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WEEKLY REPORT CMAX logo black 28 April 2020
 
 
 
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Australian Weekly Report

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Economy already feeling Covid-19 shock

 
Early data has indicated at least 6 per cent of workers have lost their job over the past month, with younger and older Australians the most affected. 
 

Data released by the Australian Bureau of Statistics and the Australian Taxation Office revealed that the worst-affected sectors were those most impacted by government-imposed social distancing rules, such as accommodation and food, the arts and recreation.

 

The data revealed that while employment fell 6 per cent for all workers in the second half of March, for those under 20 and over 70 it dropped by 9 per cent. Even workers in the most secure age group — those in their 50s — experienced a 4 per cent fall in jobs.

 

An employment fall of 6 per cent would, according to economists, lead to an unemployment rate of 9.2 per cent in a best-case scenario.

 

Meanwhile the Grattan Institute has forecast that between 14 and 26 per cent of the entire Australian workforce would likely lose their job due to government shutdowns and social distancing. The institute’s Brendan Coates said that would mean as many as 3.4 million unemployed.

 

“That leads to an unemployment rate of somewhere between 10 and 15 per cent, which would be certainly the worst recession we’ve had since the 1990s and probably since the 1930s,” Mr Coates said.

 

He added that the secondary impact would likely be worse, as households and businesses that are not directly affected by social distancing start to spend and invest less, which will have flow-on effects throughout the economy. 

 

“Those households and those firms that have had to take on debt, or they’ve had a hit to their incomes to get through the crisis, they’re probably more reluctant to spend on the other side and that means governments are going to have to stand ready to provide support as we move from a public health into a more classic recession,” he said.

 

The government has so far processed more than 587,000 applications for financial assistance since mid-March, which is more than it normally handles in a year. 

 

The figures come as the federal government faces increasing calls to extend its increase to unemployment benefits until at least next year.

 

Prime Minister Scott Morrison is adamant that the increased benefits introduced in an effort to keep the economy alive during the crisis will be turned off to avoid an ongoing drain on the budget.

 

However, members of his own government have disagreed. The Nationals MP for Cowper in New South Wales, Pat Conaghan, said the effective doubling of the unemployment allowance should continue well beyond the government’s six-month deadline.

 

And former prime minister Tony Abbott argued it would be politically difficult for the government to wind back the increased unemployment allowance, “especially when recipients will be able to say it was government policy that threw them out of work”.

 

Meanwhile, Opposition Leader, Anthony Albanese, said the Coalition the government’s doubling of the unemployment benefit was an admission that A$40 a day was not enough to live on. “If it wasn’t enough to live on two months ago, when these changes were made, why will it be enough to live on in six months’ time?” he said.

 

Observers have noted that the issue presents a problem for the government. Turning off the tap of government money will become increasingly difficult as unemployment continues to climb and the electoral cycle moves towards an election. Yet the government will be keen to limit the impact of its measures on the budget, given the emphasis it has put on “budget repair”.

 
 
   
 
 

Reserve Bank of Australia Governor Philip Lowe has compared the economic losses from coronavirus to the Great Depression.

 
 
 

Reform push sparks opposition anger

 

The federal government has signalled that its post-crisis economic agenda will focus on tax reform, industrial relations and other deregulation, something that has raised the ire of the opposition Labor Party.

 

As the rate of coronavirus infections continues to remain low, attention is starting to focus on the longer term economy. The federal government has said it is not ruling out any options in terms of economic reforms, other than tax increases, in what it has described as a “harvesting phase” of ideas ahead of October’s budget.

 

The Governor of the Reserve Bank of Australia, Philip Lowe, outlined what he saw as the priorities facing the economy post-crisis. First was to rely more on the goods and services tax (GST) and state-based land taxes for revenue rather than income tax.

 

As well as reforms to infrastructure and the education sector, Dr Lowe said: “we should be looking at the flexibility and complexity of our industrial relations system”.

 

Treasurer Josh Frydenberg said Dr Lowe was “absolutely right that Australia must continue to embrace the productivity agenda”, and said the government’s union penalty legislation should be the “first order of business to get through the parliament”.

