Circuit-breaker could become business-breaker lockdown

Despite telling us earlier this year she wouldn’t have to lock us down anymore (see Brisbane won’t face another virus lockdown), CHO Jeannette Young has imposed on SEQ two “circuit breaker” lockdowns in one month. And this one looks like it could go beyond “circuit breaker” to “business breaker”, with the Courier-Mail reporting the lockdown could go on for two weeks, which seems very possible given the spread of the virus already.

Even though CCIQ has stressed to the state government the high cost to an affected small business of a lockdown ($15k to $65k for three days), the state government is only offering one-off grants of $5k as compensation (as reported by the Courier-Mail). Based on CCIQ’s estimates, this will be insufficient and the circuit-breaker lockdown could indeed become a business-breaker lockdown. I should also note the state government will probably require excessive paperwork from businesses to access the grant, something small business owners tell me has annoyed them about state government grants in the past.

Alas, the Queensland Government doesn’t appear to understand just how much harm its lockdowns cause. I understand these are not easy decisions, as of course COVID-19 is a serious disease, but the government’s willingness to so quickly disrupt the lives of millions with only six hours warning (as it did on Saturday) and to impose authoritarian measures is very disturbing. If you also find this disturbing, please check out the Restore Democracy in Queensland e-petition to the Queensland Parliament.

It’s still early days in the current lockdown, so we’ll need to see just how severe the ultimate cost is, but I expect the accumulating costs will make more people question the wisdom of the zero-community-transmission target, a target which could see us locked down until mid-August, if not later.

Brisbane Grammar on Gregory Terrace, Spring Hill, one of the schools shut down due to the Delta strain outbreak.

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Qld Treasury must be very worried about Olympics cost blowout

The Queensland Treasurer is being criticised for not being a team player on the Olympics (e.g. in the Courier-Mail), but what he’s being criticised over is, in my view, Cameron Dick’s finest moment in the job so far. InQld has a good summary of the dispute between Treasurer Dick and the Brisbane Lord Mayor over a media centre for the Olympics at South Brisbane which the Council has fast-tracked. The Treasurer says it will displace an existing factory and will cost jobs (That didn’t take long: Dick lashes council over Olympics development plans). While criticising the Council on talkback radio, the Treasurer provided a great talking point about Olympics’ cost blowouts. InQld reports:

“The mayor of Montreal wrecked that city, it took them 30 years to pay back the debt for a 13-day Olympics. We just can’t have that in Queensland,” he [i.e. the Queensland Treasurer] said.

“We’re six days into a 4000 day project. Let’s take out time to do it right, get the (Olympics 2032) organising committee established. The mayor will be on that but he’s not running the committee.”

It looks like the state Treasurer has been briefed by Queensland Treasury on the likely massive cost blowout associated with the Olympics.

Incidentally, former state Treasurer Jackie Trad recognised the very large opportunity cost of the Games and expressed reservations about the Olympics in Cabinet, but the Premier ended up getting Cabinet support for the bid. The Courier-Mail has reported Claims Palaszczuk told cabinet they would not leave without Olympics bid approval:

…Trad was at the zenith of her power. She had the numbers in the caucus and cabinet. With the ­unions in her ear saying an Olympics would be too expensive and the money would be better off spent on more public sector jobs, the move was on to scuttle the bid.

I’m relieved that our current and former state Treasurers, and I’m guessing Queensland Treasury, are concerned about an Olympics cost blow out and the huge opportunity cost of the Games. Alas, the Treasury can’t provide any back-room number crunching it has done.

As noted in a great Rear Window column in the Financial Review, the government hasn’t provided a proper cost-benefit analysis of the Games. It’s had KPMG estimate nearly $18 billion of benefits, but the consultants didn’t tally up the costs or “disbenefits” as KPMG labelled them. As the Rear Window columnist Myriam Robin expertly observed:

Readers of the [KPMG] report are left unenlightened of what said “disbenefits” will be, or whether the money and effort would be better spent elsewhere (the aforementioned “opportunity costs”). They are thus utterly unable to mount any informed argument about whether or not hosting the circus is, economically speaking, worth it.

Brisbane City Council may not care as the state and federal governments and hence taxpayers across Queensland and Australia will be paying the bulk of the costs. But as Queenslanders and Australians, even those of us who live in Brisbane should be very concerned about the potential economic loss from the Games.

