RUBY:

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

As Victoria enters a second lockdown, Scott Morrison has offered an apolitical response to the Labor state.
In part, he knows the economic impact of the latest closure will affect the entire country.

Today, Paul Bongiorno on the next stage of the coronavirus pandemic.

---

Archival tape -- reporter:

Good morning. The city of Melbourne has been plunged back into lockdown as police warn they will be ruthless to keep five million residents...

Archival tape -- reporter:

Tonight, the army will move in, helping police create a ring of steel around the city

Archival tape -- reporter:

... Protected by rolling roadblocks and mobile patrol.

Archival tape -- reporter:

They'll start enforcing the second shutdown from midnight. And we're being warned not to expect any leniency.

Archival tape -- reporter:

Bear in mind, this will be a massive hit to the economy. This will be a huge hit for workers and their employers. They now have to endure another six week lockdown.

RUBY:

Paul, tell me about this latest shutdown in Victoria. How it began and how the federal leadership has been involved?

PAUL:

Well, Ruby, it is a terrible situation. By Monday of this week, the Victorian Premier, Daniel Andrews, was sending out an S.O.S. to the rest of Australia. He was responding to a new spike in Coronavirus cases. He spoke with Scott Morrison in New South Wales Premier Gladys Berejiklian and told them the health advice left no option but to embark on a desperate containment strategy.

RUBY:

Paul Bongiorno is a columnist for The Saturday Paper.

PAUL:

That same day, Victoria hit a single day peak of 191 new cases. And really that's the highest anywhere in the country since the pandemic began. And in just seven days to Wednesday, the state had recorded more than a quarter of its overall two thousand nine hundred forty two cases.

RUBY:

And Paul, this comes after the much more draconian and police-led shutdown of public housing towers in Melbourne.

PAUL:

Yes, there are nine social housing tower blocks - high rise blocks - with 3000 people in them. 70 were found to have been infected with Coronavirus, so everybody was locked down and tested. And yesterday they were expecting to get those results back.

Archival tape -- unknown:

Of those nine public housing towers that had been in complete lockdown, eight will ultimately be released from that. The people in those towers will be released into the stage three restrictions… so Daniel Andrews saying everything is on the line, he believes that there will be more hardship…

RUBY:

And so, Paul, what has the federal response been to the broader lockdown of Melbourne?

PAUL:

Well, the lockdown of metropolitan Melbourne and the dramatic closure of the border with New South Wales is a massive disruption of the lives and livelihoods, not only of Victorians, but, in fact, Australians everywhere.

The state accounts for about a quarter of the national economy, and just an indicator of that is 7000 trucks carrying freight and goods cross the Victoria/New South Wales border every day.

Anyway. Midweek, Scott Morrison reached back to one of the most famous speeches of the Cold War to express solidarity. He took inspiration from the sentiment of US President John F. Kennedy in 1963, who identified with the citizens of Berlin divided by the wall. Kennedy famously said, “Ich bin ein Berliner: I am a Berliner”.

Archival tape -- Morrison:

But we're all Melburnians. Now, when it comes to the challenges we face, we're all Victorians now because we're all Australians. And that's where the challenge is right now.

PAUL:

Morrison warned there's no way to hide from a pandemic. And nothing is certain.

Archival tape -- Morrison:

This is a virus that doesn't communicate itself in terms of its intentions or how it's going to behave. What we're dealing with a lot of unknowns here...

PAUL:

Things shift quickly.

Archival tape -- Morrison:

There are no guarantees in a global pandemic. You have to deal with the situations that are in front of you.

We have to be ready to do whatever we can.

Archival tape -- Morrison:

And you need to bring the country together to focus every resource on fixing the problem and ensuring that we can keep Australians safe and that we can protect lives and we can protect livelihoods.

PAUL:

And you know, Ruby, it's how you deal with challenges or rather how lucky you are in dealing with them, that can mark a leader up or down. Unlike his Victorian Liberal counterparts, Morrison was not pointing the finger at the Labor premier or blaming him for his handling of the pandemic so far. In fact, the prime minister sounded a realistic warning for the rest of the nation when he said the risk was there for all of us.

Archival tape -- Morrison:

It's happening in Melbourne now. Of course, there's always the risk it could happen in other cities. And every step is being taken to seek to prevent that wherever possible.

RUBY:

And this more conciliatory relationship between the two, is it new? Because it seems like there was a lot more hostility earlier on around borders and that sort of thing

PAUL:

Well, Morrison and Andrews have in some ways surprisingly been on the same page all along, though there had been some friction over the extent of the first lockdowns. But this latest eruption demonstrates the extreme caution politicians of all stripes need in attempting to score political points from this highly infectious and unpredictable virus.

You know the criticism from Morrison and New South Wales Premier Gladys Berejiklian of Queensland's Annastacia Palaszczuk were for refusing to open her borders; well, it looks very churlish now. Berejiklian and Morrison have no quibbles with Victoria's highly disruptive border closure.

Berejiklian explains her backflip in terms of Victoria's sudden deterioration. While Morrison, he denies his position has changed: he says it’s containment, and that's a different thing.

You've got to say it's not the most convincing bit of marketing from the prime minister. But at this point in the pandemic, politicians are doing a lot of backward looking.

RUBY:

We'll be back in a moment.

