Why now is right time to bury JobKeeper 2.3

TREASURER Josh Frydenberg’s move to terminate JobKeeper Version 2.3 – and both the implicit and indeed explicit rejection of any return to the original JobKeeper 1.0 – is not only exactly right, it is fundamentally necessary.

It is exactly in sync with the National Roadmap – agreed by all nine governments – built around the 70/80 per cent vaccination levels.

It is also fundamentally necessary to drive a return to economic, business and, indeed, some sort of fiscal normality. Just as we can’t stay in lockdowns and cocooned within closed state borders for ever; we can’t have the federal government writing out billion-dollar cheques a week to underwrite state governments imposing them.

Yes, a state government could still choose to go down those paths; but then the cost would be entirely on its own fiscal and political shoulders.

If the Victorian government wanted to keep destroying businesses and jobs in retail and hospitality, ‘building’ on its world-record days in lockdown, that would be its clear choice and its clear responsibility.

If the WA and Queensland governments wanted to keep destroying businesses and jobs in tourism with their closed borders, same again.

Now it remains to be seen of course, how sustainable Frydenberg’s sensible hard line proves to be once we get into 2022; once we start finding out just exactly what the post-vaccine Covid reality actually is.

And once, at the same time, we start counting down to what in my judgment will be a May federal election.

We will get a telling pointer on the first, as the UK treks through its first vaccinated winter.

Right now, there are rather disturbing signs. Both case numbers and deaths are running higher, much higher, in the UK than at the same time 12 months ago.

Back in 2020, the UK was in some degree of lockdown; now it’s all but fully open. Last year was also both prevaccine and before the much more virulent Delta strain.

But, let’s see what happens in the UK over the coming winter months. It will provide the most telling pointer to what we can expect next winter.

The belated – too belated -move to tighten the rules to stop banks making excessively large home loans is also a good thing.

What’s not been noted is that it raises a huge question mark over what exactly the banks have been doing. They are supposed to have already structured to ensure they didn’t make excessively large loans. The fact that their regulator APRA believes it has to impose new so-called ‘macro-prudential’ limits on bank home loans suggests the banks have been failing.

It also suggests that APRA has been failing to keep the banks feet to the fire over their existing behaviour.

The primary impact of what APRA is now doing will be on purchases of existing properties.

The ‘losers’ will be buyers who can no longer ‘stretch’ to bid that extra $100k, or $300k, at an auction; and property sellers who lose a bit of bidding tension.

It should not have much impact on actual residential construction – first-home buyers entering land and house purchases or buying newly-built houses and apartments.

So just like the JobKeeper move, it should be positive for promoting a return to a more normal post-Covid economic reality.

It should take some of the froth out of what I call the ‘used’ housing market, but might even be marginally positive for actual residential construction.

Depending however, on just exactly what the state premiers do through October and November, the two moves could combine to limit the economy’s bounceback from the savage drop happening through the September quarter.

We expected – hoped – to leap out of the NSW and Victorian lockdowns, like we did last year.We might now find it’s more of a limp out.