Many People Have Nothing To Celebrate On The Economic Front In 2021

One might think animal spirits had gripped the Australian economy as a flurry of better-than-expected economic figures hit the newsstands before Christmas.

But Australians cannot let the political and bureaucratic class off scot-free for the devastation they have caused in 2020, or for their unwillingness to engage in serious reform which will underpin our future prosperity.

The Australian Bureau of Statistics' November labour force numbers showed that 90,000 Australians had secured work in the previous month, bringing the number of employed people one step closer to the pre-lockdown level Australians are desperate to return to.

And the Mid-Year Economic and Fiscal Outlook brought further good news.

Australia's economic recovery is going much better than expected only two months prior when the 2020-21 budget was released, and the federal budget deficit will be around $16 billion smaller than first thought.

The MYEFO is like a mini budget, usually released halfway between the annual federal ­budget, and provides an update on government revenue and ­expenditure.

It also contained improved outlooks for the unemployment rate and economic growth going forward.

For Australia's political elites, Christmas had come early.

After plunging the country into its first recession in almost 30 years, negatively impacting six million jobs, forcing children to stay home from school and away from friends, and keeping families separated by inane hard border policies, they're hoping that mainstream Australians will be content with the good news and reward them politically for "keeping us safe".

But don't be fooled. Australia has a long and tedious path back to economic prosperity, and current policy settings and an unwillingness to ­engage in necessary reform will only hold Australians back. For the 942,100 Australians still out of work, and the additional 1.3 million who cannot get enough hours, premature financial fanfare is insensitive.

And for the business owners who have been crippled by lockdowns, there's nothing to celebrate.

Australia's premiers have engaged in a reckless and devastating act of economic, cultural, and social self-harm.

While major lockdown measures have finally been lifted for the most part, they are likely to be reimposed if a few cases of coronavirus emerge, as in South Australia last month, presenting a real threat to the economic recovery.

Quite simply, businesses can't make plans to invest in new equipment or hire and train new staff if they might be forced to close shop at any moment.

That's why new private sector business investment is now at the second lowest level ever recorded at 10.3 per cent of GDP, according to the ABS.

But to Australia's political and bureaucratic rulers, this doesn't matter.

At the beginning of the pandemic, Prime Minister Scott Morrison insisted that we were “all in this together”, a phrase that became the unofficial slogan for those insisting that Australia should lock down. But as Institute of Public Affairs research shows, between March and September 607,000 private sector workers lost their job while almost 20,000 new bureaucrats were hired.

Politicians and bureaucrats are completely detached from the real economy which their edicts effect.

When they forced businesses to close back in March, they immediately put hundreds of thousands of Australians out of work, and forced millions more to take pay cuts.

But they refused to demonstrate any shared sacrifice, ignoring an IPA poll which showed 74 per cent of Australians wanted politicians and senior public servants earning more than $150,000 a year to take a 20 per cent pay cut.

There is little hope for an economic recovery based on structural reform that will turbocharge the economy because political and bureaucratic elites have no skin in the game.

The private business investment statistic quoted above is dire for working Australians. Business investment is the key to productivity gains, which ultimately underpin wage growth.

Without making Australia a more attractive place to do business, it will be impossible to arrest the decline in private sector business investment, which is in the longest-running structural decline on record.

Australia's corporate tax rate is the equal second highest among the 37 countries in the OECD, and the minimum wage is the highest in the world.

According to the World Economic Forum's 2019 Global Competitiveness Report, Australia ranks 80th out of 141 countries for the burden of red tape and 111th for hiring and firing practices.

These issues can only be addressed through structural reform, which was necessary before coronavirus came but is now vital considering the ­carnage lockdowns inflicted on ­Australians.

Good news found in the MYEFO and labour force numbers must not overwhelm the effort to hold politicians and bureaucrats accountable for the damage they have done.

And it should especially not let politicians off the hook for engaging in the structural reforms needed to ensure that all Australians can experience the dignity of work and the prosperity they deserve.

Who Is Compulsory Super Benefitting: Ordinary Australians Or The Top End Of Town?

Mainstream Australians are being failed by the political class as the gap between two Australias continues to widen.  This failure is exemplified by a superannuation system that siphons money to the financial sector and political class and actively prevents mainstream Australians from achieving the Australian way of life.

The legislated increase of forced super contributions from the current rate of 9.5% to 12% of wages will in many cases work against the financial interests of Australians, both now and in retirement.  Forced super contributions come directly at the expense of savings outside of super that can be put towards a house deposit or used to reduce debt.  Increasing the compulsory rate will only put the aspiration of homeownership and financial security further out of reach of an increasing proportion of the population.

Homeownership fell from 71% to 66% of households between 1995 and 2018, and is set to get worse if trends among younger generations continue.  In the 1980s, 68% of Australians owned their own home in their early 30s.  Of those currently in their early 30s, the rate is just 50%.

A 2019 survey by Core Data found that nearly 70% of first home buyers did not fund 100% of their deposit from their personal savings, with a majority relying on family assistance in the form of gifts, guarantees, and loans.  Further diminishing the ability to save outside of super will remove the aspiration of homeownership from those unable to rely on family wealth.

As made clear by the recently released Retirement Income Review, those retiring without owning their own home are significantly disadvantaged with retirement income having to cover rental housing and without the option of drawing additional income from their home asset.

Not only is the current system damaging mainstream Australians, but it also fails to make sense from a public finance perspective.  According to the review, by 2047 the revenue forgone through superannuation tax concessions will exceed the total cost of the age pension.

Despite the significant failures of superannuation, the current system along with the legislated increase of compulsory contributions to 12% of workers' wages continues to be pushed by special interests.  An artificially inflated financial sector and the political class benefit from the gravy train created by $30 billion of annual superannuation fees.  As my research released last week shows, the financial sector's share of national income has continued to grow following a rapid expansion that coincided with the introduction of superannuation in 1992.  Before superannuation the financial sector was 2.4% of national income and has since increased to 6.5%.

The wealth transfer from hard-working Australians to the financial sector and political class generated by the superannuation system is part of a broader divide across Australian society.  Australia is increasingly being divided into two Australias.

One Australia tends to be employed in the public sector or in white-collar jobs offered by big corporations that find fertile soil in a bloated financial sector.  The other Australia is made up of mainstream Australians who own their own businesses or are employed in the private productive economy by small and medium-sized businesses.

It is mainstream Australians that are under stress due to a plethora of failed public policy that undermines the businesses they own and work in and creates barriers to obtaining key parts of the Australian way of life such as homeownership.

Public sector wages continue to rise, funded by taxes from workers with stagnating real wages.  Big business continues its takeover of the Australian economy, while small businesses are strangled by red tape, onerous labour laws, and now lockdown and social distancing restrictions that disproportionately harm small business.  And those who own their home enjoy increased equity with rising house prices, while an increasing proportion of Australians are priced out of the market due to a failure of public policy on development, taxation, superannuation, and immigration.

If trends continue, the gap between the two Australias will only widened.  Public policy must be made to benefit the broader country and not become a tool of the political class that is tightly organised to promote their special interests at the expense of mainstream Australia.

Reforming superannuation towards a system of voluntary contributions would return control to Australians to make financial decisions in their own best interest given their individual circumstances and block off the siphoning that is enriching the political class at the expense of mainstream Australia.

Daniel Andrews Arrogantly Bungled Coronavirus ― And Is Doing The Same To Economic Recovery

Yesterday's Victorian budget was on-form for the Andrews' government:  it mishandled the COVID-19 pandemic and now it is mishandling the economic recovery from the deepest recession in 100 years.  And the contempt for democratic norms the Victorian government has shown throughout the coronavirus crisis has made its way into the budget.

It was the Andrews' government's incompetence in managing hotel quarantine, along with an inadequate contact tracing system, which kept Victorians under lockdown longer than almost any other place in the world.  The utopian elimination strategy, which has been pursued across Australia, has forced hundreds of thousands of employees out of work, with these job losses being concentrated in small businesses in the private sector.

An obsession with case numbers over and above all other economic, social, or medical indicators has meant that, since March, almost no consideration has been given to the humanitarian tragedy caused by keeping children out of school, forcing parents out of work, and driving young people to the brink with higher rates of depression and anxiety.  In the unforgiving words of Daniel Andrews on October 10:  "The only numbers I'm focused on is [COVID-19] case numbers."

But the 2020-21 Victorian budget provides a new set of numbers which reveal a striking similarity between the Andrews government's COVID management and its financial management ― suppress the numbers, be they coronavirus cases, employment figures, or economic growth, and suppress any mechanism for transparency, be it justifications for lockdown measures, or budget papers with key government spending information.

While the messaging in the budget is slick, it lacks policy substance.  For example, the new jobs tax credit, which will provide a payroll tax credit to businesses that hire new employees, will not restore the jobs destroyed by lockdown measures.