 

That prompted a push-back from the opposition Labor Party. Shadow Treasurer Jim Chalmers, said the government was using coronavirus as an “excuse to dust off its ideological obsessions” and Opposition Leader Anthony Albanese said the government intended to return to “the old rightwing agenda” after the crisis.

 

“What we need to make sure is that arising out of this crisis, we don’t have the government go to the bottom drawer and say, ‘what we need is labour market deregulation, what we need is more tax cuts for people who don’t necessarily need it’,” Mr Albanese said.

 

If Labor and the Greens oppose any government measures in the Senate, it needs to rely on the votes of two of the three minor parties. All three have given qualified support to considering any options, so long as the government does so in good faith. One Nation is less supportive of industrial relations reforms, however, with a spokesman saying reforms are needed but workers should not be worse off.

 
 
 
 

It’s a once-in-a-century event of marked economic contraction from which we will recover.

 
 
 

— RBA Governor, Dr Philip Lowe

 
 
 
 
 

OTHER NEWS

 
 
 
 

Elective surgeries resume

 

Elective surgeries have resumed this week, as the federal government begins to wind back restrictions on procedures such as joint replacements and screening programs.

 

Prime Minister Scott Morrison announced the decision after a meeting with the National Cabinet, where it was decided that category two and some important category three procedures, along with IVF and screening programs for cancer and other diseases, would resume.

 

Post-cancer reconstruction procedures, joint replacements, cataracts and eye procedures, endoscopy and colonoscopy, and procedures for any patients aged under 18 have also resumed.

 

The government is focussing on procedures that are considered to be low-risk, but high-reward, or those that carry minimal risk of spreading coronavirus, but will provide benefits to patients.

 

While the capacity to restart will vary from state to state, about 25 per cent of elective surgery in private and public hospitals is expected to resume, with authorities set to review the situation on 11 May, when they will consider resuming further surgeries and procedures.

 

The federal government had earlier put a stop to all “non-urgent” surgeries, which meant only Category 1 and the most urgent Category 2 elective surgeries could be performed. The decision was aimed at freeing up beds and staff for an expected rise in Covid-19 cases, and to preserve personal protective equipment (PPE).

 

However, the success of containment measures such as social distancing has seen the number of cases drop, giving health authorities room to allow procedures to go ahead. 

 

The decision to resume some surgeries should also let the federal government wind back some of the additional funding it offered to the private hospital sector, which had sought assistance after the suspension of non-urgent elective surgery.

 

The government set aside A$1.3 billion for a private hospital rescue package, which included giving public hospitals access to the private system’s 30,000 beds, ventilators and more than 100,000 skilled workers. 

 

However, with surgeries — and revenue — now resuming, the cost to the federal government is expected to be lower.


“The viability guarantee payments are reduced by the same amount as any external revenue, so the more privately insured work private hospitals do, the less they are paid under the viability guarantee,” said the chief executive of the Australian Private Hospitals Association, Michael Roff.

 
 
 
 

Trust in governments on the rise

 

Nearly two-thirds of voters have rated the government’s response to the coronavirus crisis as quite good or very good, compared with less than half a month earlier.

 

Polling carried out by Essential Research also found that half of all voters think it is too soon to consider easing restrictions aimed at limiting the spread of coronavirus, with a further 14 per cent prepared to wait until the end of May.

 

The polling also found that parliaments at every level — federal, state and local — have experienced double-digit increases in trust, along with business groups, unions and the media.

 

The boost in trust will be a boon for incumbent governments as they look towards their next elections, although their support is based on the high levels of bipartisanship being shown by both sides of politics, according to analysts.

 

A test of that trust will be the federal government’s contact-tracing app for mobile phones. The app, which was launched at the weekend, would trace every person who has been in contact with a mobile phone owner who tested positive for coronavirus.

 

While Prime Minister Scott Morrison has said use of the app would not be mandatory, he has sought to apply pressure, saying it would help health care workers and may be one of the conditions necessary to ease social distancing rules. 

 

The government has suggested it wants to see 40 per cent of people using the app. The electorate’s unease with the tracing technology was picked up by the Essential polling, which found 57 per cent of voters were concerned by the government being able to track movements. That was despite significant numbers agreeing that it would help authorities deal with the virus. In a positive for the government, nearly 40 per cent said they would download the app. Despite the misgivings, in the first 24 hours of its release, the app was downloaded nearly 2 million times.

