Australia is in a recession but has withstood the shockwaves of the pandemic better than other nations.
That will not remain the case should a second wave of the coronavirus cause a “double-hit” to the economy, the Organisation for Economic Cooperation and Development (OECD) is warning.
And, it says, Australians need more support beyond the expiry date set by the Morrison government.
The latest OECD outlook urges the government to extend its support packages, including JobKeeper, beyond September.
Investment in the “social safety net” should be considered, along with more money for education, infrastructure, energy efficiency and social housing.
“There is ample fiscal space to support the economic recovery as needed,” the report reads.
The scarring effects of unemployment – especially for young workers – should be alleviated through education and training, as well as enhancing job search programmes.
“Firms should continue to be supported, including through expanded
loan guarantees, accompanied by expedited insolvency procedures.
“The authorities should be considering further stimulus that may be needed once existing measures expire at the end of the third quarter 2020.”
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On Wednesday night, a move to extend JobKeeper to university workers failed in the Senate.
Prime Minister Scott Morrison has also left the door open to removing other sectors from JobKeeper when the government announces the finding of a review on July 23.
“Where there is a better way to do things, we won’t step aside from doing them in a better way,” Mr Morrison said.
The Transport Workers Union on Wednesday ramped up calls for aviation workers to be able to access JobKeeper beyond September.
But Mr Morrison declared reopening state borders was a better way to save jobs and he urged premiers to set a date for restarting interstate travel.
The debate comes after Virgin Australia’s administrators raised concerns bidders may pull out unless the federal government extends support beyond September.
“If we’re concerned about Virgin employees, it is very important that we open up the domestic borders in this country,” he told parliament on Wednesday.
“We need to get planes flying around Australia. If you want to see planes flying around Australia, Mr Speaker, we need to open up these domestic borders.”
The federal government has been aiming for the nation to relax restrictions for “stage three” of coronavirus shutdown in July.
Economists are urging caution.
Echoing the World Bank’s warning, the OECD said that should restrictions be lifted and a second wave of COVID-19 hit, “confidence would suffer and cash-flow would be strained”.
“In that double-hit scenario, GDP could fall by 6.3 per cent in 2020…even in the absence of a second outbreak, GDP could fall by 5 per cent in 2020,” the report reads.
The report notes the Morrison government’s support for hard-hit sectors, including a stimulus package for construction – but calls for more.
“The authorities should also ensure that the social safety net is adequate and consider further investment in energy efficiency improvements and social housing,” the report argues.
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Bosses call for rethink
Company bosses want to see the Morrison government take on a radical agenda that includes tackling climate change and tax reform to lift the economy in the post-coronavirus recovery.
They also want stimulus policies, such as the JobKeeper scheme, to be phased out slowly.
A survey of 2300 company directors found that more than two-thirds (68 per cent) want to see the government rethink its agenda and develop new policy priorities in a post-COVID-19 world.
“As we navigate our way through the COVID-19 recovery phase, it’s clear that going back to pre-pandemic policy settings won’t increase business confidence, strengthen social services or boost the economy,” Australian Institute of Company Directors chief executive Angus Armour said.
“Now more than ever, Australia needs a policy agenda that supports sustainable growth, including energy/climate change policy and tax reform, and a regulatory environment that encourages risk-taking and innovation.”
Aside from pursuing pro-growth, pro-innovation policies, almost half (47 per cent) want virtual AGMs, which were introduced during the height of the pandemic to enable social distancing rules, to become a permanent feature of the Corporations Act.
“COVID-19 has demonstrated our capacity to adapt and innovate, and we need to continue that momentum rather than risk drifting back to old ways,” Mr Armour said.
A large majority of respondents (79 per cent) indicated they want to see a gradual lifting of public health restrictions to minimise chances of outbreaks compared with 21 per cent who back a rapid lifting.
Similarly, 81 per cent indicated they would prefer to see a cautious phasing out of the stimulus policies such as JobKeeper and the coronavirus supplement, rather than a rapid wind-down – even at the cost of increased government deficits and debt.