The budget provides an example of a company which hires two new employees and increases its overall taxable wages bill by $100,000.  As a result, it could reduce its payroll tax liability from $21,825 to $11,825.  This sounds good in theory, but there are two key issues.  Firstly, the government's virus elimination strategy creates uncertainty for business owners, many of whom will not hire new staff when they could be forced back into lockdown with the re-emergence of coronavirus.  Secondly, much more bold policy is required to re-create jobs and restore confidence.  If the Victorian government had abolished payroll tax the same business would save the total $21,825, allowing it to make up for income lost during lockdown.

Maintaining payroll tax is an elimination strategy for new cases of potential job creation.

Much like the Premier and Ministers' avoidance of transparency when asked who made the decision to implement the controversial and likely unlawful nightly curfew, the budget is another attempt to obfuscate the truth.  According to page 83 of Budget Paper 2, "In 2020-21 there is no separate budget paper on the state capital program."  The state capital program usually provides an overview of investments that departments and government-controlled entities will make in the coming year, along with updates to currently underway projects.  This allows for year-to-year comparisons to see how much various projects are costing taxpayers as they progress, an important way of holding the government accountable for cost-overruns.

For example, in the 2018-19 state capital program Victorian taxpayers were informed that the initial Level Crossings Removal Program would see $6.7 billion of their money spent on removing 50 level crossings.  In the 2019-20 state capital program, Victorians were informed that just under $4 billion had been spent on the project so far, and that the Andrews government would remove an additional 25 level crossings at an additional cost of $6.6 billion.

Victorians searching for an update on this project in the 2020-21 budget will find nothing other than the reassurance that "43 level crossings have been removed" on page 97 of Budget Paper 2.  There is no record of how much the government has spent on level crossings removals in the 2019-20 financial year, nor any indication of how much will be spent this financial year, or if the total cost of the project has increased.

The lack of a state capital program in this year's budget is undemocratic, but also unsurprising.  It is a continuation of the disdainful attitude the Andrews government has shown to mainstream Victorians throughout the coronavirus crisis.

Disregard for cabinet government and a lack of transparency led to the tragic death of almost 800 Victorians while millions more were placed under a harsh second lockdown.  The 2020-21 budget confirms that the Andrews government will not make up for its blunders — and that this anti-democratic approach to governing is the new normal.

Why The Liberals Need A Better Labor Than The One They've Got

It was 13 years ago last week Kevin Rudd as the then-Labor opposition leader announced ‘This sort of reckless spending must stop'.  He said it at the launch of the ALP campaign for the 2007 federal election in response to the claims the Coalition's election promises were extravagant "middle-class welfare".

Unkind critics of Rudd might say that was one of his few positive contributions to Australian public policy.  Rudd succeeded in changing the narrative of the economic debate in the country ― at least until the onset of the GFC.  Whether he actually ever was the "fiscal conservative" he made himself out to be will be is one of the mysteries of Rudd's prime ministership.  As a "fiscal conservative" Rudd won an easy election victory a fortnight later, and after a few months in The Lodge had a 71 percent approval rating.

It's a measure of how much Australia has changed in 13 years that today it's impossible to conceive of any opposition leader, or for that matter any prime minister or premier winning the popular vote by criticising, to use Rudd's words, their opponent's "irresponsible spending spree".

"Irresponsible spending sprees" aren't affordable at the best of times, but they were a lot more affordable in 2007 than they are now.  Then, Australian government gross debt to GDP was 9.7 percent ― now it is 45.1 percent.

The point is that opposition leaders can sometimes be useful.  And sometimes they can influence the terms of the debate.  Occasionally opposition leaders can be too successful in shaping the policy conversation.  John Hewson in 1993, and Bill Shorten in 2019 made themselves and their policies seemingly the central issues of the elections they were fighting.

If Albanese's performance is judged solely against the two-party preferred polls he's not doing poorly, for Labor is within a few percentage points of the Coalition.  But while the Coalition has to guard against arrogance, there's not a Liberal or National MP who doesn't believe, all things being equal, that when Albanese is confronted on the election trail by as formidable a campaigner as the Prime Minister, Labor's chances will wither and die.

The problem for Labor, and the problem for good policy-making in Australia is that at the moment Albanese is the wrong person for the job.  It's understandable why he does it, and it's because he thinks his constituency wants him to do it, but on nearly every major policy issue Albanese equates the government spending more money with "reform".

"Childcare" now appears to have become Labor's signature policy area and Albanese's "reform" amount to the area amounts to removing the $10,560 annual subsidy cap.

On Wednesday, the Reserve Bank of Australia governor Philip Lowe gave a speech urging the Morrison government to undertake "big-signature moves" to boost productivity.

What Lowe said is not entirely wrong ― even if there's nothing easier than telling someone else what to do.  In this case though the Coalition is the wrong target.  It's the Labor Party that's the problem.  The sort of "big-signature moves" Lowe is talking about, and in particular industrial relations reform that Lowe singled out would most likely be completely opposed by Labor.

The Coalition hasn't yet recovered from the ALP/ACTU WorkChoices campaign against John Howard in 2007.  The paradox is that neither has Labor.  The ALP seems to be forever looking for that WorkChoices magic elixir to deliver it into government again.  That elixir is elusive, which explains why the ALP has lost the last three federal elections.

Albanese was a minister for six years and been in Parliament for nearly 25 years.  From time to time he's had some not-uninteresting ideas but it would be a stretch to describe him as a policy "reformer".  Albanese is best known for his remark:  "I like fighting Tories.  That's what I do".

It might be that what Labor needs, and indeed what Australia needs is a leader who likes fighting Tories a bit less and who likes policy a bit more.

After all, a few months after becoming prime minister, the last Labor leader to win government from opposition was described in The Sydney Morning Herald as proving "you can be a policy geek, and win".

Labor Would Keep Us Handcuffed To The Paris Climate Deal

Opposition legal affairs spokesman Mark Dreyfus's comment yesterday that Joel Fitzgibbon's opinions on climate change represented the views of "only a handful" of people within the Labor Party is precisely what someone representing the bayside suburbs of Melbourne would say.

And Anthony Albanese's recommitment to Labor's net-zero emissions by 2050 mandate is exactly the type of policy someone from inner-city Sydney would think Australia needs in the middle of a recession.

But rather than seizing on the opportunity to develop an energy and climate policy focused on reliability, affordability and jobs, Coalition governments at the federal and state level continue with their own shortsighted policies.

The federal government remains committed to handcuffing Australian industry and workers to the Paris Agreement, which has imposed on Australia the deepest cuts to emissions on a per capita basis anywhere in the world.

This is despite the fact the agreement permits the single largest emitter, China, to increase its emissions without constraint.

Modelling I prepared in 2018 estimated that the Paris Agreement would cause the cost of generating electricity in Australia to increase by $52bn from 2018 to 2030, which is the equivalent to the cost of building 22 new hospitals.

As foolish as this is, NSW Energy and Environment Minister Matt Kean's proposed energy electricity infrastructure roadmap is promising to go further by handing out billions of taxpayer dollars to subsidise the generation of 12 gigawatts of renewable energy and 2GW of storage.

Even Kean acknowledges the plan will create only about 900 jobs a year on average across the next decade.  That compares to the 315,000 workers in NSW employed in the mining and manufacturing sectors whose jobs would be put at terminal risk by the proposal.  Kean's argument that his plan will put downward pressure on electricity prices is unscientific and inconsistent with the best available evidence.

Since 2000, residential electricity prices across Australia have risen 220 per cent as the share of renewables on the national energy grid have increased from 8 per cent to 20 per cent.  This means that for every one percentage point increase to renewables on the grid, electricity prices have increased by 18 per cent.

Kean also said NSW needed to replace four of the state's five coal-fired power stations during the next 15 years.  But the best thing to replace coal with is more coal because it is cheaper, reliable and creates more jobs than wind, solar, and hydro.

The left and its cheerleaders at the ABC, the universities and big corporations have seized on Joe Biden's yet to be officially confirmed accession to the White House to reignite decades' old climate wars.  Yet in doing so they have misread the key result of the US presidential election, which is that the future is Florida, not California.

President Donald Trump easily won Florida with its large Hispanic and Latino population by about four percentage points, despite the sunshine state usually being a toss-up.

To take another example, Trump won Zapata County, which sits on the Texas-Mexico border and has 85 per cent Hispanic or Latino population, by more than five percentage points.  In 2016, Zapata went for Hillary Clinton by a 33-point margin.

On a national basis the only demographic Trump went backwards on was white men;  he made gains with African-Americans, Latinos, women and Hispanics.

