Corporate Covid giveaways wide-open for mega-rorting

Sep 29, 2020

History would suggest that conservative politicians, of all folk, would be the ones who were cautious about uncontrolled public spending programs. But it sometimes seems that the apparent moral collapse and decline of social responsibility in Australian business has also affected politics.

The forthcoming budget, new schemes to improve liquidity, and efforts to lift consumer confidence and to get the economy going again involve a good deal of risk-taking by government. Risk taking is justified, the more given that early hopes for a quick end to the Covid-19 pandemic have not been realised, because some shut-down parts of the economy — such as tourism and international travel will hold back growth for a long time, and because  government must seek to shape a new economy, rather than recreate the old one.

The Prime Minister and others have declared that they want to limit delay and red tape in getting money out to those  whose spending and activity will, we hope, help create this new economy and growth. But more efficiency and effectiveness are one thing. It is also very important that government manage the distribution in such a way as to reduce the risk of fraud, of money going into the wrong hands, or without any sort of accountability for results, or the diversion of money away from where it was intended.

All the more so given that this government, by ideological predisposition as much as by its hopes of maximising flexibility and responding nimbly to new challenges, would prefer to act without much close management and supervision by Commonwealth government departments. While government spending has massively increased, this government is still seeking to contain the size of the Commonwealth public service  — including staff cuts in some areas —  and to require the delivery of efficiency dividends. While the idea of a “snap back” to normality, has been largely abandoned, government is still planning that a moment will arrive when there will be no need for that extra money needed to kick start the economy. It wants to be sure that the public sector has not become bloated in the meantime, making the job of paring back the size of government a project to be started all over again. If anything, a Treasurer who has proclaimed that Margaret Thatcher and Ronald Reagan are his heroes hopes in fact to have a smaller standing army of federal public servants than now.

In theory this might be manageable if the new temporary structures and bureaucracies, or the transfer of money to the states for particular infrastructure programs was well designed, transparent, accountable, and subject to close and at times suspicious scrutiny. Sometimes there may be a need for speed, but experience has shown that this is just the time when the cost of carelessness, poor process or poor planning presents the highest risk to taxpayer dollars, even by those intending to do the right thing.

Anyone who doubts this should look at the excuses offered by departments such as home affairs (and earlier immigration) for unbudgeted costs and mismanagement of detention centre programs, for cost overruns and eventual abandonment of computer projects in the hundreds of millions of dollars, or for practices such as the purchase of land near the new Sydney airport by a federal government department at about ten times the independently assessed value of the land.

Or the failures of schemes designed to squeeze and harass welfare beneficiaries through robo-debt in a way that overrode loud doubts about its legality — with the eventual result that nearly a billion dollars will end up being lost in the debacle.  In some environments, the managers responsible for planning and delivering such outcomes  — and aggressively defending them when their worth was being challenged, would be out the door, if only as sacrifices to protect responsible ministers. Yet a government seemingly determined only to look forward, not back, and reluctant ever to admit error or misjudgement, has generally been wary of allocating blame and responsibility , lest somehow it set some standard against which it might later be judged.

The need for some standards, and vigorous policing of them, is also underlined by recent experiences with the private sector, including institutions once regarded as generally honest, such as the banks. The general experience with the financial services industry, including the assistance it got from senior ministers in the government, showed poor service, fees for no service, and outright fraud sanctioned at the highest levels of banking management, including by some of the great and good in the community. The general nursing home crisis, coupled with particular difficulties caused by the coronavirus pandemic, has seen blatant abuse of public trust involving some of the most vulnerable Australians. Likewise with the rorting of water rights by irrigators, particularly in NSW, with the connivance of politicians and bureaucrats at both levels of government.

When Scott Morrison, as Treasurer, was trying desperately to resist a royal commission into the banks, he was insisting that the banks may have had in the past (before him) a few rotten apples, but he and Treasury had dealt with them comprehensively. An inquiry would now be a waste of time. He was moving at a million miles an hour away from this position once it became clear that the problem was systemic, not the work of a few rotten apples, or players at the fringe. That inquiry saw many of the most senior bankers out on their ear, but it is far from clear — as witnessed by enormous fines currently being levied on Westpac and the Commonwealth bank, that the culture is over. It is far too early for it to be assumed that everyone has learned his or her lesson, and that such conduct could not occur again.

Yet that seems to be very much in the direction in which government seems to want to lead up with new talk of encouraging easy loans, particularly for home-buyers and small business, and with a lot less diligence on the part of banks, in exchange for a considerable transfer of risk away from the bank towards customers, implicitly customers of a sort least likely to be able to afford their loans, to manage payments and most at risk of default. Expecting, or hoping, that banks will exercise moderation with their new powers, or that they will be restrained in the way that they take securities, and enforce them once there is any default is ridiculous.

Perhaps Morrison will not be around to see it, but he must appreciate that he is re-engineering the circumstances that gave the world the global financial crisis of 2008 — a crisis that Australia was largely spared both because major financial institutions had not been pedling the sort of high risk loans that banks elsewhere, particularly in the US were. He might remember too that the emergency measures the Rudd government had to take, on Treasury advice, to flood the market with liquidity were strongly opposed by his party, though strangely similar to those being used now. Treasurer Josh Frydenberg might, however, note that if cheap loans to those least able to manage a house-price downfall, or market downturn, turns bad for whichever government is then in power, it will be after the pandemic, not as a part of it.

This is not to say that government should not be flirting with ways of creating easier credit for more people, or other imaginative schemes to get the house-building market out of the doldrums. The coalition remains fixated on the idea that tax cuts, including to high income groups will promote spending, investment and consumer confidence, when it seems likely that it will either do no such thing, or, if it achieves a slight effect, will do so far less efficiently than distributions to lower income levels, including welfare beneficiaries, in labour market programs, and in the building of infrastructure, including social rather than physical infrastructure.

History would suggest that conservative politicians, of all folk, would be the ones who were cautious about uncontrolled public spending programs. But it sometimes seems that the apparent moral collapse and decline of social responsibility in Australian business has also affected politics. One can sense it in the total indifference and contempt with which auditor-general’s reports — for example on sports rorts — have been greeted. Corruption and probity are problems in modern government.

Put bluntly the instincts are not right, and from the leader down. And public sector leadership is in a poor state, and will, no doubt, be said to be so busy with the pandemic as to be unable to focus on anything else. That’s matched, of course, by complete resistance to any sort of integrity body, as well as a marked increase in compulsive secrecy, refusal to answer question, the political compromising of agencies such as the AFP,  and the aggressive use of spurious claims of national security to punish whistle-blowers, truth tellers and those who do not sing from the right hymn sheets.

At the heart of the problem, of course, is the attitude and approach, and the complete want of accountability, particularly in these times, of Scott Morrison. That is aggravated by the way in which some of the watchdogs appear muzzled, drugged or sidelined. But one of the biggest problems is the Attorney-General, Christian Porter, who seems to see every problem through a political, not a public interest lens.

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