“There has been a significant change,” the Australian political consultant said in an interview with The Australian Financial Review.
“Government spending has become girth-busting and people are overwhelmingly comfortable with that at this time. They’re letting the government step in to the economy more deeply and broadly than they have for a very long time.
“The willingness of the public to accept these interventions suggests that it may not be as simple as going back to ‘normal’. We won’t be returning to the pre-pandemic position on people’s views and expectations of government.
“The likelihood is the government will be bigger and bolder.”
Soaring welfare spending
Federal and state government spending will soar to European welfare state levels of 45 per cent to 50 per cent of the economy, from about 33 per cent before the virus struck in Australia.
Prime Minister Scott Morrison has emphasised the emergency measures will be temporary and the government will return to a more traditional Coalition agenda of lower taxes, workplace relations flexibility and deregulation.
The Labor opposition is arguing that the government must be cautious about withdrawing the emergency spending because the economy will be weak.
Research by CT Group’s coronavirus tracker shows 71 per cent of Australians believe the government is “doing enough” to support society, compared with significantly fewer people (49 per cent) who say big business is doing enough.
New revenue streams
Sir Lynton said it was “inevitable” that governments would seek to find new revenue streams to repay their debts.
Wealthy people and multinational technology companies would be potential targets for governments, he said.
“As governments look for new revenue streams, things like death duties, negative gearing, superannuation and property taxes could come on to the agenda.
“Dealing with people’s acceptance of a larger spend by government becomes important for business.
“The whole issue of funding and repaying will become a critical issue for business because they’ll be a focus on where the money is coming from.”
About 70 per of Australians agree the government should take major industries, such as water and railways, into public ownership, up only slightly from last year, according to CT Group’s polling.
Some 71 per cent agreed the government should keep lockdown in place for as long as possible, even if it risks further harm to the economy.
Sir Lynton said the left side of politics would use the expansion of government in the crisis to justify a permanent increase in the size of the state.
“The challenge for the government is to say ‘this was a once in a century crisis that needed a unique response, and we sought to prop up the private sector because ultimately it will get us out of this’.”
Former British Labour leader Jeremy Corbyn has said the UK government’s response to coronavirus, such as paying up to 80 per cent of people’s wages, proves he was “absolutely right” about advocating big public spending at the 2019 general election.
“They’ve now suddenly realised that they have to spend money to invest in the state, as we have always said as a party, and they have come around to a lot of that position,” Mr Corbyn said recently.
Sir Lynton said business was “heavily exposed” to fundamental political and economic changes, including pressure for economic nationalism and economic sovereignty.
Already Treasurer Josh Frydenberg has placed restrictions on all foreign investment bids, lowering to zero the dollar value of takeover proposals that would trigger scrutiny by the Foreign Investment Review Board.
The government is also reviewing which goods it needs to produce more of domestically, including medical equipment, pharmaceuticals and oil.
The heavy reliance by universities on Chinese students has also become a topic of debate.
If business doesn’t step up, they will be exposed and suffer.
— Lynton Crosby
Former Treasury secretary and now chancellor of Macquarie University Martin Parkinson said in March that Chinese-student dependent universities and firms that sourced intermediate and finished products from China would need to revamp their business models following the health crisis.
Sir Lynton said business would have to fight to have its voice heard in the policy battles.
“If business doesn’t step up, they will be exposed and suffer,” he said.
The pre-pandemic business drift to environmental, social and corporate governance (ESG) issues might need to take a back seat to the core responsibility of business.
“ESG is important but not immediately critical to business survival,” he said.
“The risk for business is talking about social responsibility instead of the significant business challenges they will face.
“Business and industry bodies will need to refocus on the very basic issues of business survival – taxes, costs, regulation, productivity and competitiveness.”
Sir Lynton is usually based in London, but fortuitously arrived in the relative safe haven of Australia for a wedding six weeks ago.
He has been residing south of Sydney and avoiding the worst of the virus pandemic in the United Kingdom.
He was knighted by the British government for political service after he helped the Conservatives win the 2015 election.
He oversaw four election campaign victories for John Howard and was involved in Boris Johnson’s election wins as mayor of London in 2008 and 2012.