The US election shows that the trajectory of Western democracies, including Australia, is towards the aspirations of multiracial, multiethnic, working and middle-class voters who reject divisive identity politics, celebrate their nation, along with its values and history and freedom, and believe all work — whether in a coalmine or as hairdresser — has dignity and meaning.

This is why Fitzgibbon is so right when he said "We (Labor) also need to talk to aspiration — those coalminers on $150,000, $200,000 a year, who have big mortgages but have worked hard, and made big decisions on behalf of their family, who can't afford to have politicians specifically close down their industries."

But it has been years since Labor has spoken to workers and the Australian heartland.  Instead, the result of Labor's policies, such as mass migration, emissions reduction, internationalism, higher taxes, more regulation and mandatory superannuation have undermined the jobs, wages and opportunities of working and middle-class Australians.

Labor's propagation of identity politics, support for an Indigenous-only body to advise parliament and attacks on freedom of speech and religion have divided Australians at a time we should unite around our shared values.

Australia might not be Florida — yet — but a realignment is coming, whether the major parties are ready for it or not.

Bloated Super Sector Sucking Up Workers' Wealth

The Morrison government has a key decision to make before the end of this financial year:  does it stand with mainstream Australians who have suffered through the lockdown-induced recession, or with the financial sector and industry super elites that are seeking to line their pockets further at the expense of working people?

The compulsory superannuation contribution rate is legislated to rise from 9.5 per cent to 10 per cent next July and steadily increase to 12 per cent five years later.  In the wake of the largest economic shock in decades, and the sharpest spike in unemployment and underemployment, increasing the super rate will come at the expense of working people who are already struggling with a rising cost of living.

By scrapping the legislated increase in the super contribution rate, the Morrison government will demonstrate that it prioritises the interests of mainstream Australians above those in the bloated superannuation industry.

There is a misconception that employers pay superannuation contributions.  The legal incidence of contributions falls on employers, but it is workers who must pay them through lower wages.

This used to be an uncontested point.  Compulsory super was first introduced after Paul Keating as treasurer agreed with the ACTU that it would allow for wage increases without creating inflationary pressures.  In a speech in 2007 Keating reaffirmed the point that super was paid by employees:  "The cost of superannuation was never borne by employers.  It was absorbed into the overall wage cost … In other words, had employers not paid nine percentage points of wages, as superannuation contributions, they would have paid it in cash as wages."

In 2010, in a speech after the Labor government legislated to increase the contribution rate, Bill Shorten as assistant treasurer said:  "It's wages, not profits, that will fund super increases in the next few years.  Wages are the seedbed of the whole operation."

Keating and Shorten have since sung from different song sheets, arguing that increasing the contribution rate will not come at the expense of wages.

But their change of tune does not alter the fact super is paid by workers through lower wages, which is the agreed wisdom of the Parliamentary Budget Office, the Grattan Institute, a range of academic studies and the Rudd government-commissioned Henry tax review.

Compulsory super was designed to ensure that Australians could retire in comfort without putting too much strain on government pensions.  In reality, it prevents a decent working-life standard of living and often diminishes the ability of Australians to buy a home and raise a family.  The home ownership rate declined from 71 per cent in 1994-95 to 66 per cent in 2017-18.

In the meantime, things could not be better for the financial services industry with a guaranteed and growing revenue source from super fees.  Before compulsory super was introduced, the financial services industry represented 2.4 per cent of the economy.  Now it's 6.5 per cent.

The forced savings scheme has allowed the financial services sector to flourish as it enjoys a never-ending transfer of wealth from working Australians.  Meanwhile, working people struggle as private sector wage growth has been below its long-run average for the past decade as the cost of living increases.

The government should provide a message of hope and aspiration for Australians as they emerge from the lockdown recession.  This means making the case for individuals and families keeping more of their wages, rather than seeing more siphoned off into the accounts of the elites running super funds.  It also means making the case for liberal values rather than ac­qui­escing to the technocratic mantra that the government must force people to save for their own good.  Australians should be able to make their own decisions about how they spend or save;  they are best placed to make the right decision.

According to statistics from the Australian Prudential Regulation Authority, more than 3.3 million Australians have withdrawn an average of $7400 from their super under the COVID-19 early release scheme.  This indicates that young people are withdrawing their entire super balance and are voting with their feet;  they believe that they are better placed to manage this money than the super funds to which it was previously sacrificed.

The budget contained some sensible reforms of the super system, but there is still a long way to go in ensuring that it works in favour of mainstream Australians.  For example, the $450 a month earnings threshold after which contributions must be made has not increased since compulsory super was introduced in 1992, meaning people earning about half as much in real terms today are forced to make contributions to their retirement fund.

For most working Australians, the super system does not serve them well.  Forcing them to throw more money at it will do more harm than good.

What The ACT Election Results Tell Us About Our Rulers In The Bubble

Last weekend's ACT election results have again revealed how out of touch our nation's capital city is with mainstream Australians.  While it is tempting to write off the ACT Legislative Assembly as little more than a glorified city council, ACT elections are one of the clearest indicators of elite opinion that we have ― and the results are alarming.

ACT Labor will continue to govern, as it has done since 2001, but the big winners were the Greens, who have more than doubled there representation.  The 25 seat ACT Assembly will have ten Labor members (down from 12), nine Liberals (down from 11), and six Greens (up from two).  The Greens already have a seat in cabinet, in exchange for propping up the minority Labor government, and will now be even more influential.  The radical Greens are a party of government in the ACT.

Overall, the ACT electorate is markedly out of step with the country.  Labor, the Greens, and minor left-wing parties received more than 58 per cent of the first preference vote ― a tally even exceeding the left's primary lower house vote in Victoria's landslide 2018 election (approximately 56 per cent).

Of course, this pattern diverges wildly from that seen in more conservative states.  At the 2019 New South Wales election, left-wing parties received only 44 per cent of the first preference vote (in the lower house), and at the 2017 Queensland election, the figure was 45 per cent.

Many Canberrans are transplants who have moved to the city to work in the federal bureaucracy, so the political differences are quite striking.  Canberra, it seems, both attracts a certain type of person and instils in people a certain set of beliefs and attitudes.  These sorting mechanisms have gradually separated the capital from the country over which it rules, encasing it in a bubble of ideology.

The left's stranglehold on Canberra poses two big problems for the rest of the country.

The first is that the residents of the Canberra bubble make policy for all of us.  Their detachment from the preferences and values of mainstream Australia has led to a range of policy disasters.

Perhaps most seriously, economic policy in this country increasingly favours the public sector and the corporate bureaucracies that oversee the enforcement of government regulation.

As my research has demonstrated, the COVID recession has made this trend worse.  Our country increasingly has a K-shaped economy, in which bureaucrats thrive even as the productive economy that sustains them is hobbled.

At the height of the recession, public sector wages in the ACT increased by 6.5 per cent.  The average wage in the ACT is $102,000, far exceeding other states and territories.  While the country has seen 600,000 private sector jobs lost this year, the ACT has largely been insulated from the fallout.

We also seem to be developing a K-shaped culture.  Consider, for example, the obscene and embarrassing fiasco that is national arts funding.  The ruling class amuses itself with deranged art, obscure research projects, and the self-flattery of the ABC, while traditional and elevating cultural pursuits are shunned and shuttered.

The second problem emerges from the unavoidable fact that the ACT electorate is highly educated.  The Canberra bubble represents, to a worrying extent, the best that our systems of education and moral instruction can produce, and they are turning against the values of the rest of the country.

This is one way that Canberra is similar to the rest of Australia: educated people are radicalising.  Just as we have seen in some wealthy parts of Sydney and Melbourne, the Greens in Canberra picked up votes mostly from the Liberal Party.  Our inner suburbs are filled with spiritual Canberrans.

Somehow, we have created a system that selects for these kinds of beliefs, or that fills the heads of many of our brightest people with bad ideas.  Maybe both.

The elite, the attitudes of which are made plain at ACT polling booths, is the main reason that elections in this country never seem to change anything ― a reminder that democracy means more than just elections.  If we want a democratic country in which policy aligns with mainstream values, our highest priority should be ending the miseducation of our ruling class.

The Reserve Bank's Great Gamble On Interest Rates

The fiscal path outlined in the federal budget will constrain monetary policy and undermine the stability of the Australian economy.  The Reserve Bank of Australia will be forced to pursue expansionary monetary policy that will leave it impotent in the event of future economic headwinds.

The RBA's decade-long experiment with record low interest rates has created an economy that is dependent on low borrowing costs and has emboldened the Federal government to dramatically blow the government debt out to $1.7 trillion over the next decade.

High levels of government and private debt has committed the RBA to a policy of continual monetary expansion that will trap it between a rock and a hard place should price inflation set in.

