Is Federation still working?

As three of the six Australian States (and one of the two Territories) grapple with fresh COVID outbreaks, their respective lock-down measures reveal quite different responses to what should be considered a common problem. It’s not just the differences within their own borders, but also how they react in relation to each other in terms of classifying “hot spots” and imposing travel restrictions. It’s a fresh example that despite defining itself as a single nation, the Commonwealth of Australia remains a patchwork quilt, hurriedly stitched together from the remains of colonialism, under the pretext of “Federation”.

Federation feels even more of an artificial construct than the former British colonies themselves. In my view, the inconsistencies between each State and Territory in dealing with COVID, and their fractious collective and individual relationships with the Commonwealth, can be linked to questions of national identity, the legacy of imperialism, a lack of consensus on a Treaty with our First Nations people, and the failure of Republicanism to pave a way forward.

For a start, Australia tries to maintain four different codes of professional football – yet not every State or Territory is represented in the national competitions. Of these codes, one is essentially a Victorian competition, with a couple of other States brought in on merit, and a couple of the others only included after some fabricated interstate franchises. (And how long before a Victorian club has to relocate to Tasmania?)

Another football code runs an interstate competition, but only two States compete – and sometimes they compete in another State (just for the hell of it, or to try and instill “national” relevance?)

Cricket may rightfully claim to be a national sport at a professional level, but even the major Sheffield Shield competition excludes the two Territories.

These observations may appear flippant, but in a sport-loving nation, such examples might help explain why we don’t feel a very cohesive place – not all of us even get to barrack for our own State or Territory on the playing field!

There are many other examples of arbitrary differences between the States – e.g., unicameral or bicameral Parliaments; recognition of Public Holidays; the calculation of State election dates; the width of railway tracks; connectivity with energy grids; the minimum legal age for driving a car; the size of beer glasses in pubs; and the term for a “corner shop”.

Back in 1901, Federation must have felt like part of a grand scheme towards a modern era, designed to galvanize a bunch of colonies into a cohesive whole, and forge a new nation. But we don’t formally celebrate its existence with a public holiday. Rather, each State prefers to mark the Queen’s Birthday (albeit on different dates…) instead of recognizing the Act of Federation, which was supposed to confirm Australia’s independence from the UK. Not only that, but the “National Day” we do observe is Australia Day, which is highly contentious and increasingly overshadowed by its association with foreign invasion, imperial expansion and colonial oppression.

Back to COVID: recent events have shown that the “social contract” between the Commonwealth of Australia on the one hand, and the States and Territories on the other, is purely transactional. In respect to the pandemic, the Federal government has had two primary responsibilities: 1) international border control and quarantine; 2) vaccine acquisition and distribution. Although they have maintained closed borders, the Commonwealth has “delegated” quarantine arrangements to the States, with all the resulting inconsistencies and glaring mistakes. The Commonwealth has also fudged the vaccination roll-out (too many reasons and causes to go into here).

On the need for dedicated quarantine centres: while the States have taken on (or been lumped with) an unenviable task, after 18 months of the pandemic, I don’t understand why the States haven’t taken it upon themselves to build their own facilities, and then stick the Federal Government with the bill. If landlords won’t undertake essential property repairs when brought to their attention, I think most of us would agree that their tenants would have a valid case for getting the work done themselves and deducting the cost from the rent.

Except that the States don’t have that sort of leverage over the Federal Government (despite what Queensland and Western Australia might say and think).

In short, Federation is merely a way to distribute taxes levied by the Commonwealth – even then, this distribution is mired in political horse-trading and pork-barreling. The States, unable to raise their own revenue (other than via payroll tax, stamp duty, land tax and fees from providing certain services, issuing permits and granting licenses), are heavily reliant on Federal handouts. While this allocation is often dressed up in the guise of achieving minimum targets and standards, in reality funding is tied to political objectives.

I suppose even after 120 years, Federation can still be called a work in progress. Whatever the future debate on Australia Day and an indigenous Treaty (plus constitutional recognition and parliamentary representation), and whatever the prospect of a Republic, we may need to consider that the States, as currently constituted, have had their time and are increasingly redundant. Part of me thinks we might be better off by dissolving them (along with our local authorities) and re-constituting regional government and administration around the lands of the original settlers to this island. Just a thought.

Next week: Startup Vic FinTech Pitch Night

Here We Go Again…

At the time of writing, Melbourne is once again under a COVID19-related lock down. Currently, we are three-quarters of the way through a 14-day “snap” lock down or “circuit breaker”. Variously known as #lockdown4, v4.0 (now v4.1 with the added week), or simply “The South Australian One”. Along with a prevailing sense of déja vu, much of the political, media and social coverage has a very familiar ring to it – like, here we go again!

