EMERGING FROM THE PANDEMIC: WHY IT WILL BE IMPORTANT TO MAKE THE MORAL CASE FOR POLICY REFORM

Parnell McGuinness a business owner, writer and communications strategist specialising in complex ideas and business-focused communications. She also fortnightly column for the Australian Financial Review on politics, economics, good ideas and great disasters. On 20 May 2020, Parnell McGuinness joined Adam Creighton, Economic editor at The Australian, in a discussion about the outlook both politically and economically after the COVID-19 lockdowns.

EMERGING FROM THE PANDEMIC: WHY IT WILL BE IMPORTANT TO MAKE THE MORAL CASE FOR POLICY REFORM

PARNELL McGUINNESS

Thank you for having me – it’s lovely to be back at The Sydney Institute and a great pleasure to be experimenting with a new event format inspired by the COVID-crisis.

At this point in time, we find ourselves in a deep economic hole.

We have some metrics on how deep: the official unemployment rate is up to 6.2 per cent, a million Australians are receiving the JobSeeker payment, the underemployment rate is at a historic 13.7 per cent, and the government estimates that six million employees will eventually receive JobKeeper.

But we don’t properly know whether it will get deeper: there is still doubt around whether people who have had the virus become immune, whether there will be a second or third wave of infections, and whether the many businesses which have registered for JobKeeper will be viable in the post-lockdown world.

One thing is for sure: there are plenty more rounds of bad news to come – perhaps on the health front and certainly on the economic front.

The upheaval is changing our habits, our expectations and our aspirations. What will emerge out of this time is a new politics, one that responds to the ways in which society is changing. The shape it takes in Australia will depend largely on how the government and the opposition manage the risks and opportunities that will present themselves over the coming years.

I will discuss some of these risks and opportunities in a moment, but before I begin, I would just like to take a moment to reflect on the pre-COVID political landscape.

Even before COVID began to ripple across the world, political alignments were in flux.

Social democracy was in decline as parties of the Left were torn apart by intersectionalism. Chasing the chimera of individual equality, while establishing a hierarchy of victimhood inconsistent with equalisation, these parties had made themselves unpalatable to the traditional worker base. A small rump of genuine social democrats has been left behind in every nation which alternately grieves over the tatters of their once-great movement and tries to mend relations with the mainstream, but their efforts are nullified by the fringe elements within their parties.

Meanwhile the pre-COVID Right was in the process of gouging out its own differences, finding and deepening rifts between cosmopolitan free-marketeers, conservatives, populists, and righteous reactionaries, each vying to foment contempt for the other among the voting public.

The disunity on the Right had not yet become toxic enough to completely alienate mainstream voters, so populist-conservative alliances were able to win over voters the Left had abandoned. They did this largely by taking up the causes which social democrats had discarded in their great leap to the fringes.

And so, as we slouched into 2020, the political landscape was already repolarising – a reorganisation we can expect to see intensified as the world tries to find its way back to some kind of economic and epidemiological equilibrium.

The Morrison government responded to the crisis in a way that has been judged proportionate by the majority of Australians and authoritative by the rest of the world. Its mistakes have been small by comparison with the size of the task, and some decisions were made early and well, like closing borders and insisting on quarantine for all returning citizens while the World Health Organisation was still jabbering slogans about diseases not respecting borders.

However, one thing is for sure: every mistake that the government made at the peak of the crisis will be inflated by commentators and political opponents who possess the perfect information of hindsight. The conflicts of the pre-COVID era have not been erased and they are already informing tribal views of how the crisis should have been handled. These disagreements are becoming the handmaidens of existing conflicts and resentments. How we emerge from the pandemic and rebuild our economy will be coloured by the push-me pull-me of these shifting political poles.

So much for the context. Now let’s look at how things might unfold.

There are three types of risks the Morrison government will be managing: policy risks, political risks and opportunity risks. I will argue that the key to navigating them lies in emphasising the moral foundations that unite us.

Firstly, policy risk.