The dramatic expansion in deficit spending will require the RBA to increase money creation to purchase government debt if it is to maintain low interest rates.  The RBA has already doubled its balance sheet since January to over $300 billion which has contributed to record growth in the money base.  The money base measure, which includes currency held by the private sector and bank deposits with the RBA, is up 48% on this time last year.

In the event that continual growth in the money supply flows through to price inflation, the RBA will be forced to either allow inflation to wreak economic havoc or fight inflation by restraining monetary growth and allowing interest rates to rise.

Increased borrowing costs would reveal the instability of the Australian economy.  Government interest payments would shoot to the top of the budget expenditure list, and Australian households, which have the second highest household debt to GDP ratio in the world behind Switzerland, would quickly go underwater with mortgage defaults causing a housing market decline that could undermine the balance sheets of Australian banks.

The expansion of government debt combined with the RBA's mandates has severely constrained the central bank.  The Reserve Bank Act (1959) charges the RBA with conducting monetary policy to best contribute to "the stability of the currency", "the maintenance of full employment", and "the economic prosperity and welfare of the people of Australia".

For the foreseeable future, the economic prosperity and welfare of Australians depends on low borrowing costs, but achieving this will require continual monetary expansion that risks undermining the stability of the currency.  Given the RBA's charter, it has little option but to attempt to hold the line with low interest rates, hope for modest inflation to assist the indebted economy, and pray that inflation doesn't get out of control.

This shows that the RBA is independent in name only.  For all intents and purposes, its decisions are constrained by the need to accommodate fiscal policy and the rapid expansion of government debt.

However, the RBA's current predicament also reflects a long-term failure of its own monetary policy.  In the wake of the Global Financial Crisis the RBA slashed the cash rate from 7.25% to 3%.  In November 2011, after an attempt to normalise rates, the RBA began a rate cutting cycle that culminated in March this year with the cash rate target being set at 0.25%.  Never before have we had a decade-long period of record low interest rates.  This has facilitated a record level of household debt and enticed governments into deficit spending.  Instead of having a stimulating effect, myopic monetary policy has severely undermined the stability of the Australian economy.

Low interest rates cannot be assumed in the long-term as debt is repaid.  The timeline of repaying the national debt has shifted out decades with my estimating that it could take until 2080 before gross debt is repaid with favourable conditions.  A host of not unlikely scenarios over the next half a century ― including rising interest rates, increased price inflation, and future economic shocks ― could see the Australian economy enter a deep and debilitating depression.

This is not a position of strength to leave to our children and grandchildren.  Pursuing the status quo will not improve Australia's economic resilience.  Governments must recommit to reducing debt by implementing pro-growth reforms, such as cutting red tape and inefficient taxes, reducing the size of government and restraining government spending.

A Target Of Zero Cases Means Zero Jobs, Zero Freedom And Zero Hope. Here’s A Better Way

Australia needs a COVID-19 reset.

After seven hard months of social isolation, economic pain and despair about the future, the time has come to change course.

COVID-19 is not going anywhere.  It never was.

This virus cannot be eliminated;  there is no vaccine.

It will not be avoided;  global transmissions are surging.

What is clear is that the virus spreads faster than influenza and without a vaccine, it will kill more people than it.

These facts alone justify a unique response.  But that response must be proportionate to the risk.

Children should be educated, family must be cared for, and debt has to be serviced.

None of these things are possible under a never-ending lockdown.

Lockdowns do not work because they are a flawed solution to a complex problem.

They curtail personal freedom by ignoring demographic resistance.

They lack proportionality by outlawing activities which pose a minimal threat to public health.

And they polarise communities by divvying up exemptions based on employment and social status.

These realities are anathema to Australian society.  We have never lived this way and we can't be expected to any longer.

COVID-19 is already changing Australia for the worse.

As you read this, our people are further dividing into two Australias.

The first part comprises those Australians whose employment remains unaffected by the crisis ― predominantly public sector workers.  This group of Australians have kept their jobs, grown in number, and even enjoyed pay rises.

The second part are those Australians whose lives now lie in ruins.  They are young Australians, small business owners, the self-employed, and those otherwise employed in the productive, private part of the economy.

Twelve months ago, the later were the backbone of Australian prosperity.  Today, they are the victims of government decision-makers immune to adversity.

Embittering the public mood has been the uneven application of lockdown enforcement.

Again, two distinct Australias have emerged.

Celebrities like Shane Warne leave the nation to commentate on cricket in the UK, while regular Australians are refused travel for funerals or palliative care.

Black Lives Matter protestors take to the street in defiance of social distancing orders, yet mainstream Australians are the ones fined for holding picnics and BBQs.

And foreign students can easily traverse our country, but agricultural workers living along state borders cannot.

Sadly, all of this has been done in the pursuit of a goal which cannot be achieved ― virus elimination.

Without a proper debate or public approval, governments across the nation have dumped the goal of "flattening the curve" in favour of "virus elimination" ― an ambition which is unachievable without a vaccine or an end to global transmissions.

And as each government demands greater and greater sacrifice from the public in pursuit of this goal, the Australian community suffers ever more.

Intentionally or otherwise, Australia's COVID-19 response has placed the nation on a highway to nowhere without an off-ramp.

A target of zero cases means zero jobs, zero freedom, and zero hope.  And we have had enough.

Australia needs a plan to live with COVID-19 where the risks of infection are balanced against the risks long-term lockdowns impose on greater society.

Recently, I released my Medical Capacity:  An Alternative to Lockdowns report, offering a pathway for achieving that balance.

Medical Capacity confirms that the cost of a COVID-19 elimination strategy is over $319 billion.

This figure is the equivalent to 2.2 times the total annual value of Australia's entire Health Care and Social Assistance industry ($142.9 billion) and is equal to the 2018-19 Commonwealth Government expenditure on defence, education, health, and social security and welfare combined.

Medical Capacity charts a more reasonable course.

It acknowledges the risks posed by COVID-19 ― and manages them.

It recognises the human costs of lockdown ― and alleviates them.

Critically, it incorporates the latest learnings about the virus to ensure our risk management approach evolves alongside it.

The best COVID-19 response has always been about balance.

Governments should put in place measures to protect the elderly and vulnerable, implement high-quality contact tracing, continue with random community testing, and maintain international border control measures.

Equally, they must put an end to extreme lockdowns and relax social distancing measures so that economic, social, and recreational life can return to normal.

It is never too late to correct a mistake.  It is never too late to restore freedom.

A new approach is required to steer Australia through the next stage of this pandemic.

And that approach is ready right now.

We Know Daniel Andrews Has Maimed Melbourne. He’s Also Wreaking Ruin In The Regions

The implementation of Victoria's lockdown restrictions highlights the growing divide between Melbourne and regional Victoria.  The Melbourne centric Victorian government has ignored the issues faced by regional Victorians, failing to implement measures in proportion to the varying risk of coronavirus across the state.

To understand why many regional Victorians are frustrated with the restrictions one has only to look at the active cases map of Victoria.  There are 139 active cases in Melbourne but only five cases across regional Victoria, a landmass larger than most European countries.  These five cases are just beyond the border of metropolitan Melbourne.  Yet, the Andrews government has inexplicably tied any further easing of restrictions in regional Victoria to case numbers in Melbourne.

In the shire of Corangamite in south-west Victoria, there have only ever been three cases, there has been no community transmission, and there are zero active cases.  Yet the restrictions in place are still more severe in many respects than the restrictions imposed on the hardest hit councils in Melbourne between March and August.

The Andrews government's Melbourne-centric policy has failed to account for the lower risk of transmission in regional Victoria.  The Corangamite Shire, for example, has 0.04 people per hectare compared to Greater Melbourne's 5 people per hectare.  It doesn't take an expert in epidemiology to work out that the risk of viral disease is not uniform between regional Victoria and a city with 135 times the population density.

When questioned as to why it is mandatory to wear a mask outside when there is no one in the same square kilometre, Daniel Andrews dismissed the issue as an "esoteric debate".  It is hardly esoteric for the many Victorians who work in wide-open outdoor spaces, who may encounter 50 head of cattle for every human, and are far removed from the world of packed trains and office elevators.

Shutting down businesses and preventing social interaction in areas with zero cases of coronavirus is indefensible, especially when the government maintains that it is not pursuing an eradication strategy.  There is no science or rational risk assessment that supports making masks mandatory for those walking the streets of Mildura, a town more than five hours drive from the nearest known case.

Not being allowed to have people in your own home, visit loved ones, or operate your business to capacity when there are no cases of coronavirus in the district is an absurd restriction, and would not have been believed possible several months ago.

There is no reason why restrictions cannot be further eased in low-risk areas to minimise the cost to the social and economic wellbeing of Victorians while maintaining the mitigation of the spread of the virus.