Overall, I would much rather be in Australia at the moment, compared to many other places in the world that are still struggling to cope with the pandemic. But there is no doubt that this latest lock down is once again revealing some political and structural weaknesses in the Australian Federal and State system – and the people of Victoria (and especially Melbourne) are paying a heavy price for these combined failings.

The blame game between Federal and State politicians is becoming a farce – most of us would rather see some effective leadership and practical solutions, as well as a bit more owning up and taking responsibility for where and when things have gone wrong. After all, the first known case of COVID19 was reported in Australia in late January 2020, so our elected representatives at levels and of all persuasions have had nearly 18 months to sort this out. It doesn’t help that our Prime Minister is generally regarded as being absent whenever there is a crisis – on the other hand, does it help to have him turn up in hi-vis and hard hat for another photo opportunity? And sometimes when he does bother to make it, he’s often made to feel unwelcome.

Here are just a few of the disconnects between Federal and State roles and responsibilities when it comes to managing COVID19:

First, the Federal government is responsible for external border control (i.e., immigration and quarantine). It’s generally argued that the Feds have failed to deliver a workable quarantine solution for anyone coming to or returning to Australia. For whatever reason (and we’ll probably have to wait 20 years before the relevant papers are released), National Cabinet in March 2020 agreed to delegate the management of hotel quarantine (HQ) to the individual States and Territories. The big question is: why did the States agree? Where there incentives on offer, or did they do so because they could see no solution coming from the Federal government? At the same time, the States have applied inconsistent border controls as between each other, and at times, Victoria has been able to suspend in-bound international flights, putting more demand on the other States’ HQ programmes.

On the other hand, Melbourne still managed to host an international Grand Slam tennis event in the summer (notwithstanding some COVID scares and cases), and our nation’s softball players have already been vaccinated prior to heading off to Japan for the Tokyo Olympic Games (which many locals want to cancel for obvious reasons). Plus, AFL teams were somehow able to travel interstate from Melbourne immediately prior to the lock down (did they get a tip-off?). Yet, at least one AFL club has breached COVID regulations, when travelling on a domestic passenger flight. I’m so glad we have got our priorities right when it comes to professional sport!

Second, health services (along with education, aged care and social services) are a strange mix of Federal and State responsibilities, services and delivery. As a result, there is bound to be some overlap and double handling, as well as some obvious gaps. The Federal government is being blamed for failing to secure and distribute adequate vaccine supplies when and where they are needed, and for failing to meet their own aspirational targets in terms of vaccine roll-out. Yet, as with so many public services, there is a (confusing) dual delivery system. Victoria set up a number of vaccination hubs – only it still hasn’t deployed an online booking system: only phone bookings (or walk-ins) are available. But the Federal delivery is via health clinics and GPs, with each service provider offering different booking systems.

Third, the vaccination roll-out (by age and priority categories) has seen the criteria move around, somewhat arbitrarily. There is anecdotal evidence that due to low take-up rates in March and April, some people within one of the priority age categories (initially 60, it was suddenly moved to 50 in May) could access a jab at a clinic or hub at short notice, as otherwise those stocks were going to waste. It doesn’t help that there was/is confusion over the vaccine requirement for certain front line workers (e.g., in aged care) and who is responsible for administering those vaccinations. Of course, since the latest lock down in Victoria, demand is outstripping supply, and it is difficult to verify data on whether anyone who was in a priority category was initially unable to access a vaccine (or was denied access) at the time they became eligible and wanted a jab.

Fourth, hotel quarantine continues to be the key weak point in the transmission chain. I’m not going to dwell on the systemic failure that led to Victoria’s second (and lengthy) lock down last winter/spring – from which we were only just starting to recover when #lockdown4 was imposed. The fact that the latest lock down was triggered by an apparent breach in South Austalia’s HQ is of some significance, as it re-introduced the Kappa “Variant of Interest” into Victoria. More worrying is the presence of the Delta “Variant of Concern”, whose precise source in Victoria is still unknown, but likely to have come from our own troubled HQ system.

Fifth, the calls for the Federal government to pay for dedicated and purpose-built quarantine facilities in each State are understandable – but I’m not sure why Victoria in particular didn’t just go ahead and build their own (and then later stick the Feds with the bill). It’s not as if there is a shortage of construction work going on at the moment in Victoria (much of it State-funded), so it would have been quite easy to pull that project together without waiting for the Feds to come to the party. After all, construction was one of the few industries to continue relatively unscathed during last winter’s lock down – and with the Federal job keeper and job maker subsidies available at the time, Victoria could easily have completed the task by now, especially with the support of a key developer such as the union-backed Cbus.

