In late March the government announced a second economic stimulus package in response to the COVID-19 pandemic. While the package was significant, it did very little to deter employers from laying off huge numbers of staff.
The $66 billion announcement – combined with the initial $17 billion, and the Reserve Bank’s measures – means that an extra $189 billion will be pumped into the economy. This is close to 10% of Australia’s entire GDP.
But within days major employers were already announcing that tens of thousands of workers would be immediately sacked. Thousands of small shops and restaurants were also closed. Some because of the COVID-19 restrictions, but others were already struggling and the latest developments pushed them over the edge.
Some commentators now estimate that an extra million people could join the ranks of the unemployed across Australia within weeks. That is a tragedy, but unfortunately a million could still be an underestimate.
The government itself has been forced to admit that the crisis is so severe that even more economic stimulus will be needed in the coming days and weeks. The alternative of letting the market ‘correct itself’ would result in the total collapse of the economy.
Immense social and political implications would flow from a collapse and that is what the government wants to avoid. While they try to appear generous, they are really only acting to save the skin of their big business backers.
Like the first stimulus package, large parts of the plan are designed to prop up companies and profits. Tens of billions in loan guarantees are being offered to bosses and changes have been made to soften insolvency and bankruptcy rules.
The Reserve Bank has also injected more than $100 billion of liquidity into the big banks in the hope that this will buffer them from a collapse that would wreck havoc throughout the entire economy, including housing.
Businesses have been offered wage subsidies, and while some companies will take them up, the slowdown in trade has meant that many have instead decided to just close up. Some hope to reopen when the worst of the pandemic passes, but many will be ruined forever.
The government announced that they would double the level of the JobSeeker allowance (formally Newstart), as well as a number of other welfare payments. This will be for at least six months. While welcomed by those thrown out of work, this is an admission that the wage subsidies and cash grants offered to the bosses won’t be enough.
Welfare recipients will also be given a second one-off payment of $750. Again, while welcomed, it will do little to boost the economy or make people feel secure. This crisis is likely to go on for many months so people will want to hold onto that cash rather than spend it now as the government hopes.
One of the main features of the situation right now is a deep sense of worry. People worry about their health, their financial position, their housing situation and whether or not society will ever go back to ‘normal’.
Only a matter of weeks ago millions thought they were going OK. While they might have had to juggle their bills and their loan repayments, they were able to scrape by. Now, all of a sudden hundreds of thousands find themselves on the dole queue and deep in debt. Making matters worse, there is no light at the end of the tunnel.
It’s been a major shock to many all at the same time. This will have a big impact on the outlook of masses of people. Workers were already being politicised but this crisis has accelerated things. It’s a real turning point as both the system, and huge swathes of people, are shaken to their core.
For decades we were told that capitalism was the best system for distributing wealth and dealing with problems that society throws up. In a matter of weeks all this has been proven wrong. It started with inadequacies in the healthcare system but this crisis has now spread through the entire economy and to every facet of society.
Even now, weeks into the pandemic, the system is still resisting taking the safety measures needed for fear of impacting profits. The short of it is that this sick system is costing lives.
While Morrison and all the other capitalist leaders around the world scramble to save their system, their actions will go a long way to educate people. Once things settle down people will not want to just go back to how things were.
While for now most people are in shock, they will not put up with being forced to shoulder the burden of this pandemic forever. A struggle against the powers-that-be is brewing. Socialists will play a role by offering solidarity, providing a plan for how to fight, and outlining a vision for new type of society that really caters for people’s needs.
By Anthony Main