The restrictions that have needlessly damaged the social and economic health of regional Victoria have been implemented by a government with no incentive to care about regional Victoria.  The Victorian Labor party can comfortably form government by controlling Melbourne electorates and the electorates between Bendigo, Ballarat, and Geelong.  Even with its landslide victory in 2018, Labor only won the one electorate outside of this corridor.  The concentration of political power into Victoria's cities has resulted in a blanket treatment of regional Victoria as a broad region that can be safely ignored.

Victorians are increasingly being divided into two, in more ways than one.  One Victoria can be categorised as regional and suburban, being employed in small productive-sector businesses, with higher rates of self-employment, and without political connections, while the other Victoria is centralised in the cities, employed in the public service, health or education, and politically connected.

The Victoria in the private sector experienced a 4.2% decline in wages in the June quarter in the wake of the current crisis while the other Victoria in the public sector has seen their wages increase by 0.7%.  This has been made possible by a Labor government that The Herald Sun's James Campbell describes as "simply a machine for shovelling money to public sector workers.  Nothing more, nothing less."

The Andrews government's Melbourne-centric approach has prevented vast segments of Victoria from reopening and returning to their normal way of life built on enjoying and caring for family, religious worship, the ability to run businesses and experience the dignity of work.  The restrictions have been implemented in a way that has caused needless damage and widened the gap between two Victorias.

This Massive Debt Is With Us Till 2080

"Insouciance" is a word Australians don't use very often.  Maybe we should.

It perfectly describes the popular reaction to this week's federal budget and the news the country faces more than a trillion dollars of government debt.

Australians are also insouciant about the jobs of a quarter of the nation's workforce now being dependent on wage subsidies from the government.

And the Coalition seems insouciant about the political consequences of government spending going from $549 billion and 28 per cent of GDP in 2019-20 to an estimated $677 billion and 39 per cent of GDP in 2020-21.

To be insouciant is, according to various definitions, to be "apathetic", "carefree", "unconcerned", and "with no feelings of worry or guilt".  That's been the prevailing attitude to the national economy for the past decade, and it looks set to continue.  It's an attitude that's the product of 29 years without a recession.

To take the last point first, eventually it's going to dawn on the Labor Party, as it already has on the Democrats in the United States, that such massive increases in government spending can pave the way for the introduction of a universal basic income (basically a non-means-tested guaranteed government welfare payment for every adult).  A universal basic income is already advocated by the Australian Greens.

Leaving aside the philosophical arguments against the concept, the biggest hurdle to its implementation is what it costs ― if it were paid at the rate of the minimum wage, it would cost at least an additional $100 billion a year in government spending.

Before March, that was an astronomical sum.  Now, not so much.  A universal basic income is a lot closer to reality than it was six months ago.

With the Coalition for all intents and purposes guaranteeing the government would pay at least part of the wages of workers who would otherwise have been unemployed because of COVID-19, it's now not that big a step for Labor to guarantee a "wage" to everyone, whether in work or not ― which is the "income" part of the universal basic income.  (The genius of the left is in describing a welfare payment not as "welfare" but as "basic income".)

BASIC INCOME PLAN COULD CHANGE THE DEBATE

As soon as the ALP declares itself for a universal basic income, all the contours of the country's political debate will change.  Labor will be seen to have a plan, and it will take the policy initiative.

Meanwhile the Coalition will be left attempting to explain why, if it's already willing to increase government debt by hundreds of billions, it doesn't want to borrow just a little bit more to provide an adequate standard of living to the hundreds of thousands of Australians, especially young Australians, whose job prospects and futures have been blighted by the pandemic.

My analysis following the release of the budget reveals that even on the most optimistic assumptions, the federal government will not pay off its debt until the 2080s ― even if future governments wanted to.

While interest rates are less than 1 per cent, it's easy to be insouciant about the consequences of gross debt at more than 50 per cent of GDP.  To expect interests will stay at their current level for the next 40 years is as heroic an assumption as that made by Treasury when, in preparing this year's budget, it assumed "a population-wide Australian COVID-19 vaccination program [would be] fully in place by late 2021".

To all of this the Prime Minister and Coalition ministers respond, not completely unreasonably, "What's the alternative?"

Many of the government's fiscal measures are appropriate and are necessary to maintain the country's social and economic fabric ― especially in the face of mismanagement and parochialism on the part of state governments.

An additional $100 billion of government spending could have bought a lot of reform.

Income tax scales could have been properly flattened, social security could have been redesigned to focus on getting people into work, and state governments could have been given the fiscal incentives to cut their red tape.

The problem with the 2020-21 federal budget is not even so much what's in it.  It's what's not in it that's the problem.

It remains to be seen for how long Australians will be insouciant about their country's economic condition.

REVEALED: Get Set For Debt Until 2080

Australia is unlikely to be debt-free until 2080 as a result of the lockdowns implemented in response to COVID-19.  The much anticipated 2020-21 Budget does not even attempt to highlight a path out of debt and deficits, leaving mainstream Australians with little hope that the bill for the largest public policy failure in the nation's history will be paid off in their children's lifetimes.

My modelling has estimated that it could take until 2045-46 for the Commonwealth government to deliver a budget surplus, with total debt expected to peak at $2.05 trillion and not be paid off until 2079-80.

This modelling is based on a scenario where nominal gross domestic product grows at an average rate of 3% per year, and where the federal government is committed to fiscal responsibility by pursuing Howard-era budget surpluses equivalent to about 1% of GDP.

In reality, there is little hope that any Australians alive today will be around to see the nation released from this debt burden.  And if there is another economic shock between now and 2080, which there almost certainly will be, the debt and deficit situation can only get worse.

All Australians will be paying for the lockdowns over their lifetimes.  From the young people who have disproportionately suffered and are at greatest risk from economic "scars", to small business owners who have lost everything, mainstream Australians are suffering.  Meanwhile, the public sector continues to grow, with about 20,000 new jobs added since March, while the productive, private economy has been hammered.  As the nation is plunged further into debt, senior bureaucrats and politicians who have no "skin in the game" are happy to maintain a fanciful strategy of elimination.  Not one of them has lost their job, and many have received pay rises.  It's no wonder they see little that is wrong with the lockdowns.

The only path out of this catastrophic debt situation is for the Morrison government to pursue real liberal reforms based on reducing the size of government and allowing the private sector to flourish.

Rather than subsidising companies that hire young people receiving JobSeeker, for example, the Morrison government should engage in structural reform of the industrial relations system.  Carving small businesses out of the Fair Work Act 2009 would be a far more efficient way to create jobs than by betting against the current policy settings.

The bloated public sector should be also reduced, and wages for senior public servants and politicians earning more than $150,000 should be frozen until the unemployment rate is back to around 5%.  According to a poll published in April, 74% of Australians want public servants and politicians earning over this amount to take a 20% pay cut to demonstrate that we are all in this together.

Structural reform and massive cuts to red tape are vital for getting the economy back on track.  This means reducing the $176 billion red tape burden, which robs Australians of job opportunities and pay rises each year, and permanently reducing the size and scope of the government.

One of the only positive features of the Budget was that Stage 2 personal income tax cuts were brought forward from July 2022 to July 2020, meaning that workers will receive an almost–immediate boost to their take-home pay.  While this was a welcome move, the Morrison government should have brought Stage 3 forward as well.  Stage 3 will be the most significant reform to the tax system in recent years, providing a significant step towards a more efficient and fair income tax arrangement.  The cuts were voted for at the 2019 election and have since been legislated, so it would make perfect sense to bring them forward in recognition of the fact that individuals and families know how to spend their own money better than government.

Commonwealth budgets are likely to remain in the doldrums for the next half a century.  The only way out is for the Morrison government to commit to liberal values, reduce the size of government, unleash the economy through industrial relations reform and red tape cuts, and to practice fiscal responsibility.

Danandrewstan And The Death Of Melbourne, Explained

It was the image that shocked Australia and soon went global.  A pregnant woman, handcuffed in her own kitchen, in front of her children, as police officers seized every computer, tablet and cell phone in the house before frog-marching her off to the station.

It's the treatment that Australians are used to seeing meted out to drug traffickers, suspected terrorists and child pornography rings.  But in Zoe Lee Buhler's case, her "crime" was a Facebook post.

Zoe had tried to organise a protest against coronavirus restrictions in place in the state of Victoria.  For this, she was charged with "incitement", and now faces a sentence of up to 15 years.  She has been released on bail, and will go to court in January.

The most remarkable thing, though, is it's taken until now for some sort of protest movement to emerge.  Melbourne — Victoria's capital city — has been under some form of lockdown since March.  When the coronavirus first hit, the premiers governing Australia's eight states and territories descended into a kind of unspoken competition to see who could take the "toughest action" against the virus — that is, which leader could close the most businesses, destroy the most jobs, and stifle the most liberties in the name of being seen to be "doing something" about the virus.

