RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

The Treasurer, Josh Frydenberg, started this week by launching an extraordinary attack on the Victorian Premier Daniel Andrews… and ended it by presiding over the biggest fall in economic activity in decades.

Today, columnist for The Saturday Paper, Paul Bongiorno, on Australia’s economic predicament and who’s really to blame.

RUBY:

Paul, this week we saw confirmation that Australia's economy has taken the biggest hit in recorded history. And even though it was what economists were predicting, it was still shocking to see those numbers. So how did the federal government handle the announcement?

PAUL:

Well, Ruby, on Wednesday when the national accounts confirmed Australia's biggest economic contraction since the Great Depression, the federal government had a ready and credible excuse. But I have to say, it was a little consolation to the one million Australians already out of work or for the 400,000 extra the government expects to lose their jobs before the end of the year.

Archival tape -- Scott Morrison:

“Mr Speaker, this is a devastating day for Australia…”

PAUL:

The Prime Minister, Scott Morrison, told parliament that the numbers were devastating.

Archival tape -- Scott Morrison:

“Australians know, Mr Speaker, that many, many months ago that this day would come and this day has come.”

PAUL:

The Treasurer, Josh Frydenberg said we haven't seen the like of this recession before.

Archival tape -- Josh Frydenberg:

“It was the single largest fall on record since the series began in 1959”

PAUL:

And the soon to retire Finance Minister, Mathias Cormann, told journalists at Parliament House that the cause for the contraction was well known: it was the coronavirus pandemic.

Archival tape -- Mathias Cormann:

“Well, look, you know, we do expect a severe contraction in this quarter. We also know what has caused it. I mean, economies around the world have been hit very hard by a global coronavirus pandemic.”

PAUL:

And to soften the blow in his earnest fashion, he listed the devastating outcomes for the United Kingdom - a contraction of more than 20 percent there for them. And he said the average for OECD countries was just over 10 percent in the June quarter.

Archival tape -- Mathias Cormann:

“This has been a terrible period. The global coronavirus pandemic has had a very heavy impact on economies all around the world, including, of course, here in Australia.”

PAUL:

He seemed to be inferring that Australia's seven percent was world beating and good by comparison. But the fact is, it's still the worst performance on record for this country. And you'd have to go back 46 years for the next worst figure of two percent in the June quarter of 1974. That was thanks to the world oil price shock. The worst quarter of the 1991 recession was in March of that year. A contraction of just 1.3 percent. I say just, but it's hardly a blimp by comparison to our current crisis, even though it did cause a lot of pain.

RUBY:

Paul, this week Parliament also debated the future of JobKeeper and JobSeeker. Labour and the crossbench had concerns about the government's proposal. So, what happened?

PAUL:

Well, on Tuesday, the Coalition won support in the Senate to extend the payments made under JobKeeper and JobSeeker from the end of this month until the end of March next year. There are new eligibility rules and a two tier system for JobKeeper and, of course, for both programmes an overall haircut. The government will drop the JobKeeper payment by $300 to $1200. That is bringing it below the minimum wage and it will taper it down even further to $1000 from January. Labour supported the bill, but denies it also supported the tapering off of the payments.

Archival tape -- Fran Kelly:

“Jim Chalmers is Labour's shadow treasurer. Jim Chalmers, welcome back to breakfast.”

Archival tape -- Jim Chalmers:

“Thanks very much, Fran…”

PAUL:

Shadow treasurer Jim Chalmers told Fran Kelly on RN Breakfast the legislation didn't set the rates or the eligibility. That was entirely up to the government.

Archival tape -- Jim Chalmers:

“The legislation does not set the rates or the eligibility for the JobKeeper payment. We did not vote to reduce those payments. The rate of those payments is entirely the responsibility of the Treasurer…”

PAUL:

As well as keeping the rate at its current level. Labour has argued for the payment to be extended to casuals, university arts and entertainment workers, all of whom have missed out. Chalmers pointed out that cutting economic support while unemployment is going up is a risky policy move.

Archival tape -- Jim Chalmers:

“It makes no sense when unemployment is rising for the government to be withdrawing support from the economy. Without a comprehensive plan for jobs to replace it.”

RUBY:

And is this a sign that Labor is starting to take a more combative approach to the government, because for most of the year, they have seemed reluctant to be too aggressive...

PAUL:

Well, Ruby, I think it does. But Anthony Albanese is very well aware that it's a matter of tone and timing. We saw examples of this approach in Question Time. There were pointed, hard hitting short questions, but without a hint of the crude partisanship that, well, we've been used to over the years. The Prime Minister and Treasurer are certainly aware of the potential effectiveness of Labour's criticisms. And the Treasurer displayed this touchiness on ABC TV's Breakfast Show. He stunned presenter Michael Rowland on Monday when he scolded him for saying the level of JobKeeper payment was being cut.

Archival tape -- Michael Rowland:

“Finally, Treasurer, you tweeted last night, the Morrison government will do whatever we can to support Victorian families, workers and businesses. Why, then, are you cutting the level of JobKeeper for Victorians at the end of September?”

Archival tape -- Josh Frydenberg:

“...Well, that statement is just false.”

PAUL:

When Rowland pressed him about the rate being reduced he did confirm it, the Treasurer, but emphasised that it was originally legislated to cease this month.

Archival tape -- Josh Frydenberg:

“It was legislated for six months. We're extending it for another six months. We've just announced…”

Archival tape -- Michael Rowland:

“I just want to clarify for our viewers, it goes down, you are cutting it from its current level at the end of September?”

