Avoiding an economic ‘cliff’ will require more spending

Just how much “fiscal space” a country has is a judgment call, but it’s safe to say Australia has a fair bit more up its sleeve. The same report said our projected government debt for 2021 as a share of the gross domestic product was about half the average for advanced economies.

But how far should governments go in propping up businesses and jobs that have been destroyed by measures to contain COVID-19? And when should we start to worry about the risks of taking on even more public debt?

So far, Australia’s economy has fared better than most in this crisis. The government rightly responded to the pandemic with one of the biggest stimulus packages in the world, relative to our size, which prevented much economic and social misery.

However, economists are still pretty gloomy when looking at what we’re facing in a few months’ time.

The sheer size of Australia’s stimulus effort, and the fact the spending is concentrated in the six months to September, means that removing it will have a big impact. ANZ Bank has even forecast the economy will shrink in the three months to December because of stimulus being withdrawn.

Business leaders are nervously awaiting this final quarter of the year, with National Australia Bank chief executive Ross McEwan last week supporting targeted packages to support the hardest-hit industries.

Illustration: Simon LetchCredit:

And Prime Minister Scott Morrison has indeed signalled there will be some targeted support for the sectors that have been forced to effectively close, such as aviation and international tourism.

The questions are how much extra support there will be, who will get it, and when does the downside of all that debt outweigh its benefit?

There are clearly limits on how much we can and should borrow, but the view of most market economists is we’re not there yet, especially in an era of ultra-low interest rates. More to the point, attempting to rein in debt through “austerity” would make a bad economic situation even worse.

Independent economist Saul Eslake says one of the key lessons of the aftermath of the global financial crisis overseas was the damage caused by withdrawing stimulus too early. “Germany, Britain and to at least some extent the United States tightened fiscal policy too early in 2010 and dealt their recoveries an unnecessary setback, and we don’t want to do that,” he says.


ANZ Bank head of Australia economics David Plank, who is forecasting a budget deficit of $200 billion for the coming financial year, also says the debt being racked up is worthwhile. “I don’t think a deficit of $200 billion in 2021 is inappropriate. I think what would be inappropriate would be sharply withdrawing government spending,” he says.

Deloitte Access Economics partner Chris Richardson says that with official interest rates at rock bottom and unemployment high, it is a time for government spending to step into the breach. “A given dollar of government spending can do more good today than at any other time that Australians have ever known,” Richardson says.

Importantly, none of this is to say we should be writing a blank stimulus cheque, nor that every business can be saved. Further public spending to get the economy off a “cliff” is a far cry from what proponents of modern monetary theory advocate – expanding the money supply to finance government spending.


It is also a sad reality that many businesses are likely to fail during this recession. It won’t be in the economy’s interests to have a series of so-called “zombie” companies – those that only survive because debt is extremely cheap, but are unable to invest.

Indeed, Eslake points out that part of improving Australia’s low productivity growth will involve allowing capital and labour to move to more productive uses. “We don’t want to adopt a suite of policies that inhibit the movement of labour and capital from low productivity uses to higher productivity uses,” he says.

Australia’s economy still faces a highly uncertain outlook as it tries to avoid the”cliff”, and there will no doubt be many hard decisions facing economic managers in the months ahead. But whether to provide more targeted stimulus to the economy should not be one of them.

Ross Gittins is on leave.

Get our Morning & Evening Edition newsletters

Most Viewed in Business


Source link

Court rules Trump can’t require drugmakers to disclose prices in TV ads

In a major legal setback for President Donald Trump on a high-profile consumer issue, a federal appeals court has ruled that his administration lacks the legal authority to force drug companies to disclose prices in their TV ads.

The ruling denies Trump an easy-to-understand win on a major reelection priority for the White House, bringing down the cost of prescription medicines. Where most plans to overhaul the cost of drugs are complex, mandating that companies disclose prices is something any consumer can relate to.

Separate from the court case, legislation that would lower drug costs for Medicare beneficiaries with high bills is stuck in Congress. It’s unclear that Trump can get it moving, since it would require some hard compromises for both Republicans and Democrats. There’s also a separate bill that would mandate drug companies to disclose their prices in consumer advertising.

Trump, however, is not empty-handed. His administration recently brokered an agreement with drug companies and insurers that would give Medicare recipients taking insulin the ability to limit their copays to $35 a month, starting next year.