Olympic rings. Original author: Pierre de Coubertin (1863-1937), Public domain, via Wikimedia Commons

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Full-employment policy in post-war Australia – Brisbane bus network example from Seven News Flashback

Seven News Brisbane has prepared a Flashblack with an extraordinary example of full employment policy in action in Brisbane in the late sixties/early seventies, when Brisbane adopted diesel buses after the trams were retired by Clem Jones. A distinguished gentleman who must have been a Council official appears to say (in grainy audio) that, even though some of the ex-tram drivers/new bus drivers were crashing the new buses, because some of them had never driven an automobile before, that was fine in one sense because at least they still had jobs (check out the YouTube video from 1:35). That’s a good illustration of how values can influence policy. Very few of us would think like that anymore. I’m not necessarily saying it’s wrong to think that way. It just seems strange to many of us now, particularly to economists and accountants. The past is a foreign country, as they say.

In the seventies and eighties, Australia was forced to abandon what was widely viewed as an important policy goal, full employment, because the way we were going about it was highly inefficient and fiscally unsustainable. Governments could no longer absorb everyone who wanted to work in state-owned electricity boards or railways. Government would no longer be the employer of last resort. The unemployment rates of 1-2% seen in the fifties and sixties according to some measures could not be sustained. Another factor contributing to those low unemployment rates was the expectation men would hold down steady jobs for decades and that women would leave the workforce when they got married. All that has changed, too, but there is no doubt a policy goal of full employment contributed to the very low unemployment rates we saw until the oil shock, productivity slowdown, and stagflation of the seventies destroyed the post-war Keynesian model in western economies.

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The Other Side interview on federal debt and lockdowns

Earlier this week I spoke with Damian Coory on his The Other Side program about the massively expanding federal debt and the economic cost of lockdowns, among other issues. The YouTube video of our conversation is embedded below. Given the large protest against the lockdown we saw in Sydney today, it’s becoming clear many Australians are really hurting from the current round of lockdowns and they can’t see lockdowns delivering net benefits.

In my view, we should abandon these authoritarian lockdowns as a policy measure, and governments should instead rely on moral suasion. There is no doubt COVID-19 is a serious disease, and governments should be able to convince the public to act in ways consistent with limiting the spread of the virus. But, in a free society, governments should not rely on authoritarian police-state measures to achieve that objective.

Once upon a time in Australia, people used to say “It’s a free country.” We can’t really say that anymore. I often wonder how the Greatest Generation, those who grew up during the Great Depression, and who fought in or came of age during the War, few of whom are still with us alas, would have handled COVID-19. I can’t see them having put up with these lockdowns. Many of them would think we’re absolutely mad in how we’re handling this.

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Brisbane Olympics interview with Grafa’s Grady Wulff

As well as keeping track of the worsening COVID-19 situation, I’ve spent much of this week thinking about the economic consequences and costs and benefits of the 2032 Brisbane Olympics. I was pleased to chat yesterday with Grafa’s Grady Wulff about the 2032 Olympics, and you can watch our conversation via LinkedIn or YouTube. Grafa is a new Aussie fintech company aspiring to take on Bloomberg and Refinitiv, and one we should all get behind. Go Grafa!

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Worthy petitions on Olympics and Restoring Democracy in Qld

Now that Brisbane has won the 2032 Olympics we need to avoid the Winner’s Curse and do our best to deliver it cost-effectively while maximising the benefits and spreading them across Queensland, so the Olympics doesn’t only benefit the promoters, developers, PR people, engineers, and consultants in SEQ. Taxpayers across Queensland will end up paying for the Olympics, and they all arguably deserve a fair share of the benefits. Hence, I’m happy to support Townsville economist Colin Dwyer’s petition to the Queensland Parliament, which is designed to get a “Better Olympics deal for regional Queensland” as Colin puts it. In his email update to his mailing list today Colin wrote:

The petition to get a better deal for regional Queensland from the Brisbane Olympics has performed beyond expectations, collecting almost one thousand signatures after just three weeks. We want a regional facility audit, a significant regional fund, a guarantee on protects, skills and population retention and a seat on the Brisbane Olympics decision making Board…

The ‘Better Deal for regional Queensland” petition ends in late September. We love the Olympics but Regional Queenslanders need a better deal including a water tight guarantee on projects and completions, an audit of current and future required facilities including a maintenance audit, we need to agree to terms on skilled worker and population retention. Regional Queensland would also like a fund to BUILD OUR BASICS and a seat on any Olympics Board; so we can keep the decision makers honest.

I’m a big fan of keeping the decision makers honest, so good luck getting those signatures Colin!

Another petition I’ve supported recently is the Restore Democracy in Queensland petition organised by Queensland MP for Mirani Steve Andrew (One Nation) who rightly opposed the extension of CHO Jeannette Young’s extraordinary emergency powers earlier this year, as I did (see Qld CHO emergency powers extension bill submission). The Government now proposes to extend the CHO’s emergency powers for an even longer period. The preamble for the petition reads:

Queensland residents draws to the attention of the House that the Public Health and Other Legislation (Further Extension of Expiring Provisions) Amendment Bill, tabled 16 June 2021, will extend Queensland’s ‘State of Emergency’ powers and measures into a third year. There needs to be a public discussion on the great danger posed to Queensland’s democracy by all these rolling emergency powers, lockdowns and abrogation of citizens’ rights. Powers granted under emergency legislation are supposed to be exceptional and time-limited. After 18 months, there is no justifiable reason why the Government can’t legislate for more reduced powers that allow Government to deal with the situation at hand while restoring many of the State’s normal democratic processes.

