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Australia's responded to Corona virus with panicked lockdowns and a reckless spending spree

By Brendan O'Reilly - posted Thursday, 16 April 2020


Effectively the Commonwealth and some state governments are "hanging landlords out to dry" by overtly encouraging both residential and commercial tenants not to pay their contracted rents.  While many commercial landlords are large corporations (some overseas-owned), residential landlords are generally mum and dad investors (often retirees or people with mortgages).  Such people are now effectively being expected to provide and subsidise social housing, that is normally a government responsibility.

[There is a precedent illustrating what happens when a "no evictions" policy is adopted.

According to the ACT Hansard, in 1983 the then Minister for Territories and Local Government, Tom Uren, began a policy of no evictions under any circumstances in respect of ACT public housing tenants.  Before the 1983 edict, rent arrears hovered at just over $200,000 per year. Within two years of implementing a no-evictions approach, that figure increased six-fold, because many more public housing tenants simply stopped paying their rent.  Before the minister changed his mind in 1985, 3,800 out of 11,000 tenants, owing a total of $1.2 million, were in arrears.]

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The government has also introduced other measures, which seem imprudent.

Nearly 618,000 Australians have applied to get an early release of their superannuationunder the Federal Government's plan to help people out of work and facing financial hardship during the corona virus pandemic.  Clearly, if withdrawals of super by such numbers are allowed, the retirement income system is threatened.  Additionally, if funds respond by liquidating shares or property to pay the money, this will place asset markets (already in crisis) under further pressure.

Under the Higher Education Relief Package, there will be 20,000 places available in short-term nursing, teaching, health, IT and science courses, and universities will retain the $18 billion budgeted this year, regardless of any fall in enrolments.  Maintenance of funding is probably justified but it is hard to imagine demand for new short term courses (or how worthwhile courses can be put together at such short notice) under lockdown conditions

Lockdown/quarantine restrictions are having an important effect in preventing spread of the virus.  There is an undisputed need, for example, to quarantine anyone with the virus and persons in close contact with them, as well as others (e.g. travellers from overseas, those on cruise vessels) considered high risk.  At the same time one gets the impression of a panicked lack of targeting because the shutdown does not vary much with either regional risk or indoor/outdoor location.

Most outdoor activities are very safe, where social distancing is followed, and should be permitted.  Victoria has many complete bans on innocuous activities.  Fishing, hunting, boating, camping, and golf are not allowed during the pandemic.  In NSW convoys of police have been targeting parks and beaches ordering many people to go home immediately.  Outdoor auctions and rural clearing sales are also among banned activities, many outdoor sports have been stopped or discouraged, and commuting between home and second homes has also been prohibited.

Share prices for childcare providers have rocketed (the four listed childcare operators all went up around 30 per cent) immediately after the government announced a $1.6 billion plan to provide free childcare to working parents during the COVID-19 crisis.  The sector had been struggling as parents (as might be expected) pulled kids out because of the virus.  Childcare (in my opinion) is higher risk than schools, which have been widely shut down, because childcare is a major source of spread for colds, flu and other viruses, and social distancing at centres is almost impossible to enforce  Free childcare in the current circumstances is a ridiculous response to special pleading.  Instead it makes sense to shut down child care centres while shutdowns are the rule for schools.

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Counselling services for families at risk of, family violence (such as 1800 Respect and Mensline Australia) will share $150 million.  This is a lot more money for programmes that already benefitted from large funding increases for little apparent result.

The Morrison Government’s $130bn wage subsidy package has now passed both housesof Parliament with Labor support, after the Coalition rebuffed calls to expand eligibility to one million short-term casuals and to temporary visa workers.

The timing of big spend has been rushed because of the circumstances.  More pertinently the size of the spend seems unnecessary, and does not properly address the biggest need, which is to assist badly affected businesses with their fixed costs (especially rent and interest).  What particularly disappoints is an almost complete lack of effort to mitigate the burden on the taxpayer or a plan to reduce restrictions as soon as feasible.  For example, little effort is being made to require use of leave entitlements or to provide loans instead of unconditional handouts.  If the lockdown lasts six months as planned (and I have strong doubts that it will), the economic damage will be huge.

The $320 billion being spent to alleviate the effects of the virus on the economy and on public health is a huge amount of money.  We need to remember that if these funds were allocated to other areas of health services (e.g. pharmaceuticals, coronary care, cancer) the money would probably save a lot of lives (maybe even more than we will lose to this virus).

Overall, the Morrison Government (with State governments in tow) is acting like a bunch of socialists.  Over the course of little over a month, fiscal restraint has been entirely dumped in favour of an unrestrained spending spree, and personal freedoms have been unjustifiably restricted in many areas.  Eventually a time of reckoning will come, and all the increase in debt will need to be paid for.

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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