It was a contest that hard-left Victorian Premier Daniel Andrews won by a mile.  Almost six months later, Melbourne is still under what is by far the strictest lockdown in Australia, and probably the world.  At time of writing, a city-wide curfew applies between 8 pm and 5 am.  Melburnians are permitted to leave the house for exercise for an hour a day and in groups of no more than two.  You're allowed to go out to get food as well, but only by yourself, and only once a day.  The increasingly few people with jobs must carry a government-issued permit indicating that they're allowed to go to work — and even then only if your job is deemed "essential".

If this shatters your idea of Australia as a rugged, relaxed, irreverent wonderland, then I apologise.  That Australia died long ago, to the extent it ever really existed at all.  Australia has no First Amendment, and its political culture is closer to continental Europe than the U.S.  Fundamental freedoms have been largely left to conventions inherited from the British.  They have proved fragile, though nobody ever imagined that they would be this fragile.

The fact that Melbourne has allowed itself to be decimated in the name of the coronavirus is as predictable as it is heartbreaking.  It's a city a bit like San Francisco or Seattle — A beautiful, vibrant, dynamic metropolis that until now had among the best food, culture and nightlife in the world.  But like America's coastal cities, left-wing politics is a package deal — street art in aid of one asinine cause or another almost becomes part of the scenery.

Daniel Andrews knows this and exploits it.  Somewhere along the way, he picked up the playbook of Democrats who preside over dysfunction, poverty, crime and thinly-veiled corruption, and make up for it all by wheeling out some woke gimmick every so often — almost always involving vast sums of public money.  The coronavirus has given him the best talking point of all:  "The economy versus human life".

It's the recurring theme in Andrews' interminable press conferences — daily sermons that are so theatrical and dishonest they would make Andrew Cuomo blush.  Behind him always, a purple banner with the state government's Orwellian coronavirus slogan, which can also be found plastered on billboards all over the city:  Staying Apart Keeps Us Together.

The media response is — with a few exceptions — fawning and uncritical, but it's the only real check or balance they have:  The state parliament has barely sat since March, and coronavirus restrictions have been made by executive fiat under dubious "emergency powers".

All that said, Andrews' hitherto insurmountable hold on power is slipping.  The lockdown has wrought enough joblessness, business closures and outright despair that people are starting to take notice.  Even in the People's Republic of Victoria, the mood is turning against the man now widely derided as "Chairman Dan".

But in the meantime, Melbourne's lockdowns continue.  Andrews sought an extension for his emergency powers, which the parliament inexplicably gave him.  And over the weekend, he announced a convoluted "roadmap to reopening" which basically means that Melburnians will enter Australia's sweltering summer under house arrest, and will be holding their Christmas dinners via Zoom.

It's a cautionary tale, and then some.  For the sake of a nasty strain of viral pneumonia, Victorians eagerly cashed in their freedoms for the promise of safety.  In so doing, they have turned one of the greatest cities in the world to a dystopian hellscape with no end in sight.

Our Threatening K-Shaped Corona Recession

Australia is emerging from the COVID-19 lockdown measures not as one, but two separate nations comprised of the economic, cultural and political elite embodied in the public sector on one hand, and mainstream Australia embodied in the productive, private sector on the other.

The two Australias have emerged over time.  Before coronavirus arrived in this country, those in the private sector were second-class citizens compared to their public sector counterparts.  According to the Australian Bureau of Statistics, at the end of 2019 average weekly earnings in the public sector were 30% higher than those in the private sector, and while private-sector workers receive superannuation contributions of 9.5%, those in the public sector can look forward to a comfortable retirement with contributions of 15.4% funded by taxpayers.  My research has found that this public sector wage and super premium cost taxpayers $5.7 billion in the 2018-19 financial year.

This divide set the stage for the current recession, Australia's first in almost 30 years.  This is not any ordinary recession;  it is a private sector recession.  The public sector, which contains those responsible for making the decisions to lockdown parts of the economy, has been completely insulated from any negative consequence arising from these decisions.  The private sector, on the other hand, has borne the entire cost of the measures aimed at stopping the spread of COVID-19.

Since March, commentators have been searching for the ideal letter to express how the economy will recover from the lockdown-induced economic contraction.  The most optimistic is a "V" shaped recovery, where, after a short sharp contraction, things return to normal.  Another possibility is the "W" shaped recovery, where there is some turbulence provided by a short-lived snapback after the initial contraction and a slower eventual return to normal.  The most dreaded, one might think, is the "L" shaped recovery, where jobs and economic activity are never restored to their pre-pandemic levels.

The search for such a letter is over.  The most accurate way to describe Australia's economic recovery is using the letter "K", where the public sector is on the upward arm and the private sector is on the downward arm.

As shown in my analysis published in August, the public sector has flourished during the lockdown while the private sector has been smashed.  As visibly demonstrated in that analysis, mainstream Australia continues to suffer while public sector workers go unscathed.  According to the latest data from the Australian Bureau of Statistics, public-sector jobs have increased by 1.9% since 14 March, compared to a 5.4% decrease in the private sector.  This translates into about 15,200 jobs added in the public sector and 650,000 jobs lost in the private sector.

My analysis of ABS data released on 2 September provided more evidence of the "K" shaped recovery:  in the June quarter private sector wages declined by $5.9 billion, while public sector wages increased by $768 million.

Contrary to the condescending refrain that "we are all in this together", few public servants have experienced the economic hardship being inflicted on mainstream Australians.  In fact, 15,200 public servants have been hired since 14 March.  And for each public servant hired, 42 private sector workers have lost their job.

This divide poses a serious threat to Australia's robust, egalitarian liberal democracy.  According to the Australian National University's Australian Election Study, which measures long-term trends in political attitudes and behaviours, 75% of Australian voters in 2019 thought that people in government look after themselves, up from 49% in 1969.  Alarmingly, 41% of voters said that they were not satisfied with democracy, up from 23% in 1969 and a sharp rise from the 14% who thought so in 2007.

Ordinary Australians have been left behind by the disdainful class of public sector elites during the COVID-19 crisis.  The lockdown measures have smashed those in the private sector, and those in the public sector, who decide when and how lockdowns will be eased, have not suffered any negative consequences.

The trend of dissatisfaction with democracy and alienation from the political class will only become more pronounced during the economic recovery, particularly if it continues along its current "K" shaped trajectories.  Everything that underpins the Australian way of life, small business, reward for hard work, and liberal democratic freedom, are in peril if the "K" shaped recovery continues.

Lockdowns Hurt Small Business, Young Australians But Public Servants Flourish

This is not Australia's first recession, nor will not be the last, but it is the first recession caused by deliberate actions taken by government.

Creating a depression-era economy is the expert classes' solution to managing COVID-19.

Shutting down the economy and society through social distancing and travel restrictions was considered the only way to slow the spread of the virus.

The problem is that this man-made recession falls unevenly across Australians.  It is the young, small businesses, the self-employed, and those in the productive, private parts of the economy who are being smashed, while public servants and bureaucrats have not only been sheltered but they have flourished.

My analysis of data released by the Australian Bureau of Statistics on September 2 estimated that in the June quarter total wages paid to private sector workers dropped by $5.9bn, whereas wages in the public sector rose by $768m.

Every state and territory is divided along these lines.  In NSW, private sector wages fell $1.95bn while public rose $185m.  In Victoria, the split was $1.91bn versus $88m, and in Queensland $1.66bn versus $136m.

In the ACT, which is home to public servants with the biggest snouts in the biggest trough in the nation, public sector wages rose an astonishing $277m.  That accounts for more than a third of the total public sector wage increase while the ACT accounts for less than 2 per cent of Australia's population.

Across the nation more than 22,000 jobs have been added to the public service since lockdowns began in March while more than 572,000 jobs have been destroyed in the private sector.  This means that for every job added in the public sector, 26 have been lost elsewhere.  And yet it is those in the public sector that decide when those in the private sector can return to work.

The divide goes on.

Young Australians have incurred 35 per cent of net job losses, even though they account for 15 per cent of the workforce.  And they will need to pay back the forecast $1 trillion in debt that will be accumulated at the federal level alone over the next three years.

According to the ABS data, 35 per cent of small businesses reported that it would be difficult to meet financial commitments over the next three months, compared with 18 per cent of large businesses.

And a poll undertaken in August found 65 per cent of the self-employed agreed with the statement:  "I have either lost my job, had my hours cut, or had my pay cut, or someone I know has, as a result of the lockdown restrictions".  This compares with 46 per cent of those working for someone else.

But despite this destruction and the inequitable impacts, governments have doubled down with a virus elimination strategy.

In March and April the objective of the lockdowns was to "flatten the curve" to make sure that the hospital and medical systems were not overwhelmed.