The $130 billion rescue package unveiled by the Morrison government at the height of the crisis is terrifyingly large. It is already heavily criticised for being out of all proportion to the challenge that COVID poses. The size of the package had a “shock and awe” effect which short-circuited some of the building hysteria among businesses and their employees. The message was unmistakable: the government understood the havoc the virus response had wrought on the economy and was not going to let blameless businesses go under or leave individuals without a livelihood.

To begin with, the temporary safety net was gratefully received. Stable social democracies like Australia expect their governments to step in, in times of crisis. The breathtaking size of the package seemed to underscore the size of the challenge, the government’s commitment to shepherding the economy through the crisis, and the capacity of the Australian budget to support a response on this scale.

Internationally, Germany and Australia were mentioned together as countries whose strong budget position rendered them able to devote enviable resources to the twin challenges of COVID.

But there were of course critics. Criticism from the Left focused on the plight of groups without access to the JobKeeper program, including government funded universities and local councils, or without access to either the JobKeeper or the JobSeeker program, like international students and migrants on temporary visas. Meanwhile, a section of the Right focused on the astronomical costs and trade-offs involved in shutting down the economy and putting over 70 per cent of the population onto some form of welfare.

These positions have book-ended an interesting mainstream discussion about the nature of fairness. This conversation is allowing us to talk about the moral foundations of the wider Australian tax and transfer system and examine what we mean when we invoke fairness, proportionality and mutual obligation.

In The Righteous Mind, Jonathan Haidt’s book on how our moral intuitions guide our political leanings, the author proposes that there are six moral senses, which act like the tastebuds of the soul. Liberals, in the American usage of the word (from now on I’ll just say “the Left”) have a slightly more limited moral palate than libertarians and conservatives (from now on I’ll just say “the Right”) but there are areas of morality which are universal across cultures and political tribes. Everyone – left, right and centre, likes caring and dislikes harm; likes liberty and dislikes oppression. We also all like proportionality and fairness (or people getting what they deserve) and reciprocity, which means people doing their bit.

We like them in different amounts and with differing emphasis, and this underpins our political differences, but we all operate within a moral matrix that values proportionality and reciprocity, likes care and dislikes harm, likes liberty and dislikes oppression.

Most of the time the operation of our own matrices within us is invisible to us – they are the framework through which we view the world, not an object of examination themselves. We rarely make our matrices explicit when we discuss policy – rather, we tend to discuss policy as though our individual moral matrices were universal.

The disruption caused by the pandemic has created a pocket of history in which we are suddenly able to talk about these policies morally rather than tribally. The policies are too new and too undebated to have become tribal totems, so we can examine them on merit.

Interestingly, in this environment, even the Labor leader whose default position is to reject mutual obligation has been talking about proportionality. At a recent press conference, Anthony Albanese lamented that a single mother receives the same JobKeeper payment as a university student who was working a few hours a week.

Some individuals have also questioned why they are receiving the full JobKeeper amount and one columnist recounts the case of his two daughters, one of whom had been earning around $200 a week for over a year in a casual job and was therefore eligible for the payment, while the other who had started a more permanent job earning a proper salary found herself ineligible for the payment.

Business owners have complained about employees who refuse to work now that they are receiving a mandated wage and have remarked on the unfairness of a scheme which pays some employees more than they were earning before, while leaving those who were earning more with less.

And trade businesses have recounted instances of apprentices who are eligible for JobSeeker preferring this payment to the apprentice wage.

For a brief moment at least, we are talking about the ethics of welfare.

If the scheme is ever to be wound back, it will be important to maintain this focus on the topic of social reciprocity — or mutual obligation — rather than the economic bottom line.

The disruption and focus on reciprocity has also opened up the opportunity to discuss national sovereignty, immigration, globalism, shared identity, the intergenerational social bargain, employer-employee relations, corporate responsibility (and by that I mean the real thing, not the performative corporate social responsibility that we have been palmed off with latterly), subsidies and economic rent, and many other topics from a moral vantage, using our shared matrices to examine ways that each of these things can be improved.

There is a brief window, before the rationally disengaged majority once again rationally disengages, to discuss policy in a way that has previously been unavailable to us. If policies in these areas are allowed to become miscast as economic policies, we will miss a once-in-a-hundred year opportunity to understand each other and set our course for the 21st century.

