Monday, 20 April 2020

COVID-19: Comparing jurisdictions - opportunities for policy borrowing?

Policy ‘borrowing’ among the states

Adam Hannah

Adam Hannah highlights the opportunities and risks of policy borrowing across different Australian jurisdictions in tackling the COVID-19 crisis, drawing on the example of rental assistance packages offered in different states.

Australia’s federal system provides both challenges and opportunities for responding to crises like the COVID-19 pandemic.

On the one hand, there is the challenge of coordination. Power over many relevant policy areas are either held with the states, or with varying degrees of contestation and overlap between the states and the national government. This is particularly the case for key areas such as health care, housing, education and policing. As such, there is a need to ensure that decisions taken show concern for both national and local interests.

Still, the capacity for variation between the states may also bring opportunities to enhance policy making. For the states, one benefit is the ability to adapt policy to the local context – the ability for Western Australia to effectively close its own border being an obvious example.

In addition, advocates of federalism often make the claim that states can act as hubs of policy experimentation, the lessons of which can then be drawn on by others. One recent example of such learning can be seen in relation to the handing of the arrivals of cruise ships. While the issue was clearly mishandled in New South Wales, Western Australia appears to have been far more careful as a result. More broadly, the states, particularly the larger ones, have significant policy capacity and expertise of their own. While this has historically led to complaints about doubling up of resources across the country, in the current moment, states may be able to build on good policy work already done elsewhere.

At the same time, there are several reasons to be cautious about the role of policy borrowing or transfer in the current pandemic response. Academic work on policy transfer highlights the importance of factors such as differences of context, and the need for a detailed understanding of what it was that made the original policy successful.

In the current crisis, differences of context are unlikely to be a major barrier to policy transfer, given the general similarities in health, education and housing policy across the states. However, it is also the case that the policy responses are being developed with extreme haste. There is little time for consideration of alternatives, analysis and economic modelling or wide consultation that is usually understood to characterise an ‘ideal’ policy process. Where policy is made on the fly, the groups that are best connected, resourced or electorally influential are at an advantage. Moreover, the capacity for news media to take a critical eye to policy announcements, already much weakened even prior to the crisis , is reduced by the sheer pace of recent events.

As such, any policy borrowing should be done with as much care as possible. It will be tempting for governments to jump at any policy that appears to give immediate relief to key constituencies. However, given the short-term focus of the crisis, concern also needs to be given to the possibility of longer-term or unintended negative consequences.

Rental assistance packages

A good example of this dynamic can be found in the various rental assistance packages being announced by the states. At the time of writing, such announcements have been made by New South Wales, Queensland, Victoria and Western Australia. This follows the decision by the national cabinet to introduce a six-month moratorium on rental evictions .

As housing is largely a state responsibility, it falls to the states to decide exactly how to construct a rent assistance package. The more difficult element of this is not the moratorium itself, but how to ensure that neither tenants nor landlords are unfairly burdened where tenants are not able to continue paying the full rental amount. While several states have made announcements to this end, at the time of writing, none have been legislated. In Western Australia, for example, Premier Mark McGowan has announced that a moratorium will be legislated , but provided few details on how exactly the government may help mitigate the financial burden and ensure equity. As such, there is a chance to examine the approach of other states and adapt.

From a quick analysis of the packages announced thus far, it appears the states are making decisions in four main areas:

  • Negotiating rent reductions
  • