After twenty-nine years without a recession, Australia now faces the worst economic downturn in living memory. Unemployment is officially at 7.4 percent. With the addition of those receiving government wage subsidies or who have stopped looking for work, the figure is closer to 12 percent. On any substantive reading of the employment data, this is a sharper and deeper recession than the downturns of the 1990s and 1980s.
The pain is real for millions. Even before the virus hit, Australia’s economy was treading water. For those who do have jobs, wages have barely grown in a decade and workplace conditions are difficult. With around a third of the workforce in casualized or gig employment, insecurity is rife and workplace protections vestigial. Compounding this, the housing market is among the most over-leveraged and expensive in the world, with extremely high levels of rent and mortgage stress.
And yet for some, the economic news is no big deal. Amidst the news of job losses and business failure, a strange economic factoid floated to the surface recently: luxury cars are selling in record numbers. Who buys a BMW or Mercedes during a devastating recession? The answer: rich people. The highly skewed nature of the downturn has smashed younger and poorer demographics, while leaving well-heeled Australians with their wealth intact and far fewer opportunities to dispose of their income.
These problems are long-term trends; COVID-19 has brought them to the forefront. But far from addressing these structural crises, the Coalition government is doubling down, rewarding already-rich constituents while punishing enemies in sectors and demographics that are already hardest hit.
A Very Good Pandemic
If you believe the opinion polls, Australian prime minister Scott Morrison has had a very good pandemic.
Less than a year after winning reelection against a bumbling Labor opposition, Morrison’s ham-fisted response to the bushfire disaster of the 2019–20 summer seemed to seal the fate of his prime ministership early.
Perhaps already shaken, the COVID-19 crisis seemed to spook Morrison into making a series of out of character decisions. As the nation locked down in March, the economically conservative leader instigated a massive Keynesian stimulus package, effectively doubling unemployment benefits and creating a wage subsidy, keeping workers on the books with their employers. Other improvisations included a national cabinet to coordinate pandemic policy with the states and territories, and free childcare for three months from mid-March.
Long-term observers of Australian politics could be forgiven for their astonishment. Was this really a Liberal-National government extending Australia’s welfare state? Voters loved it; Morrison’s approval ratings rocketed to 66 percent.
The Devil in the Details
While state premiers and health officers broke daily bad news of new infections, Morrison worked assiduously behind the scenes to ensure the emergency policy settings favored big business. JobKeeper, by handing power to bosses and undermining minimum wages and conditions, was tailored to fit with the Coalition’s industrial relations reform agenda.
The devil in the details began to show itself when Morrison appointed a former mining executive, Nev Power, to run his National COVID-19 Coordination Commission (NCCC). Officially charged with the economic response to the pandemic, the NCCC was stacked with fossil fuel executives. Not surprisingly, it came up with a plan based around using cheap gas to drive a manufacturing industry recovery. Embarrassingly, Power then had to issue a formal public statement distancing himself from his work on the board of Strike Energy — you guessed it, a gas corporation.
While gas has had a hand-up, other industries have not been so lucky.
Bleeding revenue from locked-out international students, Australia’s universities needed a bailout. But Treasurer Josh Frydenberg changed the rules three times to make sure universities could not access JobKeeper wage subsidies.
University vice-chancellors predictably responded with a wave of redundancies: credible estimates put the potential university job losses at 21,000 high-skilled, high wage positions. The Australian Broadcast Company, despite its heroic efforts in covering the December and January bushfires, was also punished, forced by more funding cuts into making 250 staff redundant.
Meanwhile, key aspects of the coronavirus welfare state are being wound back. In June, education minister Dan Tehan announced that the free childcare experiment was over, barely three months after it began. On July 21, Frydenberg announced that the JobKeeper wage subsidy and JobSeeker supplement would be reduced in coming months.
On the other hand, cherished conservative policies have stayed. Despite worsening income inequality, Frydenberg is committed to delivering $28 billion worth of tax cuts over three years, mostly directed to the top 10 percent of income earners.
Industrial relations deregulation is another example. Lax regulations and rampant casualization are the very policies responsible for COVID-19 outbreaks in low-wage industries like aged care and meat-working. Despite this, Frydenberg has trumpeted labor market deregulation as the centerpiece of his agenda, telling the ABC his inspirations are Ronald Reagan and Margaret Thatcher.
Clever Conservatives and Suburban Populism
Critics, particularly female critics, have noticed a pattern. Morrison’s policies have a marked gender bias. Industries with lots of female workers — the arts, hospitality, higher education, child care — have been amongst the hardest hit in the downturn. Yet they are just the ones Morrison has ignored or punished.