That might sound like high-minded guff, so let’s bring it back to something we know is rarely high-minded and talk about politics.

The second set of risks ahead of Morrison is distinctly political. Morrison narrowly won the election against Bill Shorten this time last year because he persuaded a party which had spent a decade talking about itself and waging internal culture wars, to finally stop fighting for long enough to point out that jobs are important, as is self-sufficiency and budgetary responsibility, and that a vote for Bill Shorten put all these things at risk. However, it would be naive to think that the Liberal Party culture wars are over, or that Morrison is protected against them just because he won an election by side-stepping them.

As I mentioned earlier, the Right is currently in the process of reorganising itself globally and the stakes are high.

If anything, the right wing of the Australian Liberal Party sees itself vindicated in removing a leader, by Morrison’s election win and is relishing its power. Disunity, it has been said to me, is no longer death. This means that Morrison is in constant danger from within his own party. And the Right-of-the-Right has a new unifying cause here and around the world: ending the lockdowns and, increasingly, questioning the need for them in the first place has become a tribal rallying cry for Trump supporters, the AfD in Germany, and many commentators here.

They may well be vindicated – whether they are or not is immaterial politically.

The fact is, these accusations have the potential to become a weapon wielded against the leader.

Meanwhile, the Labor Party is too unthreatening to present a common enemy for the Right to unite against. If the situation escalates, Morrison’s strength will depend on the support of the “quiet Australians” of the mainstream. He had better hope then, that the moral arguments for his decisions in taking us into lockdown and then out again are understood widely and well.

Morrison’s reported response to the idea of accepting the deaths of elderly Australians in pursuit of herd immunity as “not on my watch”, resonated and can be considered a good start. Now he’ll have to find an equally strong parole to carry us through the hard times to come.

As Australia emerges out of the crisis, Morrison will have to undertake reforms which he has previously deemed too risky. Because we will not be able to find a way back to the way things were: too much has already changed. Businesses have died, habits have changed. Our aspirations and expectations have shifted.

Australia needs policy reform that will encourage and remove barriers to the enterprise and entrepreneurialism that we need to regrow the economy as quickly as possible. We need to find better ways to contribute to each other and strengthen Australia economically, socially and morally. We will need to maintain solidarity to face a changing world in which our friends, allies and trading partners are themselves challenged and challenging.

So, the third risk is inaction.

If there is not a clear trajectory towards positive change, Morrison will struggle to defend an election in the midst of a downturn.

A government that works for people is not a government that gives them everything they think they want, but one that is in tune with the moral sentiment of the population and able to create a reform agenda founded on values rather than on an economist’s Utopia.

The COVID pandemic has created the conditions for this kind of reform agenda, by reminding us of our dependence on one another and our unity as a nation state.

The way out of the pandemic lies in seizing the political and policy opportunities that will unite us into a society that understands its moral foundations.

GETTING OUT OF LOCKDOWN – POLITICS AFTER THE PANDEMIC – DISCUSSION – ADAM CREIGHTON, PARNELL McGUINNESS & GERARD HENDERSON

Gerard Henderson: Thanks to you both for such wide-ranging assessments.

Adam, the question is will there be some jobs that won’t return? As I recall, a year or so ago you wrote a piece in The Australian saying a lot of people had nothing jobs. These jobs they thought they were doing didn’t really exist because they were essentially talking to one another or writing papers to one another. Those jobs that you targeted will they return? If you’re in a big company and you’re really not doing much that’s productive, will you retain such positions or will those jobs disappear?

Adam Creighton: I think the phrase was actually “bullshit” jobs Gerard. I don’t know if I’m allowed to say that.

Gerard Henderson: Bullshit jobs?

Adam Creighton: It’s a technical term. The anthropologist David Graeber has made it so. Look, it’s a really profound question. One of the ironies of this, at least in the short term, is that you’ve seen a lot of jobs lost that are actually useful jobs, stuff that has to be done. In restaurants and hospitality, in tourism, in retail sectors. It’s the corporate jobs, the office jobs, which more readily fit that description. So far at least, these have survived because they can be done at home. What actually “done” means is another issue. A lot of large firms, as I mentioned in my speech, as the months and weeks go on, will have to look at who is worth their salary in these organisations. If you are to make cuts surely it is going to be these jobs that will go first. In the short term, those jobs are safe but in the long term this will be a real jolt to the economy that could see many of them phased out. Ironically, this work from home period highlights who is producing what. Short of all of the Facetime in the office, what matters for the organisation? And that’s going to become very stark.