On TV ads, the unanimous decision by a panel of the U.S. Court of Appeals for the District of Columbia Circuit did not address a core argument of the pharmaceutical industry, that forcing companies to disclose their prices in advertising violates their free speech rights. Instead the three-judge panel ruled that the Department of Health and Human Services overstepped its legal authority by requiring disclosure under the umbrella of its stewardship of Medicare and Medicaid. The panel issued its decision Tuesday.

In a scathing rebuke to the administration, Judge Patricia Millett wrote for the court that HHS “acted unreasonably” in asserting it had authority to impose “a sweeping disclosure requirement that is largely untethered to the actual administration of the Medicare or Medicaid programs.

“Because there is no reasoned statutory basis for its far-flung reach and misaligned obligations, the disclosure rule is invalid and is hereby set aside,” the judge added.

White House spokesman Judd Deere shot back in a statement: “It makes absolutely no sense to keep patients in the dark on the true cost of care, and only the ‘D.C. Swamp’ would support such a thing. While big pharma will do everything they can to avoid even a conversation on their astronomical list prices, President Trump remains committed to making pricing information available prior to the delivery of care.”

When the disclosure rule was announced last year, administration officials were confident that it would be in effect by now.

Trump tweeted at the time that “Historic transparency for American patients is here.”

Drug pricing details were expected to appear in text toward the end of commercials, when potential side effects are disclosed.

The government hoped that patients armed with prices would start discussing affordability with their doctors, and gradually that would pressure drugmakers to keep costs of brand-name drugs in check. AARP was among the organizations supporting disclosure.

The idea was part of a multilevel blueprint Trump announced in 2018 to try to lower prescription drug costs.

In Congress, a bipartisan bill from Sens. Dick Durbin, D-Ill., and Chuck Grassley, R-Iowa, would achieve essentially the same results as the Trump administration rule, requiring companies to list prices of their prescription drugs in their consumer advertising. Although an act of Congress would may carry more weight in the courts, its path forward also seems unclear.

Democrats see an opportunity to make far bigger changes. The House passed Speaker Nancy Pelosi’s bill authorizing Medicare to negotiate prices directly with the industry. That’s a nonstarter for Republicans, though Trump once supported it.

Pelosi’s bill would plow billions from prescription price cuts into providing new benefits for Medicare recipients, such as vision, dental and hearing aids. Democratic presidential candidate Joe Biden also backs Medicare negotiations.

More must-read stories from Fortune:

Source link

Coronavirus: Uber to require face masks but not in UK

Image copyright

Image caption

An AA engineer installing a perspex screen in a taxi for Uber

Uber drivers and passengers in most countries will have to wear face masks from next week as the ride-hailing firm toughens its coronavirus policy.

The new rule takes effect on Monday.

It applies to services in the US, Canada, Mexico, India and most of Europe, Latin America, the Middle East and Africa.

But the UK is not on the list, following government guidance which advises but does not require people to wear face coverings in confined spaces.

Although it is not making it compulsory to wear a face mask in the UK, Uber said it had distributed free protective equipment to UK drivers, including more than a million single-use face masks, as well as 95,000 cleaning sprays. In the coming weeks, it will hand out another two million masks.

“As well as working with Unilever to provide drivers with free sanitising products, Uber is distributing millions of masks and directly reimbursing drivers if they choose to source the PPE themselves,” an Uber spokesman told the BBC.

At the same time, Uber, along with taxi firm Addison Lee, has announced new safety measures as the government looks to ease coronavirus restrictions and people return to work.

Addison Lee will fit perspex partition screens between drivers and passengers across its 4,000 vehicles next week.

And Uber is paying the AA to install partitions in 400 cars in Newcastle, Sunderland and Durham as part of an initial pilot.

Image copyright
Getty Images

Image caption

United Private Hire Drivers union wants it to be mandatory for both drivers and passengers to wear masks during journeys

“We know there is significant demand from drivers, passengers, businesses and the general public for more to be done to make transport cleaner and safer as we go back to work – including calls for the introduction of partition screens into private hire vehicles,” said Liam Griffin, chief executive of London-based Addison Lee.

“That’s why we have taken the decision to begin rolling out the installation of safety screens between drivers and passenger seats.”

Uber said its pilot in the North East of England was crucial for the company to get a better understanding of how to carry passengers on journeys as safely as possible.

Uber is first trialling the partition screens in areas where it has been able to gain the permission of the regulator or city council, in order to ensure that the screens are installed safely.

On Wednesday, Transport for London (TfL) updated its guidance for taxi and private hire vehicle firms.

The regulator is advising firms to have drivers and passengers socially distance, with passengers sitting in the back seats of cars. It advised drivers to carry a bottle of hand sanitiser gel in their vehicle that contains at least 60% alcohol.

