Last Sunday, 6 September 2020, the Victorian Premier released his Government’s much-awaited COVID19 Reopening Roadmap (See https://www.vic.gov.au/coronavirus-covid-19-restrictions-roadmaps). Shortly after the lunchtime press release, a host of business and industry leaders were dragged away from their Father’s Day lunches (virtual ones in Victoria) to attend a series of industry sector meetings to hear the details of the proposed roadmap.
“It is fair to say that the level of anger expressed by business and industry leaders on the Father’s Day Zoom calls convened by the government to go through the details of the roadmap after it was launched, was palpable”, said ACAPMA CEO Mark McKenzie
This anger has continued to be ventilated in various newspaper stories and TV interviews since that time with the Roadmap being variously described as a Roadblock and an Economic Roadmap to Nowhere. The modelling has been criticised by some health practitioners who suggest that some of the assumptions used appear ‘overly conservative’ and/or the proposed heath targets for reopening are unrealistic.
On the face of it, the Victorian Government’s decision to pursue a health strategy at all costs – that is without any apparent assessment of the potential severe economic and social consequences of a lockdown extension – demonstrates a level of policy recklessness that is unprecedented. Despite pointing to ‘extensive and complex’ health modelling, the Victorian Government made its decision without any evidence of simultaneous modelling of the likely impact on the Victorian economy – and the future livelihood of all Victorians.
Various studies released by third parties since the decision was announced, have estimated that the extended lockdown will likely result in the destruction of around 350,000 jobs and may contribute to more than 2100 additional deaths over the next 5 years (as a result of cancer patients deferring treatment because it is simply too difficult to access treatment services). All this before any consideration of the potential impacts on the mental well-being of the Victorian population over time.
This observation begs and obvious question: How could any Australian Government make such a narrow decision without taking account of the potential economic and social harm on its population?
“The answer is simple. The decision was taken with the knowledge that the Federal Government’s Job Keeper safety net would largely cushion the State’s economy against the severe economic impact on the livelihoods of Victorians”, said Mark
The Federal Government has separately estimated that 60% of the forecast Job Keeper payments during the December 2020 Quarter will be paid to Victorian’s. This is despite Victoria accounting for 25% of the national population, around 31% of Federal Tax contributions, and 40% of contribution to national GDP.
So, in effect, the Victorian Government was able to make a health-centric decision that imposes severe economic consequences on the Victorian population because it knew the economic costs of this decision would be shouldered by the taxpayers of all other Australia States and Territories.
Within this context, it is also worth noting that other State Governments (i.e. Queensland and Western Australia) are making similar unilateral decisions about Border Restrictions that have a severe impact on their economies, with the Federal Taxpayer funding the costs of the mitigating against the economic damage of these decisions.
“My guess is that all of us would love to be able to make business and personal decisions where the costs of such decisions fall to someone else”, added Mark.
This disaggregation of the Nation’s economy has caused many to reflect on the Constitution of Australia and the notion of Federation, with some suggesting that there is an urgent need to review this mechanism given the apparent willingness of some State Governments to put the national economy at risk for largely political purposes.
But such arguments are difficult to progress. They would involve lengthy and complex High Court actions. More importantly, they would likely lead to an endpoint that would see far greater damage done to the national economy over the medium to long term, than currently forecast.
An alternative response would be to adapt the current COVID19 compensation mechanisms of the Australian Government (e.g. Job Keeper) in a way that caps future federal government contributions to the economic repair of given State/Territory at a level that is commensurate with the contribution of that State/Territory to national economic output.
At an emergency meeting called by the Council of Small Business Organisations of Australia (COSBOA) on Monday 7 September 2020, a coalition or around 25 national industry bodies called for State Governments (e.g. Victoria, Queensland and Western Australia) to be required to pay the economic costs of their health decisions – as opposed to expecting the Federal Government to bail them out.
These Governments have effectively made a unilateral decision to suspend the principles of the Federation. Such decisions should carry consequences. Why, for instance, should the taxpayers of NSW fund the costs of economic harm in Victoria caused by a unilateral and apparently economically reckless decision of the Victorian Government?
One approach would be to cap Federal Government contributions to State/Territory economic repair using the same proportions used for the allocation of GST revenues to all Australian States. That doesn’t mean that the residents of affected States/Territories should be deprived of urgent assistance. Rather, the difference between a State or Territory’s share of Federal economic assistance and the total amount needed would be funded via a loan to the State or Territory government involved.
“The recent debate about a national definition of hotspots being used as a rationale for a harmonised approach to border management is a case in point, with a number of Premier’s blatantly ignoring the national interest”, said Mark
If individual State or Territory Governments decide to make decisions outside national cooperation, then they should be required to pay the costs of the associated economic harm. It is time to make all Australian Governments accountable for making COVID 19 decisions that are in the health, economic and social interest of all Australians – not just their own voter base!