The curve was not flattened, it was smashed by mid-April.  Mission accomplished.

But power-hungry premiers, politicians and unelected health bureaucrats weren't going to return the freedoms confiscated on the basis of what we now know are exaggerated claims and highly inaccurate modelling.

Modelling by the federal Department of Health from April infamously reported that under a best-case scenario which included social distancing, travel restrictions and quarantining, a peak of some 5000 Australians would require intensive care while infected with the coronavirus.  The peak was about 100.  They were out by a factor of 50.

Rather than acknowledging this, which presumably would be too embarrassing and prove the credentialled class has no clothes, governments went to virus suppression and then to virus elimination.

But elimination is a false god, worshipped by those such as the Grattan Institute, the ABC and health bureaucrats, whose jobs and livelihoods aren't hanging in the balance.

Zero COVID-19 cases may mean zero jobs, zero freedom, and zero hope.

To get back our jobs, freedoms, democracy and way of life we must learn to live with the virus, not eliminate it.

Cutting Red Tape In Project Approvals Can Boost WA Jobs

Western Australia's prospects of becoming the fastest-growing, highest-potential state in Australia after the coronavirus recession was boosted by the commitment of the Commonwealth and McGowan governments to slash red tape for WA's resources sector.

Yesterday, the Commonwealth government confirmed its intention to enter into a bilateral approval agreement with WA under the Environment Protection and Biodiversity Conservation Act 1999.

This would put the WA state government solely in charge of the environmental approvals process, removing unnecessary Commonwealth duplication.

Commonwealth government approvals for big projects currently average 1013 days, or almost three years.  The bilateral agreement could reduce the approval time up to six months, and would help unlock more than $100 billion of development.

This latest initiative builds on momentum developed by the state government to cut red tape.  In 2018, the McGowan government launched a whole of government red tape reduction initiative called Streamline WA.

The initiative has already produced tangible results, such as the establishment of risk-based statutory guidelines for mining proposals and mine closure plans.

The EPBC Act, and green tape more generally, impose significant costs on the Australian economy.

My research released this year found that regulation under the Act has increased by 445% since the year 2000.  With 4,820 individual regulatory restrictions, the Act provides one of the most significant regulatory burdens to WA's most important industry, the resources industry.

According to a recent survey by the Chamber of Minerals and Energy of WA, the resources sector contributed $102 billion of value to WA's economy, including by paying $45.6 billion in wages, in the 2018-19 financial year.

Additionally, the sector directly and indirectly supported 452,229 full-time equivalent jobs in the state ― that's just over a third of total employment in WA.

The resources sector is central to WA in emerging from the COVID-19 lockdown-induced recession.

By reducing the green tape that holds this sector back, Premier Mark McGowan can ensure that WA has the best-performing economy in Australia.

According to the Australian Bureau of Statistics, 73,000 West Australians have lost their job since March and an additional 98,600 people are working fewer hours than usual because there is no work, not enough work, or they have been stood down.

These job losses are both an economic and social tragedy that will have a lasting negative impact on people's lives, from worse mental health to increased likelihood of alcoholism and drug dependency.

The experience from past recessions has demonstrated that the longer people are out of work the harder it is for them to get a job.

While West Australians should be encouraged by the latest move to cut red tape, it is up to the McGowan government to hold its Commonwealth counterparts to their word.

The WA and Commonwealth governments originally finalised a bilateral agreement way back December 2014.

The draft agreement sat in the bottom draw of a bureaucrat's desk until November last year when Mr McGowan revived interest in it, saying that "we need to do everything we can to speed up approvals and bring on these new jobs as a matter of urgency."

Indeed, we do.  But doing so means moving beyond "confirming an intention" to enter into the bilateral agreement, to actually signing that agreement.

The Economic Crisis Is Still To Come

It is pretty clear what Victorian Premier Daniel Andrews wants:  the overwhelming majority of Victorians to remain in their homes for, at least, 23 hours a day.  Go out for exercise, and shopping, if you must.  Don't go out between 8pm and 5am at all.  If you don't know, the answer is "no".  Stay at home is the very clear message.

Business is shell-shocked.  The problem being that everyone who can work from home, is working from home.  Those who can't have mostly been stood down.  Nationwide the federal government estimates "effective unemployment" to be about 11 per cent.  When JobKeeper goes many of those people will never work again.  Many businesses will not reopen.

Yet the Victorian government wants still less economic activity.

The economy is already broken.  Devastated.  The economic crisis is still to come.  Realise this:  in 2008-09 the government spent tens of billions of dollars keeping the economy going.  In 2020 the government has already spent hundreds of billions of dollars to stall the economy.  We haven't begun restarting the economy.

Victorians are panic buying.  Again.  Who can blame them when the Premier keeps saying you'll be able to buy what you "need" ― whatever that means ― not necessarily what you "want".  He is trying to be reassuring;  but everyone knows that government has a poor track record in providing what people need, let alone what they want.  The Victorian government is trying to micromanage supply chains and distribution.  This is not going to end well.  It never does.

It gets worse.  Both state and federal government are in denial.  They seem to think that this is a "business-as-usual" crisis.  That somehow when they give the all-clear that we'll emerge ― as if from hibernation ― from our homes, squeeze into our work clothes, give up our day-drinking, and go back to work.  This is the snap-back view.  Similarly many economic commentators seem to think that a good dose of government spending and tax increases will restore our prosperity.

Well, no.  Reflect on the fact that the federal budget never recovered from the global financial crisis.  At best, the federal government was going to deliver a $5 billion surplus in 2019-20.  That forecast surplus is now a $85.8 billion deficit.  This financial year ― before the second Victorian lockdown ― the federal deficit is forecast to be $184.5 billion.

Economies are not about businesses, and unions, and shops, and goods and services.  The economy is about people;  their plans, their expectations, their relationships.  For all the talk about competition, the economy is about co-operation.  The economy is not a machine that can be switched off and on at will.  The interrelated web of co-operative relationships that was the February 2020 economy is gone forever.  The economy that now exists is a lot smaller than what it was just six months ago.  The problem now being that we can't be sure which part of it will revive and which part of it won't.

What we can be sure of is that monetary and fiscal policy will play a small role in recovery ― perhaps no role.  The RBA has been trying to ignite "animal spirits" with low interest rates for a decade.  The government has already borrowed so much money that our grandchildren will be paying it off.  Not that I'm being overly critical ― that spending was necessary to maintain the fabric of our society.  The point being that we have already spent a lot of money just to stall the economy.

I do not want to suggest that debt and deficit don't matter ― that somehow the RBA could just print money to finance our spending.  Modern Monetary Theory is to economics what hydroxychloroquine is to COVID treatment.

Warren Hogan of University of Technology Sydney has suggested that two decades of sustained economic growth will be necessary to pay off the debt.  I agree.

We are going to have to work our way back to prosperity.  Job creation is going to have to be the number-one policy objective for the next generation.  Not make-work job creation that government excels at, but rather private sector jobs.  Not more road building projects, but rather private sector entrepreneurship and innovation.  That means trade and open borders.  There is going to be a lot more technology use, too.

Serious microeconomic reform is needed.  Australia has done it before.  We could have been a banana republic.

There is no excuse why Australia cannot be a wealthy and prosperous nation.  Healthy, kind and caring too.

We have also become used to the trappings of prosperity.  We are going to have to give up some luxuries.  Like the massive regulatory state that has evolved over the past generation.  We can no longer afford to have government agencies suing companies on a whim.  Or have competition authorities making the world safe for incumbents.  To be fair, government has already undertaken some deregulation and instituted some tax cuts, even repaid taxes.

That is a good start.  Going forward cutting more taxes, cutting red tape, green tape, and beige tape will be a priority.  Getting people into jobs and keeping them in jobs will secure our prosperity.

The Rage Of The Economics Establishment

An article on these pages last weekend by this newspaper's economics correspondent, Matthew Cranston, titled "We need reform like we've never seen before" revealed everything that's wrong with what Australians are told about economics.  And it reveals why many people were apoplectic when Treasurer Josh Frydenberg dared suggest there were lessons to be learnt from the success of Margaret Thatcher and Ronald Reagan.

Cranston discussed the opinions of prominent current and former advisers to government about what was required to improve the country's economic performance.  One of the people whose views Cranston referred to was Bernie Fraser.

As secretary of the federal Department of the Treasury for five years and then governor of the Reserve Bank for seven years, Fraser sat at the pinnacle of economic policy decision-making.  After his retirement from the public service, Fraser joined the board of two large industry superannuation funds.  If there's a doyen of economic policy in Australia, it's probably Bernie Fraser.  (If there were two such doyens it would be Fraser and Ross Garnaut.)  If there's was an "Economics Establishment" in Australia, Fraser would be its president.