I totally agree with that and would encourage fellow Queenslanders to sign this important petition.

Nationwide, it’s frightening how readily we’ve accepted authoritarian measures to deal with COVID-19. I accept COVID-19 is a serious disease, but, when we have chief medical officers telling us to ignore our neighbours at the supermarket, various experts calling for harder lockdowns and curfews, and one TV journalist suggesting the army should go into South West Sydney and forcibly vaccinate people, we have to ask what on earth has happened to Australia? We need to find a way of responding to the COVID threat without sacrificing our basic freedoms.

Queensland Parliament House. Photo by Jennifer Tunny.

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Regional concerns over 2032 Brisbane Olympics

The Queensland Premier, Brisbane Lord Mayor, and federal Sports Minister are flying to Tokyo for the Olympics, to make the final pitch for Brisbane to host the Games in 2032, although we’re the preferred bidder and apparently the only city left in the race, leaving many to wonder whether the trip is necessary and whether any discussions with the IOC couldn’t be conducted over Zoom instead. As I’ve commented on QEW before (e.g. my 28 February post), the state government hasn’t yet produced a convincing case the Olympics would bring net benefits to Queensland, particularly given that the massive cost over-runs of some past Olympics in other cities are notorious (e.g. Montreal, Rio, and now Tokyo). The state government has undertaken far less economic analysis of a 2032 Olympics than it has required for less costly infrastructure projects.

Economists and business academics are asking questions about the merits of Brisbane hosting the Olympics (e.g. see the CPA Australia In the Black article I’m quoted in). We are also seeing criticism from regional Queensland of the Brisbane Olympics bid. Retired Townsville Bulletin journalist Malcolm Weatherup has just published a blistering critique of the bid, which is a delight to read, in his latest Magpie’s Nest newsletter:

A successful bid for the 2032 Olympics will be an easily foreseeable disaster for Queensland rate and taxpayers. The sugar hit of a massive economic influx will be preceded and followed by the taste of ashes in the mouth for years across the whole state, as the cost of momentary glory becomes obvious as vital community projects in the regions are delayed or shelved as money is poured into the required infrastructure build. Jobs and more jobs you say? Yes, that’s for certain, but they will be in the south-east corner, there will be no Olympic infrastructure projects of any note outside that bubble … and those jobs will be filled by skilled tradesmen flocking in to Brisbane [and] the Gold Coast from guess where? That’s right, from the regions, including Townsville, where tradies are in short supply already for a variety of reasons. The need will be so great that interstate workers will gravitate to the Queensland capital, which will put a brake on population and skill growth in regional areas…

…And it’s a generational thing, too. In much the same way that Baby Boomers are being pilloried for perceived ‘selfishness’, so will those behind this wrong headed seeking of personal glory … it will take decades for this binge spending hangover to be paid for, long after today’s current decision makers are cursed in their graves and the history books damning of their stupidity.

Like Cross River Rail, a Brisbane Olympics would reinforce the perception in regional Queensland that the state government favours the South East. Moreover, it may not be in the best interests of the state overall, and I expect to learn about large cost over-runs on Olympics projects in future years. Alas, the state government didn’t crunch the numbers properly before committing the state to the bid.

Brisbane coat of arms on corner of Wickham Terrace and Albert St, Spring Hill.

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Managing government budgets podcast chat with Rachel Nolan, former Qld Gov’t finance minister

Former Queensland Government Finance and Transport Minister Rachel Nolan (currently Queensland Executive Director of the McKell Institute) provides some great insights into managing government budgets in my latest Economics Explored episode EP96 Managing Government Budgets. For example, here’s Rachel on the need for treasuries or finance ministries to keep a close eye on government spending:

Treasury would like to argue that they keep a pretty close eye on agencies spending all the time. I think you can always keep a closer eye on it and I think governments are just so big that I think you need to run them, both as a minister and at a public service level, you really want to kind of keep your finger on the pulse all the time. There will be something bubbling along that government has been doing a little bit unnecessarily, because that’s just what it’s always been doing.

A good way to uncover all the questionable things government is spending money on is to every now and then run a Zero-based Budgeting exercise for the whole government, something Rachel mentions the Beattie Government’s first Treasurer David Hamill did in his first year, when Rachel was working for him as an adviser. Here’s how Rachel tells the story:

When I was quite young, I worked for a former state treasurer, a very smart guy called David Hamill who was a Rhodes Scholar and a very good treasurer. He ran, and I think it was the last time it happened in Queensland, a zero based budgeting process. So what happened was Labor, my party, had been re-elected after a period of time out of government. This was in about 1998…the budget wasn’t in terrible shape at the time, but we wanted to, frankly, really get into the guts of it.

