NOBODY LIKES RUNNING DEFICITS, BUT RIGHT NOW CREATING JOBS IS PRIORITY NUMBER ONE
The Canberra Times, 2 September 2020
‘The first duty of all Governments in the present period of stress is to relieve, as far as possible, the hardships and needs of persons who are willing to work but cannot find employment.’
The year was 1930, and the Canberra Times editorial reflected the anguish of the Great Depression. Around the world, unemployment spiked, and millions of lives were blighted by joblessness.
Nine decades on, the world is suffering the worst downturn since the Great Depression. Yet economic policymakers have a considerable advantage over their predecessors. It wasn’t until 1936 that John Maynard Keynes published The General Theory of Employment, Interest and Money, advising governments to spend in order to support demand. Keynesian economics did not become mainstream until decades later.
Today, the economic response to the global slump is more coordinated. The OECD, IMF, G20, RBA and an alphabet soup of other expert bodies have uniformly recommended that governments invest to keep unemployment down. Economists know that joblessness is particularly damaging for young people, with those who graduate in a recession experiencing the scarring effect up to a decade later.
The longer the downturn goes on, the greater the impact on employment. Firms cannot stay frozen forever, and when the insolvency laws return to normal at the end of September, it is possible we will see a succession of corporate collapses. Organisations are also increasing their uptake of automation – replacing factory workers with robots, and service workers with computers. The consequence of this may be that once a vaccine is found, firms will decide that they need fewer workers than they did before.
Another change is affecting cities. Throughout the post-war era, there has been a steady movement of people from regional areas to major cities. City workers tend to be more productive, and urbanisation has been a major driver of economic growth. But COVID-19 will slow this trend. If a significant share of office workers begin working from home, there will be fewer jobs for those who currently provide security and cleaning services. Much of this is hard to predict, but if past recessions teach us anything, it is that the economy never ‘snaps back’ precisely the way it was before the crisis.
Here in Canberra, thousands of jobs have been lost, with the arts and hospitality sectors hit especially hard. Worse yet, many workers in those industries are casual workers who’ve been with their current employer for less than a year. Consequently, they’ve been entirely excluded from the federal government’s JobKeeper program. Universities, too, have suffered a massive drop in revenue, yet received little help from the Australian Government.
For the ACT Government’s part, the response has focused on securing a double-dividend: supporting jobs, while delivering a social benefit. A host of infrastructure projects have been fast-tracked, including work at the Canberra Hospital, Canberra Institute of Technology, Canberra Glassworks, the Canberra Theatre, the Academy of Interactive Entertainment and the National Convention Centre. More schools, universities, social housing and active transport are being constructed. Contractors have been employed to plant new street trees and remove old ones - literally taking out the dead wood.
Other programs have aimed to create jobs that support people through tough times. Lifeline, Menslink, and OzHelp have received more resources. Two Canberra Safe Haven Cafés will provide mental health support. In the community sector, the ACT stands out from other jurisdictions in providing funding for the equal remuneration order – a historic pay equity ruling that will not be funded by the federal government after 30 June 2021. Without this, those community sector jobs could be lost entirely.
Prior to the coronacession, employment in the ACT stood at 238,300. Since the downturn, it has shrunk to 233,400. The government’s goal is to grow employment to more than 250,000 by 2025.
Will the ACT go into debt? Yes, but so will every other state and territory in Australia. As ANZ economists Cherelle Murphy and Jack Chamber recently noted, ‘State and territory net debt will move to new highs.’ But as they pointed out, there isn’t much of an alternative: ‘Without discretionary policy action, economic conditions across the states and territories would have been worse, so we support the policy action’.
According to S&P Global, the ACT ranks alongside NSW as having the best credit ratings of all states and territories. In the current environment, a jurisdiction that chose not to borrow would be engaging in the worst kind of intergenerational inequity: condemning the unemployed to additional years of painful joblessness.
In 1930, the Canberra Times editorial offered a range of proposed ways to support employment. None were perfect, they admitted: ‘It would be easy to raise a dozen objections to this or any similar scheme’. But ultimately, they concluded: ‘neither logic nor economics can outweigh the claims of a large body of our fellow citizens who are at present out of work’.
The priority now, as then, is simple. Jobs, jobs, jobs.
Andrew Leigh is the Shadow Assistant Minister for Treasury, and his website is www.andrewleigh.com.
Authorised by Paul Erickson, ALP, Canberra.
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