It would not be unreasonable therefore to assume Fraser's opinions are not unrepresentative of many, if not the majority of, public servants advising the government on economic policy think.  It would also not be unreasonable to assume Fraser's opinions are not dissimilar to those of many academic and business economists.

Cranston introduced Fraser's remarks with the following:  "He [Fraser] says previous governments have certainly had their chance to reform in the past few decades but have blown it."

And then Fraser himself says the following:  "Howard and Costello had a golden opportunity to use the revenues to invest in productive infrastructure ― some of it went to the Future Fund ― but really they spent it on tax cuts.  They pissed it up the wall even when the economy was building up steam."

If you're someone who thinks, as Fraser does, that the government allowing taxpayers to keep more of their own money is "pissing it up the wall" then of course you're going to be overwrought at the slightest mention of Thatcher or Reagan.  In Reagan's first budget his 1981 Economic Recovery Tax Act cut the top marginal rate of federal personal income tax from 70 per cent to 50 per cent and the lowest rate from 14 per cent to 11 per cent.

The biggest problem with Fraser's way of thinking about the economy and the role of government is his belief that when the government is cutting taxes the government is "spending" money.  No, it isn't.  Only someone who has spent basically their entire working life working for the government could believe that.  But this is how government and how people working for the government now think, and it's an attitude that pervades practically every aspect of economic management and regulation in this country.  ASIC officials, for example, are particularly fond of telling taxpayers how fortunate they are to be allowed to manage their own superannuation.

The belief that taxpayers' money is the government's money is an idea that's been around a lot longer than Bernie Fraser.  It's exactly such a belief that Thatcher and Reagan rebelled against.  And they also had no truck with the implication of Fraser's remark that part of the solution to a country's problems is for the government to spend more money on infrastructure.  Maybe sometimes the government should, but more often than not it shouldn't.  No one knows for sure how much the NBN has cost already, and is still yet to cost ― it's a figure somewhere between $50 billion and $100 billion.  Today only Kevin Rudd would argue it was money well spent, and to this day it's never been established that such "productive infrastructure" could not have been implemented quicker and more cheaply by the private sector.

The point to remember about Thatcher and Reagan is not only the one Frydenberg made:  that their policies were successful.  What's often forgotten about what they did is that cutting taxes was just as unpopular with the Economics Establishment in the UK and the US in the 1980s as it is with the Economics Establishment in Australia in 2020.

ABC Adept At Playing Cuts Victim

The current behaviour of the ABC's management and staff is a perfect demonstration of just how removed the national broadcaster has become from mainstream Australia.

By complaining the way it has about the Coalition government's failure to index increases in its funding over the next three years, the ABC has succeeded in making the case for its eventual privatisation more powerfully than could ever have been made by its critics.

Australia is in a recession, nearly a million Australians have already lost their jobs because of the coronavirus pandemic, and a third of sole traders report they have lost more than 75 per cent of their income.  Yet the headlines at the ABC are dominated by the news the broadcaster must absorb government "cuts" of $84 million over the next three years.  These "cuts" equate to approximately 2.5 per cent of the ABC's budget over that time.

In the current economic environment any business, anywhere, would kill to be guaranteed to get 97.5 per cent of its pre-coronavirus revenue.  In any case, the "cuts" are not actual reductions in funding.  Government funding of the ABC is continuing to increase ― all that's happening is that ABC funding is not increasing to keep up with inflation, which anyway is at a record low of less than 2 per cent.

The issue of its political bias is one of the problems with the ABC.  Another problem is the justification for a government owning and funding one of the largest media organisations in the country that operates four television stations, four radio networks, and 65 metropolitan and regional radio stations.

It's too late now but the ABC would have got far more sympathy if instead of acting like just another part of the country's privileged elite who believe they are entitled to carry on largely unaffected by what's happening in the real world, ABC management had said something like "The community is hurting and the ABC is part of the community ― and we all have to share the sacrifices that need to be made."

If ABC management didn't want to put itself in the shoes of ordinary Australians, then at least it could have considered its brethren in other media organisations.  One hundred and fifty newsrooms have shut across the country.  Prime Minister Scott Morrison was right when he said "if you are a journalist today, the safest place for you to be is actually the ABC because your revenue is guaranteed in that [organisation] by the government".

What that guarantee has created at the ABC is a sense of entitlement and perhaps even an unconscious bias.  Perhaps only someone working at the ABC, who was its chief economics correspondent no less, could do what Emma Alberici did so infamously when at the height of the coronavirus pandemic crisis she tweeted "Stop talking about the economy".  Only someone removed from the economy could say such a thing.  And only journalists removed from the real lives of ordinary Australians could be as surprised as they were when the Coalition won the last federal election.

It's funny that for someone so intent on avoiding any involvement whatsoever in "the culture wars", that it's actually Morrison who, deliberately or not, has allowed the ABC to put itself one step closer towards privatisation.  All that it's taken for the ABC to demonstrate everything about itself that its critics claim is for the Coalition to not index the ABC's funding.

Eventually too, mainstream Australians are going to realise there's a reason the ALP, the Greens and GetUp! campaign so strongly for more money to the ABC.  One of Labor leader Anthony Albanese's promises made during the campaign for the Eden-Monaro byelection on Saturday is that a future Labor government would reverse the Coalition's "cuts" to the ABC.  Albanese said:  "This Saturday, the people of Eden-Monaro have the chance to send the government a message.  Don't cut ABC jobs, regional news or emergency broadcasting."

When so many people have lost their job or know someone who has, it might be that his appeal to protect jobs at the ABC reveals Albanese and the Labor Party to be just as out of touch with ordinary Australians as is the ABC itself.

We Need To Do Reform, Not Talk It

With the economy in recession, Prime Minister Scott Morrison should spend less time trying to be popular and attempting to be everyone's friend and more time advocating for the policies that will get Australians back into jobs.

When he stood up at the National Press Club last week, the Prime Minister could have announced corporate tax cuts, or reductions in red tape, or, if he had really wanted to be bold, that Australia was going to develop a nuclear energy industry.

Instead he talked about organising five working groups to have employer groups and the ACTU talk about industrial relations reforms they might each eventually agree to.  Zoom chats between bosses and unions organised by the government might well fulfil what pollsters claim is the public's desire during the coronavirus crisis for "consensus" politics and an end to partisan bickering.  But what will be the real outcomes is at this stage difficult to envisage.

To get Australia out of the recession we're now in will require the government to do more than say "we tried".  It will need a clear-eyed and hard-nosed understanding of what want to achieve

As was reported this week, Steven Kennedy, the secretary of the Treasury, said at a private meeting of the working groups "it could take five to seven years to bring the economy back to its pre-pandemic state" and with unemployment at up to 9 per cent by 2021.

Given that Australians are constantly being told "we're all in this together", presumably Kennedy will find a forum to share with those 86 per cent of Australian workers who are not a member of a trade union the insights he's willing to discuss at closed-door meetings of bosses and unions.

If there does happen to be something bosses and unions agree on it probably would have happened by now.  If there is low-hanging fruit it would have fallen to earth already.

In recent weeks the ACTU has had two opportunities to show it was interested in a different way of doing business ― but it didn't budge an inch.

The Federal Court decision allowing some casual employees access to the entitlements of permanent staff could affect more than 2 million workers, and require employers, many of whom will be small businesses, to make up back pay of up $8 billion in total.  As businesses struggle to stay afloat this is the very last thing they need, but of course it was a decision the ACTU welcomed.  According to a Roy Morgan poll, one quarter of the businesses that were surveyed said the decision will "deter them from hiring casual employees.

And when the NSW state government attempted in institute a 12-month pause in pay increases for state public servants in return for a guarantee of no job losses, the proposal was rejected out-of-hand by the ACTU.  Michele O'Neil said it was as "an insult to thousands of essential workers who had worked to get the state through the coronavirus crisis".  It's true that many essential and health workers have performed an incredible job, but NSW has 410,000 public servants.  Some are nurses and teachers, and some are administrative officers writing up diversity and inclusion plans.

Admittedly it's early days ― but so far the unions have given up nothing for their privileged seat at the table.  On the other hand, as a show of "good faith", the Coalition has shelved the Ensuring Integrity Bill to reform the administration of employer and union organisations.  What once the Coalition trumpeted as legislation to protect the interests of Australian employees it is now willing to treat as a mere bargaining chip and a political exercise ― which is what the unions have claimed all along.

No doubt there'll be some good photo opportunities when the Minister for Industrial Relations, Christian Porter, shakes hands (or touches elbows) across the table with ACTU secretary Sally McManus.  But the likelihood is that unless McManus experiences some kind of Damascene conversion towards accepting reform to nearly every aspect of Australia's industrial relations system, nice photos is all the Coalition will get from this process.

It is true that talking about reform is better than not talking about it ― but talking isn't doing.