Gerard Henderson: So to some extent these are back office jobs in big companies?

Adam Creighton: Yes, or social responsibility jobs, PowerPoint production jobs, you know, these sorts of jobs.

Gerard Henderson: But these jobs pay quite well.

Adam Creighton: That’s one of the great ironies of those jobs, which I wrote in that column – they do pay well.

Gerard Henderson: Taking them out of the economy will have an impact, although it might be good for individual companies.

Parnell McGuinness: May I just weigh in on that question because I do have a little bit of insight here. It doesn’t look like those jobs are going anywhere. They all have a word like strategy in their titles and nobody gets rid of a strategist in a crisis.

Adam Creighton: Good point.

Parnell McGuinness: So those jobs are looking, from where I’m sitting from dealing with big businesses, quite safe.

Adam Creighton: What about the thought leaders? Are they okay?

Parnell McGuinness: Well with thought leadership you still have an output that you can produce from home, right. So, these kind of communication materials are still very visibly being delivered. It is some of the other jobs, the frontline jobs, which are disappearing because you can’t perform them easily under lockdown.

Gerard Henderson: So, you reckon that the wellness departments are safer are they?

Parnell McGuinness: The wellness departments are going to be working overtime making sure that people’s home offices are HR compliant.

Gerard Henderson: I see.

Adam Creighton: I think there’s some truth in what Parnell is saying. But it’s just too early to know yet. It depends on how bad the downturn is. I was being a bit optimistic in my speech. That’s kind of useful at the moment, actually. But if it’s a really severe downturn I don’t know. There’s going to have to be big cuts.

Gerard Henderson: Going back to Parnell, one of our members asked the question what if there is no way out? If there is no vaccine, which is a possibility. Within a year or two years it’s a possibility there’s no vaccine, is there no way out? Do we just continue with a partial lockdown? If so, what’s the impact of that? Won’t people start finding their own way out?

Parnell McGuinness: At every stage, the population has actually been ahead of the government in this. The population started locking itself down before there was a formal ruling on that. And it started, at least observationally from what I can see – around the streets and around the CBD and major suburban centres like that – unlocking itself before the government had made the announcement that it was time to come out of our shells again. People will start moving back into the economy in ways that they can find to operate. There will be some things, however, that won’t be able to be done in the same way and of course there’ll be different fear levels. Some people are just going to be a lot more nervous for a lot longer and that will change how some services are delivered and what people want.

Gerard Henderson: So, the impact, going back to you Adam. As you said you were optimistic and there’s good reason to be optimistic for psychological reasons. But, as you know well, there is another side to this. And the question is will we get back to anything near normal? If you take for example a restaurant which will be limited. Or, to some extent it would seem, about how many people can be there or travel, which is going to be a huge problem. Or people trying to get into lifts in offices if there’s only one or two people allowed in the lift. The economic decline here could well continue, depending not so much on the Commonwealth government, which as you know is trying to get things working as well as it can, but resistance from nervous state governments who with their leaders and people and their health departments are worried that someone’s going to die and they’re going to get blamed for it.

Adam Creighton: It’s partly a function of just how long people are willing to put up with these measures. It’s very clear at the moment there’s an enthusiasm for lockdown generally and for the various measures. That’s what polling shows, not just in Australia but around the world. But it’s a question of how long that’s going to last and if people are frustrated with restrictions in lifts, or if they can only go to restaurants where there’s ten people allowed. Last night I went to my first restaurant in about nine weeks. I had to go to four different ones before there was a vacancy. It is a great frustration.

The fear of this virus was obviously very extreme back in March and that’s why everyone enthusiastically embraced all of these measures. But, more and more, people will come to see that it’s not so dangerous, at least for certain segments of the population. Therefore, they’ll be less tolerant of these arbitrary restrictions, which would be good for the economy.