The patriarchal bias of Morrison’s stimulus is arguably a feature, not a bug. He knows exactly who his electoral base is, especially in the vital swing seats of Australia’s suburbs and regions. These were the electorates that delivered handsomely for the Coalition in 2019, while the inner cities cleaved to Labor.
According to the authoritative Australian Electoral Study, men backed the Liberal and National Parties by whopping 10 points over Labor last year, 48 to 38 percent. Voters over sixty-five were also a massive majority for the Coalition, with 59 percent compared to 29 percent for Labor. The Coalition also beat Labor by a significant margin amongst voters with a non-tertiary qualification (46 percent to 32 percent). Interestingly, Labor did especially poorly with owners of assets like investment properties and share portfolios.
This helps explain some of Morrison’s stimulus spending. Rates of homeownership are far higher for older Australians, just as investment properties are highly prized by many in the housing and construction trades. In June, Morrison announced a targeted stimulus to the housing construction sector, in the form of $25,000 grants to home renovations and new home construction. The policy is budgeted at just $688 million, so won’t stimulate very much activity. But it ensured Morrison enjoyed plenty of photo opportunities with blokes in high-visibility work wear — exactly the spin he would have wanted.
Yet for all his canny marketing, COVID-19 has exposed festering social and economic problems that Morrison and his government are ill-equipped to address. Adroit point scoring and opportunistic punishment of class enemies won’t suffice for the Coalition forever.
Insecurity, Inequality, and Victoria’s Second Wave
Aged care is emblematic of Australia’s long-term structural vulnerabilities. Residential aged care has been largely privatized over the last two decades, with the enthusiastic encouragement of the Coalition government. For-profit aged care providers moved aggressively into the system, displacing the public sector, and driving down wages and working conditions for aged care staff.
Aged care was already in crisis before the coronavirus struck, with a Royal Commission called into abuse of elderly people. Now Victoria faces a market-made disaster: Hundreds of residents and workers are infected with COVID-19. A third of Australia’s COVID-19 deaths have occurred in aged care facilities; scores of residents have died.
As Victorian premier Daniel Andrews has acknowledged, workplace insecurity is a major vector of the spread of the pandemic. Aged care workers paid casually and with no entitlement to sick leave have spread COVID-19 between different nursing homes. The security guards responsible for maintaining Victoria’s COVID-19 quarantine hotels were reportedly hired on Whatsapp, and given just a few minutes training.
So grave is the crisis that Victoria’s last-minute attempt to provide emergency sick leave funding to casual workers infected with COVID-19 was largely ineffective — it did not cover wait time for test results. Whether Andrews’s further stopgap $300 payment will help remains to be seen.
A Long, Hard Convalescence to Come
Hard-hit Melbourne accounts for around one-quarter of Australian GDP. On current indications, it doesn’t look like Victoria’s economy will recover any time this year, dragging the national recovery down with it.
Long-term pain in key industries like higher education also bodes ill for Australia’s economic future. Contraction in the knowledge sector will compound an already unbalanced economy, characterized by growing inequality, hollowed out manufacturing, and the ever-growing dominance of minerals extraction.
Although banks and landlords are prevented from evicting tenants or repossessing mortgaged houses until October, hundreds of thousands of tenants and homeowners are in arrears in their rents and mortgages. Many private-sector firms are zombies, propped up by JobKeeper and likely to fail once the artificial support is kicked away. Despite this, Frydenberg will start unwinding the stimulus in October.
For Morrison and the Coalition, the political implications of this likely long-term and severe economic depression are grave.
Australia’s last recession in the 1990s decimated the manufacturing sector. Nearly half a million people were thrown out of work; many never worked again. The pain was especially severe for men, who suffered double the increase in unemployment.
The political consequences took a while to manifest, with the John Paul Keating government reelected in 1993. But when the consequences hit, they reordered Australian politics. Many voters, particularly men, turned against the Australian Labor Party, embracing the muscular conservativism of John Howard’s Liberal Party. Howard went on to rule for eleven years.
This recession is likely to have similarly far-reaching consequences. With its blokey persona and rusted-on commitment to extractive industries, the Coalition is poorly prepared to respond to a recession in which unemployment is heavily concentrated amongst female and younger workers.
Morrison is a clever populist and a dangerous opponent for mediocre centrists. But even successful populists can run aground on the shoals of economic malaise. The Coalition may be storing up big trouble in 2022.