Archival tape -- Josh Frydenberg:

“It goes from $1500 down to $1200 in the December quarter…”

PAUL:

The government is aware of the political risks with it tapering down the JobKeeper and the cutting of the unemployment benefit JobSeeker. So far they've got away with it, but by cutting these benefits, they're exposing themselves to this sort of blame shift, if you like. And this is the dynamic that's seen governments historically fall in times of deep recession. The deepening economic crisis might also explain why the Treasurer himself was so eager to launch an extraordinary political attack on the Victorian Premier earlier this week. It was pretty obviously an attempt to shift as much of the blame as possible for the spread of the virus elsewhere. And I have to say, Daniel Andrews is one obvious target, though there's plenty of blame to share around.

RUBY:

We'll be back in a moment.

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RUBY:

Paul, earlier this week, the Treasurer, Josh Frydenberg, initiated one of the most direct and partisan attacks that we've seen so far during this pandemic. Let's talk about what happened.

PAUL:

Well, on Monday, Ruby, an almost breathless Josh Frydenberg at a doorstop in the press gallery corridor lashed out at Victoria and its premier.

Archival tape -- Josh Frydenberg:

“So whether it's a litany of failures on quarantine, whether it's the testing and tracing, which is not up to the standard of other...states, whether it's the rejection of the Defence Force personnel that were on offer from the Commonwealth, there has been mistakes in Victoria.”

PAUL:

He slammed Daniel Andrews' response to the virus. He said it was the biggest public policy failure by a state government in living memory.

Archival tape -- Josh Frydenberg:

“What has transpired in Victoria has been like a slow motion car crash.”

PAUL:

It was an extraordinary political attack. Frydenberg gave five interviews in two days, all of them directed at the Victorian government. And he was clearly laying the groundwork to be able to blame Victoria for much of the devastating numbers he knew were coming on Wednesday.

RUBY:

And how did Daniel Andrews respond?

PAUL:

Well, Andrews on Monday did promise to outline a road map for recovery. In fact, by Wednesday, he was talking about several road maps, which acknowledged that different responses may be required for different parts of the state, depending on the number of cases.

Archival tape -- Dan Andrews:

“It is too early today to settle that road map and to lock that in, as it were. Another week's data is critically important to make sure that the strategy continues to work and for us to have a better sense of how long it is.”

PAUL:

Andrews says he'll be driven by the data. The nation's recuperation in no small way depends on what he does. And, of course, Victorians are waiting with bated breath to find out what the future holds for them.

RUBY:

Paul, do you think that this stoush will have long term consequences for the relationship between the Victorian government and the federal government?

PAUL:

That's a good question, Ruby. Scott Morrison adopted a very different tone to Frydenberg on Victoria and the lockdowns. The Prime Minister told his colleagues in a party room meeting on Tuesday that they would have to be, and I'm quoting, patient with the federation. His goal, he says, was not to pick fights with state and territory leaders. Morrison sounded every bit like a circuit preacher when he urged this congregation of his MPs and senators: ‘the way we remain a humble and in touch and focussed government is to remain in touch with each other and continue to be respectful of each other.’ Well, later, the Prime Minister told Parliament that Victoria had turned the corner.

Archival tape -- Scott Morrison:

“And we are planning, together with the Victorian government, to reopen Melbourne and to reopen Victoria…”

PAUL:

He said in discussion with the premiers of Victoria and New South Wales on Monday night. There was a commitment to see Australia opened up again.

Archival tape -- Scott Morrison:

“That is what our plan is: to work together with the states and territories to reactivate the plan that we first set out in May and made great progress towards…”

RUBY:

The government has postponed the budget back in May and it's due to hand down in October now. So are we expecting any more significant economic policies to be announced then to try and mitigate this economic collapse?

PAUL:

Well, Ruby, there's no doubt there's a lot hanging on October's budget and we are expecting significant economic policies and directions to be unveiled. But I have to say, adding to the government's degree of difficulty as it struggles to design a recovery strategy and roadmap is the unresolved tensions with our largest trading partner, China. The irony is that so far, demand for our commodities, iron ore and coal especially remains strong.

But how willing China is to help us out of this recession is by no means certain. At stake, is our multi-billion dollar education exports and our hitherto growing exports of grain, wine and beef. They are now mired in contrived suspensions. But the bigger uncertainty is how the virus will continue to impact our domestic economy and the key to that will be the roadmap Victoria's Dan Andrews unveils this weekend.
And more broadly, how soon all the state borders are opened. And Ruby, we do have to remind ourselves that a lot depends on how soon the Morrison government also opens our international borders to unrestricted travel. That's one closure the Treasurer didn't mention all week, despite the massive economic impact it too is having.

RUBY:

Paul, thank you so much for your time today.

PAUL:

Thank you very much, Ruby. Bye.

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RUBY:

Also in the news today…

Police in Victoria have charged three people with incitement over a protest against coronavirus restrictions scheduled for Saturday.

Police have told the community not to leave home to protest, after a video of a Ballarat woman being arrested for allegedly inciting a coronavirus lockdown protest went viral on social media. Civil rights groups and the Victorian Bar have expressed concern about the arrest.

And the Senate has censured Richard Colbeck over his performance as aged care minister. Labor moved a motion to censure the minister for "failing to take responsibility for the devastating crisis in the aged care sector.” It passed with the support of the entire crossbench.

7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.
Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

New episodes of 7am are released every weekday morning. Subscribe in your favourite podcast app, to make sure you don’t miss out.

Tomorrow, we’re releasing a special episode of 7am that takes you behind-the-scenes to show how we put together the show.

I’m Ruby Jones, see ya then.