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Don't be lulled into a false sense of security (Part 1)

Posted by James Cagney on 6 June 2020

Do not be lulled into a false sense of security       (Part 1)


The Coronavirus COVID-19 has thrown world economics into turmoil. Time tested principles like "Supply and Demand" has economists at a loss as to how this pandemic will pan out. Let's look into some of the issues we have in Australia taking "Supply and Demand" concept into account.  

Demand

There is a lot of people who are out of work right now. People like bar servers, waitresses, chefs, construction workers, event coordinators, musicians, casual workers and others that do not have jobs right now. With the strict and restrictive policies of the various States in Australia the prospects for employment for many Australians in the next few months is bleak .


Coronavirus has been a diabolical challenge to the economy. I applaud the Federal Government for taking action in May 2020 to prop up the economy. Let's look at the facts:

  • By early May 750,000 businesses had registered for Job Keeper
  • 6 million workers are now on Job Keeper and Job Seeker
  • 61% of the workforce are on some sort of government hand-outs costing $20 Billion per month
  • Those that are employed 13.7% of them are under employed.
  • In April we already had 600,000 collecting welfare. Research has found that the longer people are unemployed the more likely they will go on permanent welfare.
  • Retail sales dropped by 18% in April 2020

These government hand-outs will be difficult to roll back. Every job loss means a family in need. We need to accept that "A helping hand cannot be a way of life". And these job losses, though they may be short-term, creates a massive decrease in demand for products and services.

People focus their income on the essentials, such as rent, electricity, mortgages, rates, food etc. Consumers are not dining out, going to movies, going on holiday and buying the luxuries we have been accustomed to.

An example of this was the frantic buying of toilet paper during the early days of Coronavirus. It was breaking news at the pandemonium as people pushed and shoved and fought for this precious commodity. A month later the shelves were full and nobody was buying toilet paper. The truth is that the Coronavirus did not increase the usage of the product people consumers just stored it.

Part of the financial stimulus for pensioners and low income earners was the one off payment of $750 for singles and $1500 for a couple.  Even if a couple decided to buy a new Samsung TV to keep them entertained during the lockdown it has no flow-on effect to our economy. Neither would it would not contribute to the increased productivity we need to help us out of the forthcoming and inevitable recession.

The Queensland State government's ill-advised strategy to keep the borders closed to tourists has devastated the economy of the Gold Coast, Whitsundays, Cairns and others. The "Demand" is there especially as overseas traveling is still difficult, but free market principles have gone out the window because of policy.

Whilst politicians and bureaucrats still have jobs and money to pay their bills many business owners are looking down the barrel of debt. They have watched their life savings go down the drain. Many have lost their homes because of the "all monies" clause they signed when they took out bank loans. These hard working folks will now join the unemployment queue and then go on the pension creating more debt for the Federal government. This always happens when bureaucrats and politicians interfere with the principle of "Supply & Demand". 

New South Wales have not closed their borders. NSW politicians have access to the same medical experts as Queensland does. With the low incidence of Coronavirus cases in Queensland I believe politicians are covering their bum in case they have another death in the State if they open the borders makes the news.   An example of this was the death of a miner in Blackwater Central Queensland. The hospital assumed it was the Coronavirus that killed him. The town went into panic and lockdown. People did not go to work, schools were closed, businesses were closed. Then they discovered it was the Coronavirus that killed him. The incident was pushed under the carpet by the politicians and the media quietely left the town?

Ask yourself this question - Why should State premiers be concerned at the cost of their lock down policies as it is the Federal Government that bears the cost of Job Keeper and Job Seeker?  Sorry, I am mistaken it's  "the tax-payers" that will bear the cost!

Many businesses were not able to open with the restrictive numbers that the various States recently announced. Obviously the bureaucrats and medical experts who decided on these numbers that are allowed into restaurants and bars do not have an understanding how businesses need to make a profit to pay staff and survive.

State politicians have been ruthless in the enforcement of their restrictions during the lock-down. Australians were fined for having too many people playing cricket in their backyard on Australia day! A mother was fined for teaching her daughter to drive. Elderly folk were fined and moved off park benches because they should have been exercising. Although being outdoors, enjoying the sunshine in parks and on the beach which is good for your health and helps your immune system we were forbidden to enjoy these.

However, on Saturday the 6th June 2020 the same police who were so intolerant towards minor offenders allowed tens of thousands of people to attend a mass rallies in cities around Australia. The State Premiers' now sit on the sideline taking no responsibility for allowing these gatherings. They had the power to give police the directive to stop these rallies, as protesters were likely to disregard social distancing rules and they have no respect to current measures to prevent the spread of Coronavirus.  It shows double standards!  What a precedent these weak politicians have now set.  It's hypocrisy!

It makes the recently partially lifted restrictions by allowing limited numbers of people into weddings, funerals, bars and restaurants, churches laughable. It is weak governance!

There is a saying that "The people get the Government they deserve", which should perhaps be changed to "The people get the policies of the Government they vote for".  Please bear that in mind when you vote next time.

How will the Federal government raise the money to pay for the $1 trillion plus national debt we will have at the end of 2020? Can they do this through increased productivity since we gave most of our manufacturing industry away to China and Asia? The only way is to raise this money is through increased taxes in the medium to long term. Where else can they find the money? They can't keep borrowing money niether can the Australia Reserve Bank (RBA) keep buying government bonds! We need to get consumer confidence back and more importantly we need to get "Buy Australia" back again  to get our economy going again.

This burden of this debt will affect the standard of living for most Australian for decades and sadly it is a great burden to leave our children and grandchildren. Australians must not be lulled into a false sense of security with the hand-outs we are now receiving. Government hand-outs cannot be the heart of a county's recovery. It is only business confidence and increased productivity that can do this. You cannot have prosperity in a welfare state. The Soviet Union was an example of this and it's demise was inevitable. Economic prosperity pays for the generous Australian social programs. It is not an entitlement.  Social programs and a good standard of living must be earned.

State Premiers' need to wake up and bring back business back to some sort of normaility to bring us out of this economic disaster.

Don't miss  Part 2 of this BLOG which will deal with "Supply".

Author: James Cagney
Tags: Part 1 - Don't be lulled into a false sense of security
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