Gerard Henderson: So, what does that do to modelling, such as in relation to climate change? A lot of what people say governments should be doing is based on modelling. It’s a long way off to determine the accuracy of that modelling. But in relation to this virus, the modelling in places like Australia and New Zealand, has been way off. All may be, as you have pointed out, due to isolation and stopping international travel. But in both countries the number of cases, number of deaths, have been low. But even in places like Britain and the United States it seems that the estimates of the death toll from the virus seemed to have been higher than the modelling suggested. How is this going to affect modelling and how we regard modelling, that is those of us who are aware of the concept of modelling?

Adam Creighton: It has been a public relations disaster for modelling. I imagine climate change advocates will be very frustrated by this experience because in the eyes of the general public, modelling has been shown to be ridiculous. They’ll just transfer that over to climate change.

Parnell McGuinness: That is part of that of the political conflict that will be building in all of this. As you say, people who had been talking a lot about climate change modelling, and resting their arguments on similar modelling to what we’ve seen in this pandemic, are saying it’s wonderful that we’re relying on experts. If that flips the other way and it turns out the experts here did not know what they were talking about and have lead us into poverty then the whole discussion about experts and modelling is going to be pushed on its head and the climate change modellers are going to find themselves having to explain themselves.

Adam Creighton: A lot of politicians stopped using the word modelling. It could become so embarrassing. I mean it’s too early to say. But certainly, it’s going to sink in that these models were hopeless.

Gerard Henderson: One of you mentioned, that some of the modellers looked back on the Spanish flu of a century ago. And as you know, in Australia the official figure I think of deaths is 12,000, that’s estimated. It’s regarded that that’s a bit low and it was probably was probably 15,000, which in contemporary Australia with an added population would be something like 75,000 dead. At the moment, we’re at a hundred and it may go higher. Of course, modelling has assumed a second wave which may or may not occur. So those who were proclaiming the models – and of course Norman Swan and the ABC was one of the lead figures going public with these kind of projections – do you think that will translate across to climate?

Adam Creighton: It will a little bit. It’s obviously much harder with climate because the results are so far away, many decades or even centuries away. Whereas with a pandemic you find out within months basically. That’s what makes modelling so fraught with these viruses. I think the media generally has not served us well throughout this crisis, with these models of disease likely spread being grossly exaggerated. You’ve got to ask why the media wasn’t questioning Neil Ferguson at Imperial back in March. Ferguson has a track record of gross exaggeration over more than ten years. Yet his modelling formed the justification of British government.

Gerard Henderson: It came in Britain in relation to one of these animal outbreaks.

Parnell McGuiness: Mad Cow disease.

Gerard Henderson: They had to slaughter six million animals. But he’s still going. He’s still an expert although he’s got certain problems.

Adam Creighton: Of course, he didn’t abide by his own rules.

Gerard Henderson: So let’s go back to the issue of the pandemic and the difference between the public sector and the private sector. Parnell, you were talking about this in a certain sense. As you know, you’ve got a situation where decisions have essentially been made by elected politicians but very much advised by non-elected health experts. This is a situation where the public service is advising politicians, implementing rules and regulations which are then enforced by police or local council rangers. Essentially the public sector is telling the private sector that they can’t go out whilst people in the public service are going out to tell people they must stay in. Is this going to exasperate the kind of differences you referred to?

Parnell McGuinness: There are a lot of public private sector differences which have been highlighted by this. Yes, there are the strange images of police standing not far away from people whom they were telling to social distance. People whose jobs are absolutely not at risk by lockdown regulations are making decisions without fully appreciating how they were going to be felt across the economy, perhaps not even appreciating the web that is the economy. If one person loses their job that has a ripple effect across the entire economic web that’s around them. It’s not only that we’re not going into the office anymore. The dry cleaner is not getting dry cleaning anymore. The coffee shop isn’t selling coffees anymore. There are a lot of real jobs which have depended on our existing way of doing things and with a stroke of a pen – which from a public service perspective can be done from home – they’ve eradicated all of these jobs. There will be a huge amount of resentment about that, apart from anything else. I have talked elsewhere of hearing a lot of anger against public servants talking from on high about how people should behave in all of this while not understanding the economic impact that they were having on people.