 

Analysts have noted that a successful roll-out of the app would further indicate support for the government’s position. A poor take-up, meanwhile, would suggest the electorate does not trust the government with their data and that they are unwilling to see the end of social distancing measures just yet.

 
 
 
 

PM pushes WHO reform in call with US

 

Prime Minister Scott Morrison has spoken to United States President Donald Trump and other world leaders about reforming the World Health Organization (WHO) in the wake of the coronavirus pandemic.

 

Mr Morrison and Mr Trump last week discussed the need for transparency and improving global institutions such as the WHO. It followed the US president’s decision to withdraw more than US$500 million in contributions to the WHO, accusing it of being “China-centric” and mishandling the outbreak. 

 

Among his list of reforms for the WHO, Mr Morrison wants the veto power of individual members to be removed, and the establishment of an independent review organisation that would examine the WHO’s performance in a global health crisis. He also wants the WHO to be given the power to send investigators into a country to determine the factors behind a disease outbreak. Currently, investigators must be invited by the country.

 

However, reform of the organisation is unlikely, given the veto power of member states. As such, the government believes establishing a new world health oversight body may be the best option.

 

The government is reportedly exploring the possibility of the United Nations appointing an independent investigator to review the global response to the pandemic, including China and the WHO’s handling of the outbreak’s early days.

 

Mr Morrison has also raised his idea of reforming the WHO with German Chancellor Angela Merkel and French President Emmanuel Macron. The French president publicly responded to the proposal, with an official saying that while Mr Macron believes “there have been some issues at the start, but that the urgency is for cohesion, and that it is no time to talk about this, while reaffirming the need for transparency for all players, not only the WHO”.

 
 
 
 

States fight over assisting Virgin Australia

 

Three of Australia’s major states entered a bidding war to help out embattled airline Virgin Australia prior to the airline calling in the administrators.

 

The airline entered voluntary administration after failing to secure financial support from the federal government. Before the administrators were called in, however, two state governments started making offers of assistance to the airline.

 

New South Wales Treasurer Dominic Perrottet revealed his state was in discussions with the airline over a rescue package that would involve the airline relocating its headquarters from Queensland to NSW. 

 

“I’ve always held the view that Virgin should have their headquarters for both Virgin and Tiger in Sydney, as we are the truly global city and Australia’s gateway to the world,” he said.

 

That prompted Queensland’s State Development Minister, Cameron Dick, to offer the airline A$200 million in assistance if it stayed in Brisbane.

 

“At a time when their jobs hang in the balance, the 1,200 Queensland families who depend on those head office jobs should not have to face the threat of being forced to move to Sydney,” he said in a statement.

 

Meanwhile, Victorian Premier Daniel Andrews reportedly considered offering the airline A$500 million in support before it went into voluntary administration, again if it relocated to the state.

 

Administrators Deliotte hope to refinance and restructure the business so it can get out of administration as soon as possible, but the willingness of state governments to step in and offer financial assistance when the federal government will not highlights the significant role they can play in economic recovery and providing industry assistance.

 
 
 
 

Australia joins US in South China Sea

 

The Australian frigate HMAS Parramatta has joined three US warships in the South China Sea near an area where a Chinese vessel is suspected to be exploring for oil.

 

The warships arrived last week close to where the Chinese government survey ship Haiyang Dizhi 8 has been operating, which is near waters that are also claimed by Vietnam and Malaysia.

 

Another vessel, operated by Malaysia’s state-owned oil company Petronas, is conducting exploratory drilling in the area, according to reports.

 

The US Navy said the USS America amphibious assault ship and the guided missile cruiser USS Bunker Hill were operating in the South China Sea. They were joined by HMAS Parramatta and a third US vessel, the destroyer USS Barry. Australia’s Department of Defence said the ships were carrying out a joint exercise.

 
 
 
 
 

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Stay informed of CMAX Advisory’s activities and analysis as we navigate Australia’s political and media landscapes throughout 2020 and the ongoing coronavirus pandemic.

 
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