What Morrison should do next

I was contacted by a Greek language newspaper with questions about the next steps in economic policy. On the assumption that most of my readers don’t read Greek, I’m posting my response here

The Morrison government’s economic policy response to the pandemic so far has been broadly appropriate, putting practicality ahead of ideology in general. There are numerous anomalies arising from the haste with which the program was developed and from some residual ideological constraints (such as hostility to the university sector)

The program should facilitate a rapid recovery from those economic impacts directly linked to lockdown measures as these are relaxed. However, there has so far been little recognition of the problems that will continue in the medium and longer term.  The economy will undergo a substantial restructuring reflecting the effective end of international travel, at least until a vaccine is developed and globally distributed.

To deal with these continuing problems the government needs to
(i) Convert the JobSeeker payment into a Guaranteed Livable Income, available to everyone unable to find paid employment and willing to make a social contribution in other ways, such as volunteering(ii)  Use the JobKeeper payment as the starting point of a Job Guarantee, in which the government commits to achieve full employment through a combination of wage subsidies, training programs and direct job creation.

4 thoughts on “What Morrison should do next

  1. “The economy will undergo a substantial restructuring reflecting the effective end of international travel, at least until a vaccine is developed and globally distributed.” – J.Q.

    I agree and there are many more changes which will have to occur. However, starting with the effective end of international tourism and visitors to Australia, we will have for a space of time at least the effective end of the international airline industry and cruise ship industry in so far as they affect Australia. There will also be the effective end of further international students, the effective end of backpackers, guest workers, fruit pickers etc. There will be the effective end of the education for money industry. There will be a transition from Australians going overseas for tourism to Australians traveling Australia, and maybe, New Zealand for tourism.

    This last change in tourism will save Australia a lot (several $A billions at least) of exchange as tourism both ways is a large net loss to Australia. Australians have been spending up to double overseas as visitors have spent here. The collapse of international tourism will be a good thing on all fronts for Australia and the world. Mass global tourism has been unsustainable and will be unsustainable if revived . It destroys the environment and cultural identities around the world. With the accelerating rise of zoonotic diseases, the world needs to become much less connected, at least in terms of people movements. The unrealistic dream of open borders is over, permanently; on the disease front and on the sustainability front.

    On the home front, there will be a need for resident Australian agricultural workers for all tasks including fruit and vegetable picking. Job Guarantee workers could be given work in a situation of their choice, provided there is adequate work in that area. The areas of work would include government work (federal, state and council work both indoors and out) and private work subsidized by a portion of the Job Guarantee. The private employer would be required to pay part of those wages. The Job Guarantee should be set at the minimum wage and this should be set as a livable minimum wage. Where necessary jobs are unpopular with resident Australians (say back-breaking picking) then as an interim step pay a bonus and make the bonus large enough to attract adequate pickers. At the same time, subsidize research into (a) changing to crops which can be mechanically picked and/or (b) inventing and developing new, even robotic, machines which can perform all required tasks including picking on existing crops. Ensure all of this research is conducted in Australia and by government paid Universities and research labs. Create a national green army to do environmental work and a national carers’ corp. to provide extra community care.

    Remove all subsidies from fossil fuels. Add subsidies for renewable energy. Build mass transit systems. Expand the railways. Add pigovian taxes (removing all subsidies too) on all fossil fuels and all non-essential, deleterious and negative-externality-causing activities like tourism, professional sport, drinking, smoking, gambling, and junk food eating. Tax non-essential and environmentally damaging non-essentials more heavily, so yes tax my coffee more. Tax recreational vehicles harder (4WDs, power boats, jet-skis etc.). Tax high incomes and high wealth harder. Tax foreign corporations harder. Remove the privatized model progressively from education, health and community care. Nationalize all natural monopoly industries. Raise natural resource royalties to a much higher level. Cease importing oil and oil fuels over time and substitute our gas for these fuels via gas conversion. Cease exports of coal and gas. Cease production of coal altogether.

    This just scratches the surface of the permanent changes we will need to make to even survive let alone thrive.

  2. How do you rate the chances of the Morrison government actually moving in this direction, given the residual, and perhaps not-so-residual, ideological constraints?

  3. The key economic step for Australia is to aim and push hard for for zero transmission. Perhaps not possible for Greece.

    I fear not doing so may be a stupendous irreversible failure of economic policy that will leave us with life-long regrets.

    The correct economic policy for a farm with smouldering fires, some unseen, is to put all the fires out. Deciding on what to plant can wait.

    Yaneer Bar-Yam put it well responding to comments on school reopening in Australia:
    Australia is so close to stopping community transmission. Taking risks makes no sense.

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