Adam Creighton: It’s really highlighted the value of tenure in a job. In a lot of public service jobs you’re not readily sacked. In theory you can be but it very rarely happens. There’s been this argument for decades that we have to pay the top public sector leaders the same as people in the private sector and that’s happened. Indeed, you could argue it’s actually gone further in some cases. But that completely ignores that when there’s a crisis the person in the public sector is going to keep their income and that is extraordinarily valuable. Whereas the person in the private sector may not. And that would explain the old distinction of why you might earn a lot more in the private sector because there is some more risk entailed.

It shows the wrongheadedness that we’re paying our department heads $900,000 a year which is increasingly the standard. It certainly never used to be. There are valid questions to be asked about that now. But, more broadly, Parnell is exactly right. You’ve had people making decisions who don’t face any personal cost. Indeed, if you want to be cynical they actually benefit from the shutdown because by keeping their big salary they’ve moved higher up in the social pecking order, as other people lose their jobs. And if asset prices fall, as they probably still will, you can pick up assets more cheaply. That’s very cynical but that’s the reality.

Gerard Henderson: Parnell’s suggestion is people will become more conscious of this. Going back to the Great Depression, I wasn’t around then, believe it or not. But I’ve read a bit about it. We had a more regulated industrial relations system then, although it’s still pretty regulated now. There was across the board cuts of ten per cent and then there was another 10 percent due to automatic increases not being delivered. And there was of course some deflation as well. There was some sense that everyone in this society made some kind of contribution, although if you were in the public services, losing 20 per cent or 10 per cent wasn’t a great deal if you were coming back. If you were in the private sector it was different. But there was some degree of sharing. What we’ve got now, as far as I can see, is that those in the public sector don’t appear to have had any problems with employment or wage reductions and those in the private sector have been, many of them, decimated, particularly entrepreneurial people working in restaurants or setting them up or dry cleaners and these sort of small business or franchise businesses. So, is there an argument for a perception that there is a greater sharing of the burden?

Adam Creighton: There should be. New Zealand’s Prime Minister did a good job. She cut her salary and her ministers by 20 per cent for the duration of the lockdown. That’s very good politics. It’s also a fair and reasonable thing to do. I’ve been very disappointed by the federal government for ignoring this question. All they’ve done is defer a two per cent pay rise as the big “sharing the burden”. That’s laughable. But if you’re on $500,000 or $800,000 you wouldn’t even notice two per cent anyway. It’s hardly sharing the burden.

Gerard Henderson: Well, I’ll just correct you for a second. The people on $500,000 or $800,000 are actually the public servants.

Adam Creighton: Agree, basic politicians are on around $250,000. Which is still a big salary in the big scheme of things. A lot of MPs forget they’re actually very well paid. Because they’re constantly associating withcorporate elites who earn more than them.

Gerard Henderson: Well that’s true but some of them don’t have secure jobs because they could lose their seat.

Adam Creighton: Yes that is true.

Gerard Henderson: Whereas the public servants, these days have jobs that are pretty secure for the most part.

Adam Creighton: They are and I hope the Coalition will use this as an opportunity to reform some of these disparities between salaries.

Parnell McGuinness: I can’t comment on the disparities in pay. I would say that it might have been nice to see a bit more skin in the game through taking a bit more of a hit for the duration of the lockdown while forcing Australians onto the dole queues. Note that the Singapore government actually did this really early. At the end of February, as soon as it realised that it was going to require sacrifices of its people, the Singapore government partly cut their salaries for a couple of months at the time. I’m not sure if they’ve done it since then. And the Singapore Airlines CEO immediately took a pay cut for the time being. There was a sort of symbolic upfront that “we are in this with you” message they were sending out that I thought was quite important to how Singaporeans responded at that point

Gerard Henderson: A couple more questions. People are looking at or interested in what we might do with reviving our manufacturing industry. As you were saying Adam that would be pretty difficult with the current regulations, including industrial relations regulations.

