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
Recovery slower than expected, OECD
The Australian economy faces a slower-than-expected recovery, according to the Organisation for Economic Cooperation and Development (OECD), although the recession is unlikely to be as deep as first thought.
In its Interim Report, the Paris-based OECD said it expects the Australian economy will grow by just 2.5 per cent, rather than the 4.1 per cent it had originally forecast for 2021. In some better news, it now expects the economy to contract by 4.1 per cent this year, not the 5 per cent it had forecast in June.
However, the recovery will depend on continuing government spending and while the OECD assumes there will be sporadic local outbreaks of coronavirus, chief economist Laurence Boone said the forecasts could be downgraded if further severe lockdowns, such as those in Victoria, were put in place.
The economic impact of the Victorian lockdown was evident in employment data released by the Australian Bureau of Statistics (ABS), which found the unemployment rate fell by 0.7 per cent to 6.8 per cent nationally, but rose in Victoria to 7.1 per cent following the loss of 42,400 jobs.
While the national result surprised economists, who had expected unemployment to rise to 7.7 per cent for August, up from 7.5 per cent in July, the ABS head of Labour Statistics, Bjorn Jarvis, said the jobs growth could be due to a 50,200 increase in the number of self-employed people, possibly representing an increase in trades people returning to work.
Treasurer Josh Frydenberg said the numbers were better than the government and Treasury had been expecting, and would be factored into the 6 October budget, which would focus on tax reforms energy and industrial relations.
The better-than-expected employment numbers come as a major business survey revealed that almost two-thirds of medium-sized companies are concerned that economic activity faces a significant decline when the federal government unwinds its stimulus measures.
The KPMG Enterprise survey found over half of private, mid-sized firms and family businesses have benefited from measures such as JobKeeper, and were concerned about the unwinding of such measures.
“The unwinding of government stimulus measures is of great concern to these private, mid-market and family businesses, with most (65 per cent) expecting a significant decline in economic activity and higher unemployment when they are unwound,” it found.
The need for continuing economic stimulus was backed up by the OECD, which warned that “with confidence still fragile, continued fiscal support remains necessary to support incomes, minimise scarring effects from the pandemic, and ensure a full and durable recovery”.
Defence officials in Chinese database
A Chinese company with links to the country’s military has developed a database containing profiles of more than 2.4 million people around the world, including some 35,000 Australians working in defence, politics, technology and the country’s nascent space sector.
The database, developed by Shenzhen-based Zhenhua Data, has been mostly complied by culling information from publicly available sources such as social media, but also contains data on imports and exports, including the movement of scientific equipment between Australia and the US.
While individual pieces of information that are publicly available on social media are not a problem on their own, analysts say they become problematic when they are aggregated – as in the database – and reveal patterns of activity. They can also reveal previous roles in classified areas, opening individuals up to campaigns to reveal classified data by leveraging personal information or even family members.
“Large datasets like this can boost conventional espionage operations significantly,” wrote the Australian Strategic Policy Institute’s Michael Shoebridge. “They give levers to obtain cooperation willingly or unwillingly. When those levers include not just personal foibles and vulnerabilities, but information about a target’s children, relatives or friends, it starts to look uglier, even malign,” he said.
Amid the information on the database, which has been leaked to various media outlets, were details of a shipment of “scientific equipment” from the Deep Space Communication Complex in Canberra to NASA’s Jet Propulsion Laboratory in California. This included the name of the container ship carrying the cargo, as well as the customs agent that took possession of it in the US.
The leak comes as it was revealed Australian police accessed the communications of top Chinese diplomats and named a Chinese consular official in a warrant as part of an investigation into political interference.
The revelations have further strained relations between Canberra and Beijing, with Chinese Foreign Ministry spokesman Wang Wenbin accusing Australians of having a “Cold War” mindset and peddling lies in relations to Chinese efforts to exert political influence in the country.
Defence releases review into CDIC
The federal government has released a review into the Centre for Defence Industrial Capability (CDIC) assessing its effectiveness and future role.
The Minister for Defence Industry, Melissa Price, launched the review in late 2019, saying she felt the Department of Defence-funded program was not being effective in helping Australian firms break into the defence industry.