Sixth, Victoria has only just mandated a universal QR code system for checking visitors in at all business, commercial, retail and hospitality premises. Why it took so long, and why it allowed a mish-mash of third party apps and pen and paper systems is yet another example of poor IT implementation by government. (The Feds appear to be no better with their own COVID tracing app.)

Seventh, the Federal Government, via last week’s National Cabinet, appears to have established a common definition for a COVID19 “hot spot”. Again, it’s only taken the best part of 18 months, and we still don’t have consistent and national terms for defining “red zone”, “complex case”, “cluster”, “mystery case”, “complex case”, “unknown case”, “fleeting transmission”, “stranger to stranger transmission”, “primary contact”, “close contact” or “exposure site” tiers. Nor do we have a consistent framework for responding to a “hot spot”, especially when comparing Victoria to other States.

Finally, the latest lock down again reveals weaknesses and vulnerabilities in Australia’s manufacturing capabilities and supply chains (in terms of producing and distributing sufficient vaccines). It’s also shown up economic fragility with many people living pay cheque to pay cheque, and many small businesses, especially in retail, tourism and hospitality, will not manage to bounce back from a fourth shut down.

Next week: How about that AAA rating?

Rebooting the local economy

Continuing the theme from my previous, post-lockdown blog, there are definitely some growing challenges ahead as the local economy tries to gather momentum. Yes, the jobs recovery looks encouraging for the hoped-for recovery (at least, based on headline numbers); and property prices (that staple of banks and economists alike) are getting very frothy again. But the end of JobKeeper later this month will hurt both employees and employers – it will be especially hard to stomach when you consider that a few household brands have chosen to keep their government-funded windfalls, despite making significant profits even during (or as a result of) the pandemic, while these same public companies have also been paying out shareholder dividends.

It will be very interesting to monitor ABS data on the number of business entries and exits (CABEE), which is now also being reported quarterly, instead of just annually. The latest annual data released in February (for the period ending June 30, 2020) shows that there were more new businesses registered than the number of businesses that were de-registered – but the net gain was a lot lower than in recent years, as can be seen from this graph:

Even after a few months of the pandemic, the number of new entries looks to have declined significantly, with a corresponding rate of increase in exits – and the net increase was already on a steep downward trajectory from 2017-18.

According to the ABS data, “In 2019-20 three industries accounted for more than half of the net annual increase in businesses, these were:

  • Transport, postal and warehousing
  • Professional, scientific and technical services
  • Health care and social assistance”

None of this data should be too surprising; further, we should expect to see a significant number of exits from the retail, hospitality and tourism sectors. Government support in the form of domestic travel vouchers and discounted air tickets will only go so far to reverse the fortunes of airline, hotel and tour operators. (The folks in Queensland must be happy with the twin benefit of being a desirable destination for both domestic holidays and Hollywood film production.)

While on-line shopping has helped to keep retail afloat, bricks and mortar retail has been dealt a heavy blow, from which it will take a long time to recover – many people have no doubt got used to e-commerce, and can’t be enticed back to the shops.

From what I see in Melbourne, the CBD is still running at 40-60% capacity (depending on location, sector, and day of the week). Mondays are definitely quiet, it gets busier on Wednesdays and Thursdays, and then starts to taper off again on Fridays, with people opting to “work from home” as the weekend draws near. Last week, one business group wants companies to close at 4.00pm on Fridays, to encourage workers to hang out in the city after work – but Fridays has always been known as POETS day, so I hardly think anyone still here at the end of the week needs any encouragement to down tools any earlier…

There are still so many construction sites within the CBD, both new build and renovations. But who is going to be occupying this new and refurbished real estate – especially as offices are still limited to 75% capacity, and employees seem reluctant to come back to the office full time? Many shops (old and new) remain boarded up. Some cafes have not even bothered to re-open at all, let alone just on the busy days. Doubtless some current construction projects have been brought forward to take advantage of JobKeeper payments, quieter streets and low interest rates – but it means that in some areas, whole blocks lie empty and virtually devoid of any business, and it feels that many shops don’t see a customer all day.

Unfortunately, with politicians distracted by non-economic matters (plus the small tasks of managing hotel quarantine and rolling out a vaccination programme), we are only seeing short-term responses and band-aid solutions, rather than strategic and visionary policy-making. Neither our governments nor the opposition parties (of all persuasions) seem willing or capable of serious (and non-partisan) debate on things like Universal Basic Income, structural reform of the economy, and instilling innovation across all areas of industry. Instead, they prefer to tinker at the edges (tax, superannuation, industrial relations), engage in Parliamentary point-scoring, and maintain the status quo within their respective supporter base. Something has to change, and soon.