Adam Creighton: It is very difficult. The only thing that might help it is our exchange rate has fallen a great deal recently, which is below the long-term average. Certainly, it has fallen a lot over the last 12 months. That will make us a cheaper place to shift manufacturing. But if you’re a big multinational you make these decisions over a five or ten-year time frame. It could go up, they don’t know. Therefore, you wouldn’t shift production based on that. You’d only shift if governments were going to introduce tariffs in a somewhat permanent fashion. I just don’t see them doing that. Therefore, the incentive to shift to the cheapest location isn’t going anywhere. It’s a romantic ideal. I would love more manufacturing in Australia, absolutely love it. Stable, well paid jobs. But I just don’t see in practice how you get it back.

Parnell McGuinness: To be fair, they have been talking about advanced manufacturing and high-value goods. Where the gap seems to be is that we actually don’t have enough skilled people to be delivering on those jobs at the moment. One of the things that big businesses have been doing is bringing in people from overseas to do jobs at a level which is normally the apprentice entry level. This sees them learning the jobs to do the advanced manufacturing or highly skilled sort of work. Australia does have an opportunity to improve on that. But it will need to be through business understanding that there is a new way and that it has to relate to the Australian population. In a new way, that it needs to invest in Australian people as well as land and have the profits of sales here.

Gerard Henderson: One of our members who’s a farmer sent a note saying that at a technical college in one of the major states, she could sign up to do diplomas, or whatever, in certain beauty treatments but she can’t sign up to do plumbing. This obviously is a problem for state governments. They run the TAFE system. But how do we move back to a situation where we’re doing more of what used to be TAFE courses within TAFE courses rather than what has developed as TAFE courses in many states in recent years.

Adam Creighton: It’s a hard question. I’m not a huge expert in the higher education area but I do see that vocational education has been a disaster in Australia on the policy front for a decade or more. Something has to change. And it’s been rorted by private operators taking advantage of federal government subsidies. This has all been well reported. Maybe this huge shock to the higher education sector, in terms of losing lots of foreign students, will in the long run be a good thing. Certainly, in a short run it is not a good thing for those institutions but it may force them to focus more on domestic students, which, you know, given their origin in government, is or should be a high priority. Right now, it’s about charging as much money as possible to as many foreign students as possible to ensure we can have pro-vice-chancellors on $400,000 a year. That’s basically a model. Slightly facetious.

Gerard Henderson: But it’s not untrue.

Parnell McGuinness: Also, there is going to be a high rate of youth unemployment over the next year or two. We can already see that coming through. One of the opportunities that lies ahead of us is the opportunity to look at systems around the world that have dealt well with that. One of those is the Swiss model which starts apprenticeships during school but sees them as part of a career path. You start a vocational trade, and about half of these students go to university straight out of school, the rest go on to learn a trade and then might go on to university or technical college later on. As a result, the Swiss unemployment rate is around three point four per cent and youth unemployment is half a per cent higher.

Gerard Henderson: As you both know, this has been a country of high immigration, some would say very high immigration, in recent decades going back really to the end of the Second World War. It looks like, as you both mentioned, there’s going to be an artificially endorsed decline in immigration. What kind of impact is that going to have on the economy? There is an argument that immigrants were taking jobs. Well that will be tested now.

Adam Creighton: That’s true. It’s going to be a very interesting experiment. One that we wouldn’t have chosen. Some people will be very happy about this, I might add. And I kind of respect their arguments. We have had very high immigration. The highest in the Western world. At 1.5 per cent a year and the vast bulk of it of course is net overseas migration. It’s going to have a huge effect on headline GDP and it’s going to mean that we have a lot more recessions, if you like , because the main reason that we had that 28 years we kept hearing about was because of high immigration. If you look at per capita terms we’ve had three or four recessions, if you like, in that period. Those per capita recessions will become actual recessions which will be very embarrassing for the political class because they can’t rely on immigration anymore. It’s going to have a huge impact on the property sector. Dwelling prices will fall. Rents will collapse. All this is just starting to play out.

You could argue that after the lockdown measures themselves, this is the biggest change our economy is going to endure. I’m a bit on the fence as to whether it’s a good or bad thing. I used to be pro huge population but I’m starting to see that there are problems with that.

