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Will the Federal Budget result in deaths, illness and suffering?

In the first several months of the pandemic, Australian governments took generally swift and decisive action to minimise the deaths and suffering caused by the novel coronavirus.

What are the chances that economic policy-making will now prioritise the community’s health and wellbeing?

It’s a critical and timely question, amid concern that next month’s Federal Budget – the first recession budget in decades – may launch austerity measures. Like the coronavirus, these are proven to be devastating for health, reports Marie McInerney.


Marie McInerney writes:

“If austerity was tested like a medication in a clinical trial, it would have been stopped long ago, given its deadly side effects.”

That’s one of the key findings of a seminal 2013 book, The Body Economic: Why Austerity Kills, written by Professor David Stuckler and Associate Professor Sanjay Basu in the wake of the 2008 global financial crisis (GFC).

Stuckler, a Senior Research Leader at Oxford University, and Basu, an Assistant Professor of Medicine and an epidemiologist at Stanford University, looked particularly closely at what happened in Europe in response to the GFC, with a focus on suicide but also broader health impacts.

They catalogued the public health toll then unfolding in Greece as it struggled to meet debt reduction targets, including through a 40 percent cut to the national health budget.

Around 35,000 doctors, nurses and other health workers lost their jobs. Hospital admissions rose dramatically because people avoided routine and preventive treatments due to long wait times and rising drug costs. Infant mortality rose by 40 percent. HIV infections more than doubled, because the budget for needle-exchange programs was cut.

By comparison, they said, Iceland avoided a public health disaster, despite a massive banking crisis, because it chose, deliberately and democratically, not to pay for the financial sector’s sins with large cuts to their health and social-protection systems.

To test their hypothesis — that austerity is deadly — Stuckler and Basu went back through many other economic and social shocks. The collapse of the Soviet Union. The Asian financial crisis. The Great Depression in America.

While these all varied hugely, the researchers said their thesis stood up, that austerity — which they defined as severe, immediate, indiscriminate cuts to social and health spending — “is not only self-defeating, but fatal”.

It’s a warning being sounded now around the world as countries look to manage the unprecedented economic impacts and of the pandemic.

That of course includes Australia which has now officially entered its first recession for almost three decades, and worst since the 1920s Depression, with the June quarter GDP numbers showing the economy went backwards by seven per cent.

Cuts ahead

Like many others, Sharon Friel, Professor of Health Equity at the Menzies Centre for Health Governance at the Australian National University, has praised previously “unthinkable” measures taken by the Coalition Government and by states and territories in response to the pandemic.

She has co-authored a report that identified 156 specific policy measures introduced by Australian governments that are key social determinants of health equity in the areas of employment, income, cost of living, education, housing, infrastructure, community, legal and social services, and health care.

The JobKeeper and JobSeeker payments and free child care in particular have been crucial in staving off harm and distress and offered “glimmers of hope” for health equity, she says.

But Friel is deeply concerned the Federal Government, like many other conservative governments across the globe, has banked a lot of “political capital” through those responses that it will now use to revert to type: cutting taxes and spending.

That’s already being seen in plans to cut critical income support, bring forward tax cuts for the wealthier, and stimulus for industries — such as the Prime Minister’s vision for a “gas-fired recovery” — that put environmental health at risk and do nothing to address the other great looming crisis of the climate emergency.

“They’re not using the language of austerity but are talking of ‘continuing the recovery’ – still telling the population ‘we’re looking out for you’ but the actual policy responses are austerity measures,” Friel told Croakey.

Some of those measures are about to hit hard and soon. The Federal Government plans to reduce the Coronavirus Supplement from next Friday (September 25), cutting incomes of people on JobSeeker, Youth Allowance and the Parenting Payment by $300 per fortnight.

The Government plans to fully remove the Supplement at the end of the year, taking people on the JobSeeker back to just $40 a day – the old Newstart rate, and to reintroduce assets tests and waiting periods to delay access.

The Australian Council of Social Service (ACOSS) says the cuts will significantly affect 2.2 million people receiving the Coronavirus Supplement, including 1.6 million on JobSeeker and over one million children.

ACOSS CEO Cassandra Goldie told the National Press Club last week that the overnight increase for Newstart, after 26 years, had been a huge relief, and meant for the first time in decades that people hit by unemployment could cover the basics.

But now many were “terrified about what is around the corner”, she said, warning that reducing income support payments will profoundly affect people’s ability to meet rent or mortgage payments, eat regular, fresh, healthy meals, pay their bills, and afford medications and specialist services.

Feedback from an ACOSS survey of more than 600 people receiving JobSeeker or related income support payments

Shaping our futures

Professor Tony Dreise, head of the Centre for Aboriginal Economic Policy Research at the Australian National University, says the Coronavirus Supplement has lifted tens of thousands of Aboriginal and Torres Strait Islander people out of poverty.

“Sales of food in some communities have increased by as much as 40 percent as Indigenous families are finally able to meet their basic material needs,” he wrote in July.

“But what will happen in September when the supplement is due to expire?”

A paper produced by the Aboriginal and Torres Strait Islander COVID-19 working party, convened through the Transforming Indigenous Mental Health and Wellbeing Project at the University of Western Australia, has also warned that responses to this pandemic “will shape our future”.

It said:

Government actions taken now will determine the severity of the mental health impacts and subsequent recovery for Aboriginal and Torres Strait Islander peoples, who have already been disadvantaged by historical and intergenerational trauma, economic inequity, and inadequate access to health services and a culturally safe and responsive workforce.

This disadvantage results in higher risk of trauma, mental illness, economic injury, and burnout during the fourth wave of a pandemic.”

