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
Government moves to save jobs and lives
The federal government is preparing its next round of economic assistance, as it continues its attempts to soften the economic impact of the coronavirus pandemic.
It comes as the government announced forced-quarantine measures for all arrivals from overseas and limited public gatherings to no more than two people.
Federal Treasurer Josh Frydenberg said the government’s next round of assistance would be the government’s “single largest” measure so far and will provide up to A$1,500 a fortnight for full-time workers. The money will be paid directly to employers to keep workers employed and there will be legal obligations to ensure workers retain their jobs.
Mr Frydenberg said part of the package will need new legislation, which will require the recall of parliament, although that is likely to be in a reduced form.
Meanwhile, the NSW government has announced a second round of measures to help businesses. It has created a A$1 billion ‘Working for NSW’ fund to sustain business, create new jobs and retrain employees. It comprised A$750 million in new funding and A$250 million announced earlier for additional cleaning services.
The new package also includes the deferral of payroll tax for businesses with payrolls over A$10 million for six months. Those with payrolls of A$10 million or less already received a three-month waiver in the first package, and will now get an additional three-month deferral.
The federal government has also advised against outdoor gatherings of more than two people and says people should be staying inside unless it is absolutely essential to go out. While not legally binding, it will be up to the states and territories to determine how forcefully they enforce the advice.
The New South Wales Premier, Gladys Berejiklian, has said the state will be enforcing the restrictions. Both NSW and Victoria have mooted stronger restrictions on social gatherings and movements.
PM launches Covid-19 committee
Prime Minister Scott Morrison has announced the creation of a new National Covid-19 Coordination Commission (NCCC) to advise the federal government on anticipating and mitigating the economic and social effects of the coronavirus pandemic.
Its role is to provide the prime minister with advice on all non-health-related aspects of the pandemic response, with the Chief Medical Officer continuing to lead the health response.
The NCCC’s board has experience in the public and private sectors, with an emphasis on logistics, resources, telecommunications and health. Its advice will ensure the public and private sectors are coordinated in addressing the crisis, directing their resources effectively and avoiding bottlenecks.
The new body resides within the Department of Prime Minister and Cabinet and supersedes the National Coordination Mechanism within the Department of Home Affairs, which will now report to the NCCC, along with Treasury’s Coronavirus Business Liaison Unit.
Its chairman, Neville Power, is the former chief executive of Fortescue Metals Group, who was also chief executive of Australian operations at Theiss. The deputy chair, David Thodey, is a former chairman of the CSIRO and a former chief executive of Telstra.
The board is composed of:
- Greg Combet, a former Labor government minister and Secretary of the Australian Council of Trade Unions.
- Jane Halton; a former Secretary of the departments of Finance and Health and Ageing.
- Catherine Tanna, the managing director of EnergyAustralia Holdings Limited.
- Paul Little, the former managing director of prominent logistics provider Toll Holdings.
- Philip Gaetjens, Secretary of the Department of Prime Minister and Cabinet.
- Mike Pezzullo, Secretary of the Department of Home Affairs.
Concerns over PPE exports
The Australian Medical Association has warned that Australia needs to protect its stocks of personal protective equipment (PPE) amid reports a Chinese company in Sydney had its staff purchase medical equipment earlier this year and ship it to China.
The Sydney Morning Herald reported that as coronavirus spread in Wuhan in January and February, staff from the Sydney office of the Chinese government-backed property firm Greenland Group were told to purchase bulk supplies of medical items to send to China.
The Greenland Group reportedly confirmed the shipment of medical supplies in January and February, saying it felt compelled to assist in efforts to mitigate the spread of the virus, which had caused a shortage of crucial medical supplies in China.
The South Australian AMA president, Dr Chris Moy, said there was increasing pressure globally to source PPE, and Australia has to “do whatever we can to secure supplies”.
Firms come forward for PPE manufacturing
More than 130 Australian companies have offered to assist in boosting the manufacturing of protective personal equipment (PPE) such as face masks, gowns and gloves.
