus crisis has passed”.

But with the new financial measures , plus the JobKeeper payment and other existing support mechanism the early learning sector should be able to continue to play its essential role, ACA said.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.