[ADVERTISEMENT]

RUBY:

We're talking about the Victorian shutdown and the response from Scott Morrison - federally, is the main concern economic?

PAUL:

Well, Ruby, the health concerns are very real and in fact are impacting the severity of the economic consequences. As the government's most senior Victorian minister, Treasurer Josh Frydenberg, wrote in an opinion piece in the Herald Sun - that's where he quoted the acting chief medical officer, Paul Kelly. Covid-19, Kelly says, needs only the slightest encouragement to take off and can readily and rapidly get out of control. But the Treasurer outlined the extent of the mounting economic damage.

Archival tape -- Frydenberg:

This is a very severe economic downturn. Unlike the 80s and 90s recession, the shock has been, both on the supply and the demand side, in terms of the reduction in hours worked, it's already greater than what we saw in the 80s and the 90s...

PAUL:

Frydenberg quoted his department's assessment that reimposing lockdowns could cost the national economy four billion dollars a week and Victoria one billion dollars a week.

Archival tape -- Frydenberg:

This is a major challenge to the economic recovery. This is going to have an impact well beyond the Victorian border...

PAUL:

Frydenberg lamented that the restoration in confidence we saw as Australia flattened the curve and states began lifting restrictions had now been interrupted by developments in Victoria. He noted that consumer confidence has fallen in the past two weeks and that recovery is very much a confidence game.

RUBY:

Mmm hmm.

PAUL:

Frydenberg’s observation about confidence is also shared by the Reserve Bank governors statement this week. In a nutshell, Philip Lowe summed up the nation's predicament. Along the lines: we’re all flying by the seat of our pants. The statement after the bank decided to keep official interest rates at near zero, or 25 basis points, on Tuesday spelled out the challenge. It said uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious. And this is affecting consumption and business plans.

RUBY:

Okay, so was there any good news?

PAUL:

Well, there was a little bit. Governor Lowe said the downturn so far had been less severe than earlier expected. He said while total hours worked continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely. He also noted a pickup in retail spending.

RUBY:

And what about the bad news?

PAUL:

There's always bad news, Ruby. Deloitte Access Economics partner Chris Richardson said the reimposed lockdown in Melbourne risks shattering that emerging fragile mood.

Archival tape -- Richardson:

This is a different phase of the crisis. It isn't like early on when there were cases popping up all over. Now Australia has a geographically specific spike...

PAUL:

While he says the impact on Victoria of the new lockdown might impose more economic pain than indicated, in his latest business outlook, which was released on Monday, it will still be around three per cent contraction. Now, that sounds small, but in economic terms it's no mere blip.

Archival tape -- Richardson:

Deloitte says unemployment will be at high levels for quite a while, there's no need to worry about a lift in inflation, interest rates will stay low for years, and any wage gains are very unlikely...

PAUL:

Richardson endorsed our political leaders, taking the health threat more seriously than some other world leaders. He said good health policy remains good economic policy.

RUBY:

And so what are Josh Frydenberg and Scott Morrison weighing up now?

PAUL:

Well, one of the big questions, obviously, is still the future of the 70 billion dollar wage subsidy called JobKeeper and whether it will be extended beyond its September cliff.

Twice this week, Morrison flagged that the Treasurer's economic statement later in the month would continue the wage subsidy - he said it's just the scale of it and how it's targeted. That's what we've been working through.

There's speculation, Ruby in Canberra, The Treasurer will extend the subsidy at a cost of 35 billion dollars. That means, though, many businesses and employees currently getting it will miss out. Now, if the six week Victorian lockdown fails to contain the virus, will we see? Similar explosions in Sydney or another state capital. You'd have to say the government will need to go back to the drawing board and be prepared to go even deeper into debt. That's certainly the message from Chris Richardson, and in fact, the RBA too.

RUBY:

Mhm. So, once again it looks like it will get harder before it gets easier.

PAUL:

Well, Ruby, the simple solution is a vaccine, but depending on what expert you listen to, that's still a year away at the earliest and maybe two. There'll be a lot more economic carnage in the meantime.

Now, while Governor Lowe raises the spectre of the Great Depression, the fact is the structure of the economy and the understanding of how it works is much more sophisticated than 90 years ago. Back then, the establishment business and their political mates thought even greater austerity was the answer. It wasn't, it just exacerbated the pain and the misery.

Now so far. Business and the Morrison government today have shown they've learned that lesson. The challenge is, will they have the stomach to keep applying it?

RUBY:

And your thoughts, Paul, on whether Scott Morrison will be up to that challenge?

PAUL:

Well, I have to say, he's proven to be very pragmatic and he doesn't seem to have been hidebound or constrained by neoliberal economics to the extent that we thought he would be. I just think that reality has bitten him on the bum. And based on how he's responded so far, he'll continue in that vein.

RUBY:

Paul, thank you so much for your time today.

PAUL:

Thank you. Bye, Ruby.

[ADVERTISEMENT]

RUBY:

Also in the news -

There were 165 new coronavirus cases recorded in Victoria yesterday.

Six aged care facilities in the state have now been placed into lockdown after aged care workers tested positive.

And Australia will extend the visas of some Hong Kong citizens in response to China's crackdown on personal freedoms and dissent.

Temporary work visa holders and student visa holders will now be able to stay in Australia for five years.. with a pathway available to permanent residency.

I’m Ruby Jones, this is 7am, see you tomorrow.