The Voters Were Right

How badly would Labor have handled the COVID-19 pandemic? Very, judging by its performance during the Global Financial Crisis. By Nick Cater.

It is barely six weeks since Anthony Albanese was urging Scott Morrison to go harder. Now he is accusing the Prime Minister of dragging his feet in getting the ­nation back to business.

That’s the business of politics, of course, the only type Labor gets excited about these days.

On Saturday, the Opposition Leader misread the public mood by opening a press conference with a 600-word statement on the allocation of sporting club grants before the last election. The PM should resume normal parliamentary sittings and face questions on the matter, he said.

Journalists responded by asking nine questions about the COVID-19 pandemic, none about the restricted parliamentary timetable and none about sporting grants. “How careful are you about pursuing this political line of attack while also being aware that people might not be interested in politics right now?” asked one.

This time last year, Albanese had reasonable grounds to think he was less than a fortnight away from becoming the minister for something in Bill Shorten’s first government. Today, he is struggling for relevance in the midst of a crisis that, to his evident dissatisfaction, the government is handling rather well.

The pandemic has vindicated the judgment of the voting public last year. Scott Morrison has grown in stature in this crisis while Albanese has shrunk.

Among the most useful advice he received came from Ben Oquist of the green-left-leaning Australian Institute, who said while it was natural to want your political opponent to fail, different rules applied in a crisis. “It’s not a time for an opposition to seek to tear down a prime minister. It just won’t work politically,” he told one newspaper. “They need to be playing a longer, more strategic game.”

Perhaps Labor in office would have handled the COVID-19 pandemic better than it has in opposition. Perhaps prime minister Shorten would have resisted reaching for the sledgehammer, as Labor’s ideological soulmates across the Tasman have done — and ­Albanese urged Morrison to do in late March.

Maybe prime minister Shorten would have stood up to the union-controlled superannuation funds and allowed Australians to access their savings, and stared down the teacher unions to keep children in school.

But probably not. On public health, Labor would have been inclined to take the Jacinda Ardern extreme approach, believing that if you regulate people’s daily activities long enough and manage their lives for them, the virus would throw in the towel. The prospects of a proportionate economic response would have been even bleaker. If the last economic crisis is anything to go by, Labor would have behaved in this one as some people do at Christmas, taking a holiday from fiscal discipline and sticking it all on credit.

Racking up further debt is a temptation the Morrison government is determined to resist. The spending restraint that put Josh Frydenberg on track to deliver a $5bn budget surplus before the arrival of our unwelcome viral guest will continue. The extraordinary spending must remain as a one-off measure to keep people in jobs and businesses trading through a once-in-a-century pandemic.

To treat a year of record public spending as the new normal, as Labor did after the 2008-09 global financial crisis, would put us back on the road to ruin.

The government’s critics are ­already talking about doubling the JobSeeker allowance as if it is ­permanent. The government must ensure that it is not. Our responsibility to assist those who have fallen on hard times must be balanced by the risks of creating a new welfare trap. The same rule applies to the assistance the government is giving to business, since a business that can survive only on welfare is no business at all.

That is why the government rejected the suggestion it should buy up Virgin Australia. Albanese’s claim that the acquisition was an investment that would produce a return to taxpayers was a brave call, given the history of the NBN.

The Treasurer’s response has been textbook, sticking closely to the template mapped out in a 2006 policy paper on pandemics published by Treasury. As luck would have it, the lead author was ­Stephen Kennedy, the current Treasury Secretary.

Kennedy argued that acting quickly to rebuild consumer and investor confidence was crucial. He recommended government ­assistance should be offered to keep businesses viable through the worst of a pandemic, particularly those such as restaurants that would be most severely affected.

Stage three will be measures to stimulate growth in the economy. Since the limits of monetary policy were reached long ago, the stimulation is likely come in discretionary fiscal policy such as tax cuts.

Criticism that the government’s response has been slow is misplaced. Frydenberg ­deserves credit for overcoming the natural inertia of government bureaucracies to ensure that relief was sent out promptly.

The success or otherwise of that policy will become apparent over the coming months as restrictions are de-escalated.

It would be foolhardy to declare victory either against the virus or the likely economic downturn at this stage of the recovery. The theory that economies bounce back to a state of equilibrium is challenged by the size of COVID-19 shock. The comparison some hostile commentators are making with the 2008-09 financial crisis is feeble. The International Monetary Fund’s prediction of a 3 per cent decline in global economic activity — compared with 0.1 per cent last time — implies that the impact of the COVID-19 recession will be 30 times larger than the GFC.

With the restrictions costing us $4bn a week, a quick transition through the three stages of opening up the economy is vital. While more government assistance may yet be required, the pace of the recovery will not depend on government spending.

The restoration of growth depends on individuals and businesses who are prepared to take risks in the hope of a return. The task is to increase business activity as fast as possible, while taking all reasonable precautions against the spread of the coronavirus and ­accepting a degree of risk.