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Australian Weekly Report

CMAX Advisory closely follows political developments internationally and analyses implications for businesses operating in Australia.

We develop a weekly report of the most important political and economic news in Australia, utilising our understanding of complex political issues and processes to inform companies of relevant developments and forecast likely outcomes.

This week's top story

PM pushes industrial reforms

Prime Minister Scott Morrison has said the country’s industrial relations would be reworked as part of the government’s coronavirus economic recovery plan.

Speaking to the National Press Club, Mr Morrison said Australia’s current system for managing the relationships between employers and employees was “not fit for purpose”, with both unions and employers resorting to “tribalism, conflict, and ideological posturing”.

Industrial relations is a challenging area for any government, not least for a Liberal-National government that once fought – and lost – an election on industrial relations. The scale of the task was not lost on a number of commentators, who pointed to the risks involved for the prime minister in pursuing reform in the area.

Mr Morrison said that, beginning immediately, the Minister for Industrial Relations, Christian Porter, would lead a new time-bound process that brings employers, industry groups, employee representatives and government to the table to “chart a practical reform agenda, a job-making agenda, for Australia’s industrial relations system”.

Unions and the opposition Labor Party both reacted cautiously to Mr Morrison’s announcement. Australian Council of Trade Unions Secretary, Sally McManus, said unions would participate in the meetings.

“Australian unions want to see a better, stronger and fairer Australia and that’s why we will take up the opportunity to sit down with employers and with the government to discuss that,” she said.

The opposition, however, will not be a party at the discussions, with the government offering a seat to the labour movement’s industrial wing, rather than its political wing.

Other news

RBA governor calls for JobKeeper retention

The head of Australia’s central bank has said the federal government may need to continue with stimulus spending beyond its September deadline in order to keep the economy going.

In response to the coronavirus pandemic, the government introduced its “JobKeeper” package, which pays businesses A$1,500 per fortnight to subsidise the wages of eligible employees to keep them in a job. Some 3.5 million workers are covered by the scheme. The government also increased the level of unemployment benefits paid to those out of work.

Both Prime Minister Scott Morrison and Treasurer Josh Frydenberg have been firm in their commitment that the job supplement and the increased unemployment payments will end in September, even after it was discovered the cost of the JobKeeper package had been overestimated by A$60 billion.

However, Reserve Bank of Australia Governor Philip Lowe told a Senate inquiry that the JobKeeper program may need to be extended if the workforce needs it. Dr Lowe said the economy would reach a “critical point” in September, when various stimulus measures come to an end, and it was important not to withdraw fiscal stimulus too early.

In addition to the government schemes, banks also deferred repayments on loans for six months in response to the crisis, while many landlords deferred rental payments for the same period. Those payments will start back up at the same time, leaving consumers with less money to spend in the economy.

“The key observation is that the world is very uncertain, and I think it’s too early to say what it’s going to be, what the economy is going to be like, in four months’ time,” Dr Lowe said.

“But if we have not come out of the current trough in economic activity, there will be, and there should be, a debate about how the JobKeeper program transitions into something else, whether it’s extended for specific industries, or somehow tapered,” he added.

Following Dr Lowe’s comments, the opposition immediately put pressure on the government to continue the stimulus spending.

“And we would say to Scott Morrison, as we have been and others have been saying for some time, there is a need to target and taper the fiscal support going forward, to look after the economy, to look after jobs, to look after households,” Labor Senator Katy Gallagher told media.

Government to focus on vocational skills

Prime Minister Scott Morrison has said Australia needs a simplified skills and training sector, saying there is too much variation across states and territories.

“The current national agreement for skills and workforce development between the states and the Commonwealth is fundamentally flawed and it has to change,” Mr Morrison told the National Press Club.

He said the government proposed targeting funding to provide skills the job market needs, as well as simplifying the system and increasing uniformity between the states and territories.

Employer groups welcomed the focus on vocational training. Business Council of Australia chief executive Jennifer Westacott said reducing the time taken to receive qualifications would improve outcomes.

However, many point to chronic underfunding in the system. In his address, Mr Morrison said the government was prepared to increase federal funding for the sector – which is administered by the states and territories – but only if a new funding agreement was reached that provided greater oversight of where the money was being spent.

National Cabinet becomes permanent

State and territory leaders have decided to make the National Cabinet permanent as they work on the economic recovery from coronavirus.

The National Cabinet – which comprises the prime minister, along with state and territory leaders – was convened amid the coronavirus outbreak as a way to quickly coordinate a national response to the pandemic. It has been seen as providing a far more efficient decision-making process than the more cumbersome Council of Australian Governments (COAG), which is now defunct.

State and territory leaders are keen to use National Cabinet to change their relationship with the federal government. Last year, the federal government paid out nearly A$60 billion in tied funding to the states. Some jurisdictions, such as New South Wales, want more freedom in how they spend such money. For its part, the federal government is keen for states and territories to enact economic reforms that would improve business efficiencies.

The push might also make some progress in sorting out the sometimes confused relationship between the central government and the states and territories. Some responsibilities, such as defence and foreign affairs, are clearly the remit of the federal government. Others, such as health and education, are less clear cut, with states, territories and the Commonwealth sharing responsibilities. This has led to blame-shifting between governments in the past.

NZ economy facing severe downturn

New Zealand’s central bank has warned the economy is facing its worst downturn in 160 years as a result of coronavirus, with an expected contraction of almost 10 per cent.

New Zealand imposed one of the strictest lockdowns in the world, which helped it keep infections and deaths down. The country had recorded 21 deaths related to the virus, a rate of 4.56 deaths per million people, compared to 303.45 per million in the US and 551.81 per million in the UK.

“Even accounting for an expected recovery in the second half of the year, this year’s projected decline in annual GDP is the largest in at least 160 years,” the Reserve Bank of New Zealand said in its latest Financial Stability Report.

The central bank said if tough restrictions are reimposed, unemployment could reach almost 18 per cent. “There remains considerable uncertainty about the future trajectory of the pandemic, and how this will affect the New Zealand economy,” the central bank said.

Prime Minister Jacinda Ardern’s government has started to ease restrictions, but has faced criticism from its coalition partner. Deputy Prime Minister Winston Peters said the enemy at this point was not Covid-19, but the economic damage wrought by the disease.

Insurers want surgery backlog dealt with

Private health insurers are calling on governments to deal with the backlog of surgeries in private hospitals that has built up as a result of Covid-19.

Hospitals have been allowed to restart non-urgent procedures after they were banned for six weeks from 25 March to preserve personal protective equipment and free up heath care workers.

However, Private Healthcare Australia chief executive Rachel David said a plan needs to be put in place to deal with the backlog that has accumulated, otherwise waiting times for surgeries that are typically performed within weeks in the private sector would blow out.

Private patients wait an average of 24 days for surgery, compared with 109 days for patients in the public system. However, the backlog from the elective surgery ban means some private patients are waiting months.

While private hospitals have been allowed to restart surgeries, social distancing measures make it difficult for them to return to normal.

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