However, when it comes to the use of personal protective equipment (PPE) such as face masks, gloves or partition walls, TfL said it is waiting to hear from the London Strategic Coordination Group (SCG) on recommendations before mandating additional coronavirus prevention and control measures for taxis and private hire vehicles.

‘Lethal combination’

The BBC understands that a number of taxi firms in the UK are seeking clarification from the government on health and safety precautions to take once the lockdown ends, and would prefer regulation rather than advice.

In Wales, taxi drivers told the BBC they experience anxiety with every passenger they pick up, and are still waiting for approval from their local councils before they can make any modifications to their vehicles, such as installing a screen.

“Two months into a public health emergency which has seen private hire drivers suffer one of the highest occupational mortality rates, yet TfL and the Department for Transport (DfT) are still not taking responsibility to introduce necessary safety controls,” James Farrar, chair of the United Private Hire Drivers trade body, told the BBC.

“Poor regulatory standards and employment misclassification has become a lethal combination for desperately exploited drivers.”

Image copyright
Getty Images

Image caption

Taxi drivers have lost a lot of their income during the coronavirus income, as cities like Cardiff stand mostly deserted

The trade body is similarly concerned that Uber is not providing partition screens to its drivers in other parts of the UK, such as London, which has the largest concentration of Uber drivers in the country.

Mr Farrar wants to see Uber commit to limiting bookings to no more than two passengers per vehicle, and to make the wearing of masks mandatory for both drivers and passengers.

For now, there is no evidence available that demonstrates that partitions in taxis will reduce the risk of transmitting the coronavirus.

But there is some evidence that the use of cloth face coverings can help to reduce transmission of coronavirus infection where it is not possible for people to maintain a distance of 2m.

Source link

Google Will Require Proof of Identity From All Advertisers

In an effort to fight off fraudulent or misleading online ads, Google will require that all advertisers across its sprawling network prove who they are and where they operate, the company said in a blog post on Thursday.

The names of the companies or people behind ads, as well as their countries of origin, will begin appearing on Google ads this summer, starting with several thousand advertisers a month in the United States before expanding worldwide. The measure, which could take years to implement, is designed as a defense against businesses and individuals who misrepresent themselves in paid online promotions, Google said.

The move comes as Google tries to tamp down misinformation and scams related to the coronavirus pandemic. It expands a 2018 verification policy focused on political advertisers serving election ads.

Broadening the policy will “help support the health of the digital advertising ecosystem by detecting bad actors and limiting their attempts to misrepresent themselves,” wrote John Canfield, who handles ad integrity for Google, in the blog post.

In the past, Google has cited predatory behavior by companies that trumpet payday loans, bail-bonds services and third-party tech support, often banning ads outright. In September, Google said that it had taken down more than 3.2 billion ads that violated its advertising policies in a year, or more than 100 bad ads per second.

Under the new policy, Google will suspend the accounts of advertisers that do not provide proof of identity, including W9 forms, passports and other personal identification and business incorporation files. Previously, Google had requested basic information, like names, but did not require documentation.

“Who doesn’t want an internet that is more truthful, especially with the rise of fake news, fake businesses and fake face masks?” said Douglas Rozen, the chief media officer at the digital ad agency 360i. “The inevitability of this makes sense in today’s environment.”

Google intensified efforts to clean up ads after it was discovered that websites spreading false information about the 2016 presidential election were making money by selling ads through the company’s advertising networks.

In late 2016, Google kicked off hundreds of publishers from its AdSense advertising system. Two years later, it required political advertisers to verify their identities before allowing them to buy campaign ads. The move came after Google’s disclosure to Congress that it had accepted nearly $5,000 in advertising during the election cycle from the Internet Research Agency, a Russian company accused of meddling in the race.

More recently, Google has been playing cat-and-mouse with advertisers trying to circumvent its ban on ads that profit from shortages caused by the pandemic. Even as Google said it was catching millions of problematic virus-related ads a day, its networks still failed to rein in many others.

“There’s a lot of money in Google ads; it’s easy for someone to start an advertising account and start dumping money into their system,” said Jared Moré, a digital marketing consultant.

Mr. Moré, who has worked with health care companies for nearly 20 years, said he has seen plenty of sketchy behavior, especially involving search results and ads for drug and alcohol treatment centers. In 2018, Google began requiring advertisers in that category to be certified as addiction services providers.

Expanding the verification process is a necessary step, he said.

“It shouldn’t be a hassle for 99 percent of advertisers,” he said. “It will only be difficult for people who are maybe doing something unscrupulous.”

Source link