Parnell McGuinness: Let’s not forget that Australia has always had one of the best managed immigration systems. I see a big positive in being able to bring immigrants in with the sort of caveats that Australians have had in the past. But this is possibly the opportunity to look at where companies have brought them in for those lower paid roles that I was mentioning before. Companies that then take the opportunity from an Australian kid to get on the first rung of the employment ladder or an apprenticeship career. We have said that we have always focused on high-skilled immigrants. The truth of the matter is, however, they’re about a third of the program and the rest is made up through university visas being allocated, becoming paths to citizenship and so on. And not always in high quality university education. It’s not like we’re training up the best people who then become Australian citizens. We need to look at some of those areas. But a lot of our prosperity does come from immigration. And we do need to look at how we can fix the immigration program to ensure we are still benefiting from that. And that people who want to come here and contribute to our society are still benefiting as well.

Gerard Henderson: I’m going to ask you a final question in a minute which only requires a one-word answer. Before we do one of our members has asked about the concept of resources. I noticed that on Q&A the other night there were voices from the audience, the virtual audience, that any kind of recovery from any government involvement should involve most of its money going into alternative energy resources. We have spoken about the climate change debate and modelling but what about the current debate about energy? How does that fit in in a post pandemic environment.

Adam Creighton: My first observation is that if we’re poor or if there’s a recession high energy costs are going to be felt more keenly. So there’ll be more frustration at high cost electricity in this country, which as we know is now amongst the most expensive in the world from amongst the cheapest 20 years ago. That’s been a colossal policy failure. Rightly or wrongly, people do associate that extraordinary increase with a lot of this renewable energy push. The debate about it is incredibly vicious as you know. The notion that Australia can have 100 per cent solar and wind power, even in 20-50 years, based on reasonable assessments is ludicrous. There’s no country in the world that’s getting anywhere near that. Even Germany, which is furthest ahead in this. And as far as I know it’s becoming increasingly considered a failure.

Parnell McGuinness: Germany has been transitioning away from nuclear for a while – since Fukushima. McKinsey wrote a report at the end of last year which assessed the progress of the transition to renewable energy. Basically, after 30 years, Germany has about 30 per cent of its energy coming from renewable energy, and the withdrawal from nuclear is going to cause them a huge problem. It’s causing greater reliance on coal now, despite all the rosy projections of the renewable energy advocates. Realists looking at this don’t see how the renewable energy sector is going to make up for the energy taken out by the nuclear sector. A lot of the renewable energy that is being provided is coming from biomass which is considered reasonably un-environmentally friendly.

Gerard Henderson: Biomass is burning wood?

Parnell McGuinness: Yes.

Adam Creighton: Chopping down trees.

Parnell McGuinness: That’s right. Chopping down trees and this sort of thing. Essentially it doesn’t look like there is a technology at this stage that we could simply say, “Great alright we’re going to put a lot of investment into this and it’ll be fine. We’ll have enough of it by 2050 as long as we invest enough. So that we don’t need any other kinds of energy.” It does not look like that at this stage. A much greater opportunity at this point would probably be to say, okay since we’re in a moment of reviewing all the regulations and subsidies and seeing what needs to be there or not, let’s take them away from energy and see which of these energy sources people genuinely want to invest their private sector money in without the subsidies from government. Perhaps at the same time we could look at economic grants on other types of energy.

Gerard Henderson: So, in conclusion, our topic was coming out of lockdown or getting towards the end of the pandemic. You’re experienced in the economics business. Optimistic or pessimistic?

Adam Creighton: I was optimistic in my speech and so I’m going to stick to that theme. I just want to say it’s not going to be a 1930s type experience. It’s going to be better than that.

Gerard Henderson: Parnell?

Parnell McGuiness: I don’t think it’s going to be as bad as the 1930s. As Adam was saying, we’re healthier, and we’re wealthier to begin with. We’ve got a number of things going for us. In a way, it’s up to us from here. It’s up to us whether we get this right or we completely stuff it up.

Gerard Henderson: Thanks to our members for sending in questions. Thanks to you both for great talks and discussion. Well done, thank you.