Next week: Victorian Tech Startup Week

Transition – post-pandemic career moves

Even before the latest lock-down v3.0 in Melbourne, one of the other members of my co-working space in the CBD decided they’d already had enough of being confined to a 5km radius, working from home, and other lock-down related restrictions. Having had their interstate travel curtailed over the past 12 months, and suffering from cabin fever, they have opted to spend the next few months living in and working from various Airbnb locations around regional Victoria. Even though they are used to WFH, recent experience has shown that they don’t need to be confined to one place. And this post-COVID shift in our work/life patterns (already being disrupted and enabled by remote working) is only increasing.

Likewise, a client I spoke to in the USA last week informed me that they had just settled into a new location on the west coast, and was “living the dream” of a nomadic existence.

More extreme is the recent example of a Guardian employee who, having had to travel from Sydney to the UK for a family funeral last year, then took several months to get back home (due to flight cancellations), but managed to keep working remotely from various European locations as he moved around to stay ahead of border closures.

Prior to this past weekend, and despite the city being out of Stage 4 lock-down for 3 months, private offices in Melbourne’s CBD have only been allowed to operate at 50% of capacity – the proposed move to 75% capacity has been put back. It means, for example, that even on a really good day, my local coffee shop is still only doing 60% of its pre-COVID business.

It’s my guess that the combination of office restrictions and many retail and hospitality businesses simply not bothering to re-open at all means the CBD is barely operating at 40-50%. It’s deceptive – some activities (e.g., construction) have continued pretty much unabated (even expanding while there is less traffic on the roads); while others have been shut down altogether (e.g., entertainment). Certainly food delivery services are still in demand, while some retail has been doing a bit better as customers appreciate the novelty of shopping in-person.

Monday to Friday in the CBD is like a bell-curve distribution – Mondays and Fridays are much quieter, as people choose to WFH part of the week. Which is challenging for employers, as they try to revert to “normal”. But assuming a mix of remote and on-site working continues, it probably means less overall demand for office space. (It’s also difficult to assess the impact of the CBD exodus on suburban hubs.)

So all that construction work suggests we will have an over-supply of commercial premises (offices, shops, restaurants and hotels).

Residential property is a similar story – student accommodation is far from full, as overseas students aren’t returning; and more inner-city apartment buildings are still going up, but there is something of an exodus from the city to regional and rural locations.

The latter tree- and sea-changes are being fueled by a number of factors: a desire to leave the city (which is more prone to lock-downs); low interest rates (so, cash out the equity in your suburban home and move to the country where your money buys you more); increased opportunity to WFH (see, 5G and the NBN have their benefits!); and a broader wish for a different work/life balance.

Unfortunately, this shift is also putting pressure on local housing supply – average property prices are going up faster in some regional centres than in the capital cities; and more nomadic lifestyles are driving up demand for short-stay accommodation. The combined effect is higher rental costs and reduced supply, tending to squeeze out the locals.

Ironically, we’ve heard farmers and primary producers in rural and regional Australia complain that they can’t get seasonal workers due to COVID restrictions on international visitors (especially students, back-packers and experienced fruit pickers). Conversely, we’re told that 90% of jobs lost after March last year have now been recovered – although this apparent rebound is mainly in part-time roles, not full-time positions. It would be interesting to see a detailed breakdown by industry, as some sectors (tourism, aviation, universities) are still struggling.

The hiatus (and disruption) brought about by COVID and subsequent lock-downs has no doubt prompted many people to reassess their careers: where do I want to live/work? what type of work do I want to do? which industries or companies are hiring? and for what roles? As part of a wider re- and up-skilling initiative, the Federal and State governments are offering a range of free vocational courses (mostly Cert I to IV programmes), as well as some enhanced “pathways” to trade apprenticeships.

While this is to be applauded, I can’t help feeling the effort is at least 5-10 years too late to address the technological, demographic and societal changes that began at the end of the last century, with the advent of the internet, cheaper technology, an ageing population, increased globalisation, inefficient taxation and tariff systems, and general economic restructuring. If nothing else, COVID has demonstrated the need for more resilience in the domestic economy, (and a reduced reliance on overseas imports and supply chains) such as smart manufacturing and food security.

Meanwhile, a friend of mine recently related that a nephew of his had dropped out of college (like many of his peers in the USA and elsewhere) and decided to become a self-taught expert in DeFi, as there is more chance of financial success (and career satisfaction) than obtaining an “off the shelf” bachelor degree….

Next week: Corporate Art