Renationalisation in Australia

I got a message from a student asking about examples of renationalisation in Australia. Here’s my response

There hasn’t been much explicit renationalisation of business enterprises in Australia. What we have seen is

(a) Public private partnerships (PPPs) being wound up and returned to the public sector. As well as Port Macquarie, some others are mentioned here
and here on private prisons
and social housing

(b) The government has also re-entered areas of business it had previously privatised. The most important example is the NBN, but there is also the big Tesla battery in SA and other interventions by the state government there. The Federal governments proposed Snowy 2.0 is another example

How to pay for the rescue

I was asked by a journalist about the long-term fiscal effects of the government response to the crisis. Here’s what I said

 In simple accounting terms the cost of the intervention so far can mostly be offset simply by cancelling the Stage 3 tax cuts legislated in advance for 2024-25 (this also happened when the Keating Labor government legislated for future tax cuts in the 1990s). These are projected to cost $95 billion over the five years to 2029-30
so the saving would easily offset the crisis intervention over 10 years.

That’s assuming that the crisis ends quickly and everything returns to the way it was before. I think we will end up with a substantially larger role for government, and therefore a permanent increase in the public sector share of national income, which means higher taxes.

Border deflection

Another recent piece, this time in Inside Story. Opening paras

Supporters of ethnonationalist and anti-immigrant sentiment have been quick to seize on the Covid-19 pandemic as evidence against what they call “open borders,” by which they mean any relaxation of the stringent controls that prohibit international migration by anyone who falls outside a tightly defined set of categories, each subject to numerical limits. The underlying idea is that foreigners who don’t look or think like us are all potential carriers of infection, and that we can keep ourselves safe by excluding them.

The reality is quite different. The vast majority of Australia Covid-19 cases acquired overseas had a recent history of travel to Europe or the Americas, or arrived on cruise ships such as the Ruby Princess. Hardly any (in fact none, as far as I can determine) were new migrants to Australia.

What should the post-coronavirus economy look like?

The New Daily asked me to write a bit on the question “What should/will the post-coronavirus economy look like?

Here’s what I sent

The Covid crisis has demonstrated the inadequacy of crucial aspects of our social and economic system, particularly relating to employment and unemployment.  Before the resurgence of neoliberalism in the 1970s, Australian governments accepted responsibility for maintaining full employment, and provided support for all those unable to engage in paid work, whether through age, disability or unemployment on an equal basis.  The full employment goal was not always achieved, but it remained central to public policy.  

Over the period since the 1970s, government has passed the responsibility for economic management to the Reserve Bank and required a primary focus on low inflation. The treatment of benefit recipients, except the old, has been steadily less generous and more punitive. Meanwhile governments have focused obsessively on largely meaningless measures of budget balance.

The failures of this approach have been evident for years, but it has taken the Covid crisis to lead to any change. Within a matter of weeks, dogmas that have been in place for decades have been abandoned.

The most important requirement for the post-coronavirus is that we should not attempt to return to a pre-crisis ’normality’ that was unsustainable in almost every respect: social, economic and environmental. Rather, the income support measures adopted in response to the crisis should be maintained, and the government should accept the maintenance of full employment as its core economic responsibility.

Job vouchers: a step towards a Jobs Guarantee

It seems quite likely that we will soon see the introduction of a wage subsidy along the lines of that announced by Boris Johnson (himself now testing positive!) in the UK. That is, a payment to employers equal to 70 or 80 per cent of workers’ pre-crisis wages, in return for keeping them on for some period. That would be better than doing nothing beyond what has already been announced, but I have two big problems with it.

First, it is paid to companies rather than workers. The ACTU is touting this as benefit, on the grounds of administrative simplicity, but I suspect that there is lots of potential for abuse through complex corporate structures. Second, it creates essentially arbitrary distinctions between workers. If you happened to work for a company that closes and stays closed, or if you were already unemployed you are out of luck. A final issue (on which opinions may differ) is that the benefit depends on previous salary, rather than being the same for everyone.

I’m thinking about an alternative model. Rather than paying money directly to employers, we should allow recipients of benefits like Newstart to use their benefit as a wage subsidy, either with their current/most recent employer (this would be specific to the pandemic emergency) or with a new employer. This would give workers more freedom and more agency, and could potentially form part of a Jobs Guarantee, which is, I have argued, the natural complement to a Guaranteed Livable Income (the term now being used by advocates of BI/UBI/GMO schemes in Australia). In particular, it could be sustained beyond the current emergency, which is not the case for the wage subsidy ideas.

There are plenty of issues to be addressed in the long run version of the voucher idea, such as the problems of additionality and churning (ensuring that the employer is creating new jobs, rather than replacing existing workers with voucher-holders). But such issues have been addressed in other contexts, with some success.

The awful arithmetic of herd immunity

The ABC has an article quoting University of Melbourne epidemiologist Tony Blakely as saying (approvingly) that the object of the current “flattening the curve strategy is to smooth the path to herd immunity. Key quotes

You don’t go in too hard because you actually want the infection rate to pick up a bit and then hold,” he said.

“What they’re not saying is [that] ‘flatten the curve’ likely means [that] by the time this is over, 60 per cent of us will have been infected, to develop herd immunity,” he said.

The arithmetic here is pretty horrifying. 60 per cent of the population is 15 million so with a 1 per cent fatality rate, that would be 150 000 deaths. The number surviving but with long-term lung damage could easily be over 1 million.

It gets even worse. If herd immunity is supposed to be achieved over 12 months (by which time we are hoping for a vaccine) that would imply 40 000 new cases every single day. If even 10 per cent required hospitalization for several weeks, they would fill every bed in the country.

As for intensive care, we have a total of just over 2000 beds. Even with a hospitalization rate of 1 per cent, they’d be full in five days. And given that 1 per cent is the estimated fatality rate with treatment, that implies triage on a massive scale, which in turn would greatly increase the death rate.

This is simple arithmetic. If Blakely’s explanation of the government’s strategy is correct, it should be spelt out.