What Covid Plan? Paul Keating seizes on the “good news” but Australia’s economy is changing for good

by | Sep 6, 2020 | Economy & Markets

Paul Keating seized on a huge jump in productivity in this week’s horrific GDP release but the effect of the pandemic will profoundly change the structure of Australia’s economy for good. Michael West reports.

Paul Keating was on Fran Kelly’s ABC radio show on Friday. He’d picked up a peculiar thing from the GDP release.

The headline number was horrific. Australia’s economic growth had shrunk by 7%, the largest drop on record, wiping out four years of growth and sinking the nation, officially, into its first recession in 29 years.

Keating seized on the bright spot though, or at least what he thought was a bright spot.

Buried in the National Accounts data and apparently picked up by nobody, yet, were the figures for GDP per hour worked. It was an increase. Yes, an increase, and not a trifling increase either.

Growth in GDP per hour worked was up from 0.6% – the average over four previous quarters – to 4.1%. It represents a fantastical rise in productivity – a seven-fold surge in productivity.

Businesses have shed millions of workers so wage costs plummeted by 9.3% and wages are usually the highest cost in a business.

Will the passage from JobKeeper to JobMaker finish at JobSeeker?

Paul Keating had embraced the productivity data for a political cause. The former PM is agitated by the Government’s constant attacks on his baby, the superannuation system, particularly the continuous undermining of industry super whose funds perennially outperform the bank funds due to their lower fees.

Yet there was just as much political mileage in these GDP numbers for the other side. The productivity numbers per worker allow the government and its backers to claim that their JobKeeper scheme has been a resounding success, that it delivered business the time and the leeway to restructure without redundancy costs, to get rid of workers they didn’t want or need.

“Look, productivity per worker has soared,” they will no doubt claim when the numbers sink in.

The bigger issue however how many workers, the millions unemployed and underemployed, will ever come back to the workforce.

But workers who don’t have a job won’t be getting a wage, let alone super. And there are likely to be millions of them.

The absolutely critical factor in all this is automation. The pace of technology, particularly AI, will continue to eat away at workforces. Machines don’t need a wage or super or long service leave; they can’t sue you.

The legacy of Covid is shaping to be systemic structural unemployment and underemployment. We are heading towards Universal Basic Income (UBI) territory. The major parties remain in their “trickle-down” rut, adhering to neo-liberal economic theory (while doing their best to ignore the fact the Reserve Bank is pursuing MMT, creating new money).

The challenge, as they continue to create this new money by Quantitative Easing, is to get it out of the grip of the banks and circulating in the economy. The spectre of another rate cut now looms.

Treasurer Josh Frydenberg is to announce his raft of investment allowances/credits/write offs in October, probably using RBA Governor Phillip Lowe’s banking lines.

Who will invest? Will businesses invest in people, or AI and warehouses.

It is a fair bet that there will be prolonged unemployment due to the private sector’s reluctance to invest in job-creating capex, and the reluctance of conservative politicians to invest in infrastructure for the long term.

Such is the Covid Plan.

Purple House and MMT: new money creation is real, it is not a “leftist” conspiracy

ABOUT THE AUTHOR

Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

6 Comments

  1. Avatar

    In the interview, it seemed like Keating was appalled that while productivity soared, wage growth had halted and the LNP were using C19 as a scapegoat for their philosophical opposition to and freezing of Super (despite the fact it was meant to be raised almost 20 years ago). I think Keating’s message was; the productivity numbers were a substantial reason as to why workers deserve an increase in their Super and/or wage.

  2. Avatar

    I’m finding it hard to believe the people working at home do more work than they do at the office. Wouldn’t most people saving commuting time use that time for themselves. Is there a link to this productivity study? I’d like to take a look at the methodology and respondents.

    • Avatar

      I work for a big Melbourne tech company. We’ve been at home since March. The pace is hectic with most people working extra hours per day (some accidental because we’re always connected via work apps and some intentional for managers quickly pivoting plans to work with “covid normal”). The office is scheduled to close over Christmas because most people haven’t taken holiday leave since early this year and HR are worried about it.

    • Avatar

      I work for a company involved in rail signalling, so given the amount of rail infrastructure projects in Melbourne i can say there definitely has not been a slow down of work. In fact it remains busy all the time. Of course i cannot speak for everyone, you would need a study with a large number of participants to determine changes in working regime but i have found i am working more hours than reported so on paper I am more productive than when i only worked 8 hours in an office, now the time i would have spent commuting, and often into the evenings is spent on work. So on paper, more productive per hour, in reality probably slightly less or the same.

  3. Avatar

    Maybe Covid has enforced workplace changes against the natural instincts or ideology of corporate management and related commissioners?

    Many industries and sectors have not changed their management and workplace cultures under the mantra of keeping costs low and improving efficiency. However, this has been bypassing much potential improvement in workplace well being and effectiveness, due to the return (did it ever go way?) of Frederick Taylor’s ‘Scientific Management’ as used by Henry Ford on production lines.

    How many Australian workplaces, including service sector like higher education, became corporate factories with piece work on production lines for input/output, fewer union members, less job security, little personnel development, sub-optimal (mostly top down, with less lateral and bottom up) communication, distant management and low or no innovation?

  4. Avatar

    Should we really be looking to the GDP for a silver lining? After all, it’s a subjective matrix of statistics. As Rutger Bregman in ‘Utopia for Realists’ says “We’re all still fixated on efficiency and gains as though society were nothing but one big production line. But it’s precisely in a service-based economy that simple quantitative targets fail.” What about metrics that measure quality of life?

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