The review found that some clients were less than impressed with the quality of advice provided by the CDIC, while some were critical of the workshops provided, describing them as “one-size-fits-all” and not tailored enough to the business in question.
One key recommendation in the review was to co-locate the CDIC with the newly formed Australian Industry Capability (AIC) Division within the Capability Acquisition and Sustainment Group (CASG) within Defence. Commentators note this would improve the CDIC’s contact with CASG, the major buyer of defence capability from Australian firms.
However, the Shadow Minister for Defence Industry, Matt Keogh, was less than impressed with the review.
“Established in 2016, the CDIC was intended to support the Defence supply chain through both business grants and mentorship; however, one in five successful grant recipients reported that they saw no tangible benefit from the grants they received,” Mr Keogh told media.
“Australian industry needs the [federal] government to implement measurable and enforceable Australian industry capability requirements into defence contracts, so industry has assurance they are working towards a tangible outcome and our nation develops the sovereign capabilities it requires,” he added.
Calls for Pacific JobKeeper to assist region
Save the Children has suggested Australia implement a JobKeeper-style program in the Pacific in an effort to alleviate the economic devastation being experienced across the Pacific as a result of coronavirus.
Deputy chief executive Mat Tinkler said strong intervention by the federal government would save lives and livelihoods among Australia’s neighbours.
“The lack of a functioning social protection system in most countries in the Pacific is a serious barrier to providing the kind of household payments necessary for families to weather this storm,” he said.
Mr Tinkler said the closure of tourism and key export industries, the interruption of remittances, and low commodity prices had devastated Pacific economies.
Save the Children’s submission to parliament’s joint standing committee on defence, foreign affairs and trade urged Australia to help establish social safety nets for families left without income, either through local jobs or remittances from overseas.
Australia should “partner with the Pacific governments and international donors to develop a ‘Pacific JobKeeper’ – a child-focused social safety net payment available across the region to assist the Pacific to recover from Covid-19”, it said.
Danielle Heinecke, from the Department of Foreign Affairs and Trade told the committee that Australia has reprioritised aid to deal with the crisis in the Pacific.
“Our aid program pivoted very quickly in March to be able to respond. We reprioritised A$205 million. That included a A$100 million economic and health package, which was very much negotiated with each partner government to make sure that we were able to respond to the highest needs,” she said.
NSW to investigate regional hospitals
A New South Wales parliamentary inquiry will investigate the quality of rural and regional healthcare in the state after the opposition Labor Party secured the numbers for an inquiry to go ahead.
The inquiry follows allegations of widespread dysfunction in country hospitals and will scrutinise barriers to services, staffing challenges, capital expenditure, planning systems and variations in health outcomes across NSW.
NSW Opposition Leader Jodi McKay said an inquiry was long overdue and that health outcomes should not be determined by where someone lives in the state.
Health outcomes in regional and rural Australia lag those in metropolitan areas, with the median age of death in remote communities being 66, compared to 79 in Sydney, while avoidable deaths can be up to twice as likely in rural and regional communities compared to cities.
Meanwhile, patients in rural and remote areas are more likely to have strokes than those living in cities, but have poorer access to medical care.
The parliamentary inquiry comes amid extensive media reporting on significant failings at rural and regional hospitals across the state, including failures to check test results, patients going unfed, wards running short of basic medications and no doctors being rostered on, leading to patient deaths.
Telehealth funding extended by six months
The federal government is extending a number of Covid-19 health measures, including a six-month extension of subsidised telehealth visits, in a A$2 billion spending package.
As well as extending Medicare-subsidised telehealth until 31 March 2021, the federal government is extending bulk-billed Covid-19 tests, support for 148 GP-led respiratory clinics and home medicine deliveries for eligible patients.
The government will also continue meeting 50 per cent of the costs hospitals accrue in dealing with Covid-19, and the agreement with private hospitals to work with the public system and ensure bed availability will continue.
Health Minister Greg Hunt said there had been 30 million telehealth consultations since the beginning of the pandemic. “Our government’s response to the pandemic brought forward a 10-year plan on telehealth within 10 days,”’ he said in a statement.
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