Focus on housing

Many are also concerned about what Australia’s 6 October budget will bring, in both missed opportunities and harmful measures.

ACOSS and others, including economists and some in business (particularly in retail), are urging the Federal Government to scrap reported plans to fast track $150 billion-plus in tax cuts.

They say these will mainly benefit higher income earners who need the extra money the least and are more likely to save it than spend it to help boost the economy, as well disadvantaging women, who have already been worse hit by the pandemic.

Instead, many community leaders and economists are urging Canberra to pump money into long-term support for low income earners, including through the higher JobSeeker rate and ongoing JobKeeper,

They are also calling for investment in social housing and “decent” jobs, spending on services in areas of social need that have emerged during the pandemic, including mental health and aged care.

“Invest in care,” Goldie exhorted, while former Prime Minister Paul Keating also stepped into the fray, saying Australia should be “building public housing till the cows come home”.

The Menzies Centre report led by Sharon Friel also urges action on housing, and on greater attention to structural change to address social and health inequities.

“There is silence when it comes to issues of taxation, especially of multinational corporations, financial regulation, trade and investment, and racism – each of which drive the conditions in which we live, and which are so unequally distributed,” the report says.

Amid concerns about proposed changes to Australia’s national environmental laws and the Prime Minister’s insistence on backing gas versus renewables, the Menzies paper also warns against deregulation in social, health and environment sectors and against the dominance of certain gender, economic and political lenses in the recovery governance and planning processes.

“Governing going forward requires a new social compact, supported by a national whole of government health equity strategy,” it says.

This warning is also echoed by leading United States economist Professor Joseph Stiglitz, who has railed against some of the corporate subsidies provided so far in the US.

“Now that government spending is being unleashed on a massive scale, the public has a right to demand that companies receiving help contribute to social and racial justice, improved health, and the shift to a greener, more knowledge-based economy,” he wrote recently.

With interest rates low, there’s pretty much unanimity amongst economists of the need to spend big and well, a recent webinar hosted by Australian Progress was told.

But the risk is that the Coalition Government sticks with the budget surplus “fetish” that has characterised Australian politics for decades, and gets stuck on driving down debt.

Think tank Per Capita led a call early in the pandemic for the Federal Government to rule out austerity measures “such as spending cuts that would entrench high levels of structural unemployment, destroy many small businesses, suppress growth and plunge millions of Australians into poverty”.

Per Capita economist Emma Dawson told the webinar that austerity measures adopted by Australia had “deepened and lengthened” the Great Depression here.

We managed far better after World War Two, she said, by “growing the economy strongly, not cutting spending or reducing debt”, through a massive social housing spend, the Snowy Hydro scheme and a huge boost to migration.

She added:

The different challenges now are that we need to grow [the economy] in a way that’s sustainable so we don’t do any more damage to our environment and to the planet, and we need to grow in a way that is inclusive.”

Authoritative sources

According to Dr Richard Horton, Editor-in-Chief of The Lancet, the UK Institute for Fiscal Studies has published the most authoritative account so far of the likely impact of lockdown on the economy and health in its briefing paper: Recessions and health: the long-term health consequences of responses to the coronavirus.

It says that recessions have been shown to have large and persistent negative effects on health and mortality at the population level.

The paper quotes one UK study that estimates a one percent fall in employment leads to a two percent increase in the prevalence of chronic illness, and a Dutch analysis that found being born in a recession “reduces lifespan by about five percent”.

“This illustrates the stark and lifelong effects that early childhood conditions have on health, not just because of the biological pathways, but also as a result of the effects of in-utero and early-childhood health conditions on other economic outcomes and family behaviours,” the report says.

But, like The Body Economic: Why Austerity Kills, the report makes it clear that health impacts of recessions are not inevitable. How governments respond is critical.

Sir Michael Marmot, former head of the British Medical Association, delivered a damning indictment of the UK’s austerity policies earlier this year with a ten-year review of his landmark study Fair Society, Healthy Lives (The Marmot Review).

Marmot found that improvements in life expectancy in England — continuous since the beginning of the 20th century — had from 2011, under austerity, “slowed dramatically, almost grinding to a halt”.

For part of the past ten years, life expectancy actually fell in the most deprived communities outside London for women and in some regions for men.

He pointed to rising child poverty and the closure of children’s centres, declines in education funding, an increase in precarious work and zero hours contracts (no minimum hours), a housing affordability crisis and rise in homelessness, and people not having enough  money to lead a healthy life and relying on foodbanks in large  numbers. He also described communities whose needs were ignored and who had little reason for hope.

“Austerity has taken its toll,” he said.

But Marmot has recently argued that building back better from the pandemic means much more than rejecting austerity measures. Governments must address climate change and health equity together, he told a recent VicHealth Life and Health Reimagined webinar.

That is also the focus of an open letter to the Prime Minister from Australia’s peak medical groups, calling for a “health-centred economic approach” to support a transition away from fossil fuels, both coal and gas, to renewables and investment in projects and technologies that preserve our natural environment.

As the Prime Minister presses ahead with plans for a gas-led economic recovery, many in the health sector are alarmed.

Doctors for the Environment secretary Dr Richard Yin told Croakey that the plan was “horrendous”, given the impact of gas on climate change, the risk of wasting taxpayer funds on assets that will soon be “stranded”, and that air pollution currently causes 3,000 premature deaths in Australia each year.

“Why invest in something that’s going to be detrimental to human health?” he asked.

It’s a question to keep asking governments as they respond to the pandemic fallout.

Further reading

The COVID-19 pandemic and health inequalities

Resources from Australian Progress

• Croakey acknowledges and thanks donors to our public interest journalism funding pool for supporting this article.

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