And so David required agencies, as a new treasurer, he required agencies not to run through that standard budget process…but in fact to front up and justify everything they did. Now, that’s terrifying for agencies. And it’s a huge body of work. But I think it’s a very good thing for a new government to do…

Frankly, we got a lot of agency resistance. As you might know, not everybody was all that excited about this proposition. But it is only through doing that deep dive from time to time – now, you can’t do it every year, it would be too disruptive for the business of government, and it’s simply too much work – but you do need to get into the guts of it from time to time. It was a really good thing to do.

Zero-based Budgeting is a great idea we should try once again in Queensland. Thanks heaps to Rachel Nolan for her excellent insights and stories. I hope you enjoy our conversation.

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Premier’s Estimates appearance illustrates my point at ASPG seminar at Parliament House in June

Exhibit A regarding the woefulness of Queensland’s Parliamentary Committee process and the lack of accountability of executive government in this state is the appalling budget estimates committee meeting today, during which the Premier would not disclose whether taxpayers would pay for her hotel quarantine when she returns from her Tokyo Olympics junket (see Channel 10 report Palaszczuk Interrogated Over Olympics In Parliament). That’s a gangster political move from a Premier who realises she’s so popular she doesn’t have to worry about the minimal level of accountability she should abide by.

The Premier has nicely illustrated the point I made in mid-June when I addressed the Australasian Study of Parliament Group in the Legislative Council chamber of Queensland Parliament House regarding the state’s woeful parliamentary committee process. Check out the transcript of my remarks and those of my fellow panellists, former Queensland Finance Minister Rachel Nolan and UQ Associate Professor Begona Dominguez:

The role of Parliament in Public Finance

I also commented on the weak Freedom of Information (FOI) process in Queensland (on pp. 10-11 of the transcript). Here is what I said about FOI or Right to Information (RTI) as it’s called in Queensland:

One thing I would say is that it can be very difficult to get the underlying rationale for decisions when the documentation, the contracts, are often labelled commercial-in-confidence. You see that with assistance to the film industry, for example. You just see how difficult it is to get information via right to information. There are so many exemptions that governments can rely on. There is obviously the cabinet-in-confidence exemption, which I think is abused.

There is just so much information that should be released that would help us assess whether particular measures are in the public interest. For example, there is this $8 million cost to hold the State of Origin for one night in Townsville, although the government will not tell us whether it was $8 million or it was less. The government says, ‘It will create more economic activity in our view than the cost.’ Is that actually how you should work out whether this is in the public interest or not? Where is the cost-benefit analysis from Treasury? What briefings were provided by Treasury? We have no chance of getting that. I could put in a right to information request for that, but I would waste several hundred dollars or whatever it would be. All I would get back would be documents which are heavily redacted—blacked out—or they would say, ‘There is actually nothing within your search criteria.’ It is an absolute travesty. I think we need to reform that right to information law as a matter of priority.

Most recently we’ve seen how the Government won’t disclose the Chief Health Officer’s written advice regarding interstate border closures (Qld CHO’s border advice kept secret – massive failure of governance, record keeping, and transparency).

Queensland Parliament House, corner of Alice St and George St, Brisbane. Photo by Jennifer Tunny.

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4BC interview on lowest unemployment rate in over ten years

I had a good chat with Scott Emerson on his 4BC Drive program this afternoon about the June ABS Labour Force estimates released today which showed the national unemployment rate falling to 4.9%, the lowest rate since December 2010. The Queensland unemployment rate wasn’t much higher at 5.1%, the lowest state unemployment rate since April 2009 (see chart below). I’ve been very glad to see that the end of JobKeeper didn’t appear to compromise Australia’s strong economic recovery at all, which was something I must admit I was worried about at the time.

Of course, the June data are almost ancient history now in this time of pandemic, in which every day seems to bring new cases and new restrictions, and we now have to worry about the adverse economic impacts of Sydney and Melbourne lockdowns and interstate border closures. And a Brisbane lockdown is definitely a possibility. Market economists are speculating September quarter GDP growth could be negative, but are hopeful of a “snap back” in December quarter. Let’s hope we can snap back after what looks like it could be a tough quarter. I think it’s too hard to make any confident forecasts at the moment.

Here’s a link to my conversation with Scott Emerson this afternoon (from approximately 10 minutes in):

Scott Emerson 4BC Drive show 15 July 2021

Chart showing Queensland’s unemployment rate fell to 5.1% in June 2021.

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