Grattan on Friday: COVID divides the nation and isolates MPs from Victoria

COVID-19 has now made us two Australias. There’s Victoria – most specifically Melbourne – and then there’s the rest of the country.

Melbourne’s extraordinary lockdown complete with curfew is an act of desperation by Daniel Andrews’ government, as it fights a daily tally of several hundred new cases.

Scott Morrison will remember when he berated the media for using the term “lockdown”. Now he finds himself using it all the time.

Melbourne has become a city where citizens are supervised by police and soldiers. Its economy will be crushed. Regional Victoria’s lockdown is somewhat milder but it will take a big toll.

By contrast, at least in terms of COVID itself, the other seven states and territories are, Morrison said on Thursday, “in a fantastic position”.

Well, sort of. NSW is holding the line, with a few cases that so far thankfully have not morphed into a dangerous spread.

But while we are living as two Australias, we are one country. That means the huge whack the virus is inflicting on Victoria is dragging down the rest of the nation, holding back recovery.

The dire turn of events is affecting political leaders’ responses. Risk-averse premiers are running their states as gated communities.

Morrison maintains a level of public solidarity with Andrews but the PM may find himself under mounting pressure from those within his party and its base who want the economy given a much higher priority.

David Kemp, a Liberal cabinet minister in the Howard government and party elder, wrote in the Australian Financial Review this week: “The federal government is making a great mistake if it does not call [the Victorian situation] out. It apparently believes that the priority is to maintain unity in the national cabinet. There is no true unity, and the pretence is inhibiting the national debate …

"This pretence is now dividing the Liberal Party and demoralising its supporters, in Victoria at least. It is also undermining national economic recovery by sanctioning gross policy overreach.”

In early May Morrison released a path out of the COVID restrictions that would have had us in reasonable shape everywhere now. Instead, we might as well hire a fortune teller to predict where we’ll be when.

The way ahead depends on two uncertainties. Will the Victorian lockdown bring COVID-19 under control? And will the virus be stopped from breaking out elsewhere?

The government has produced Treasury’s estimates of the cost of the Victorian stage 4 lockdown.

Previously Treasury said Victoria’s recent stage 3 restrictions would reduce GDP by A$3.3 billion (0.75 percentage points) in the September quarter. The new restrictions will cut GDP in that quarter by A$7-9 billion, slicing about 1.75 percentage points off quarterly GDP growth.

The combined effect of the Victorian measures through the September quarter will be to contract growth by A$10-12 billion (2.5 percentage points).

Treasury estimates 250,000-400,000 more people will become effectively unemployed (this includes both those losing jobs and those still in jobs but working no hours). It forecasts Australia’s unemployment rate will rise above the previous estimated peak of 9.25% – released only a fortnight ago – and peak nearer to 10%.

Andrews, under intense political pressure and substantial criticism (although opinion is mixed), is sensitive when asked about the cost Victoria is imposing nationally. “There’s costs all over the place whether it be in dollar terms or in funerals,” he said.

“I’m not going to be trying to put a price tag on this. This is what we have to do, we have no choice … otherwise this won’t be six weeks, it will be six months or longer. And we’ll have to continue to bury people, we’ll have to continue to deal with an economy that is essentially closed.”

Andrews is in the ultimate corner. If stage 4 fails, the future becomes too awful to contemplate.

Victoria’s crisis is forcing the federal government into policy gyrations. After announcing just over a fortnight ago tighter eligibility requirements for JobKeeper after September, now it has announced an easing. The cost of the latest changes in eligibility plus the extra numbers of businesses coming onto the program because of the Victorian situation is A$15.6 billion, taking the total cost of JobKeeper to A$101 billion.

That Victoria is a “separate” Australia is brought home in the arrangements for parliament’s sitting from August 24.

Morrison was criticised for cancelling the early August sitting. He’s committed to the coming one, not least because the government needs to legislate some pandemic measures.

On the advice of acting Chief Medical Officer Paul Kelly, Victorian MPs going to Canberra must quarantine for 14 days beforehand. That starts from 11.59pm this Sunday.

In a letter to Morrison, Kelly said that, in the context of Victoria, the sitting led into uncharted waters. “The situation in Victoria is not improving at this time,” he wrote. Victorian MPs presented “a significant risk” to ACT citizens, particularly those working in parliament house, as well as to parliamentarians and staff from elsewhere, “with the possibility of seeding into other jurisdictions”.

Kelly prefers the politicians quarantine in Canberra, but said this could be done in Victoria. The conditions are strict. While in home quarantine, no one from the household can leave for any reason and no one can visit.

One MP immediately dubbed the household isolation the “hold-the-family-hostage option”.

In practical terms, on the present sitting pattern, Victorians choosing to isolate in Canberra would only be able to return home for about a fortnight between this weekend and when parliament adjourns for the year on December 10.

Labor has been demanding parliament sit. But in a hook-up of Victorian Labor members on Thursday, some were reluctant to meet the stringent conditions. As a result Anthony Albanese proposed Victorians should be allowed to tune in virtually. They would not be able to vote.

There are other wrinkles. For example, Queensland has banned arrivals from the ACT, so how about federal MPs going home? A Queensland government spokesman says: “Queensland MPs returning from Canberra will have to quarantine. National agreement is being sought on detail.”

Treasurer Josh Frydenberg and Health Minister Greg Hunt intend to quarantine in Canberra. Perhaps they’ll hope the odd curry delivery is ferried from The Lodge.