The federal government had earlier asked any company that might be able to produce PPE to come forward in an effort to define Australia’s capacity to produce the equipment and to identify companies that could manufacture it.
More than 130 companies responded, according to the Department of Industry, with industry minister Karen Andrews saying the government is moving quickly to ensure supply.
The companies are being asked to detail how they can help to produce surgical gowns, gloves, goggles, hand sanitiser, clinical waste bags, waste bag closure devices, blood and fluid spill kits, mask fit test kits or thermometers.
Fears of failed Pacific states
Last week’s Group of 20 meeting raised the prospect of states failing as a result of the Covid-19 pandemic, with strategic implications for Australia.
The federal government is exploring ways in which it can assist some Pacific Island neighbours deal with the crisis, although its ability to respond is constrained by the cost of dealing with the virus at home.
While the region’s isolation has protected it to date, there are now more than 50 cases so far and Papua New Guinea has declared a state of emergency.
The prospect of failed states in the Pacific raises concerns about greater Chinese influence in the region, given Beijing’s already strong interest in the Pacific and its offers to assist smaller countries with funding in return for support.
In response to China’s increased presence in the region, the federal government announced its “Pacific step-up” to better engage with countries, although its resources are currently stretched in dealing with the crisis at home.
Following the G20 meeting, Prime Minister Scott Morrison reinforced the need for greater Pacific assistance.
“We are reconfiguring our development assistance to ensure critical health services can continue to function and to help our Pacific neighbours and Timor-Leste to manage the immediate economic impacts of the pandemic,” he said.
Concerns over foreign acquisitions
Every foreign investment into Australia will be checked, as the government attempts to protect distressed assets from being acquired by opportunistic foreign firms.
Under the new measures, the Foreign Investment Review Board (FIRB) will extend its review timeframes from 30 days to six months, with the screening threshold for all foreign investments reduced to A$0.
Members of the federal government had earlier raised concerns about foreign firms taking advantage of the coronavirus pandemic to acquire struggling Australian businesses.
The FIRB had been preparing for foreign investors to take more of an interest in Australian companies as economic activity slows.
The chair of federal parliament’s powerful intelligence and security committee, Liberal MP Andrew Hastie, told media he has raised the issue directly with the FIRB, saying Covid-19 has left Australian businesses vulnerable to predatory behaviour by state-owned enterprises “working contrary to our national interest”.
Support boosted for defence industry
The federal government is fast-tracking payments to defence industry as part of its initial efforts to mitigate the effects of the coronavirus pandemic.
The measure means some suppliers will receive payment up to two weeks earlier than usual. Minister for Defence, Senator Linda Reynolds said Covid-19 posed an unprecedented challenge to Australia’s defence industry, which makes an important contribution to the economy, and the nation’s security.
“That is why we brought forward the payment of more than A$500 million to businesses in Australia, which ensures money is flowing into the Australian economy at a time of acute pressure.”
Minister for Defence Industry, Melissa Price said the federal government was committed to ensuring Australia’s defence industry — which employs about 35,000 Australians — could keep equipping and sustaining troops.
“Australian small businesses are the backbone of our defence industry and we will continue to do everything we can to relieve the current pressures they’re under,” she said.
The government is also reinforcing the message to strategic prime contractors that their Australian sub-contractors play an important role in their supply chains and there is a need to ensure prompt payments.
The Department of Defence is also looking at delivering infrastructure works across the country to support existing and new capabilities.
Defence Department deputy secretary in charge of acquisition, Tony Fraser, told an industry briefing that all defence projects were being examined to see if they could be broken down into smaller parcels of work that could be brought forward.
He added that the department was looking to have defence declared an essential industry, to assist it in circumventing many of the restrictions being put in place by various governments. He added that the department will also issue letters of surety to hold off creditors and urged companies that have been approached to sell their business to contact the department.
CMAX Advisory’s Chief Strategist on ABC
CMAX Advisory’s Chief Strategist and Chief Operating Officer, Tyson Sara, spoke to ABC News about the role on the Australian Defence Force in helping to deal with the Covid-19 pandemic. The report can be heard here.
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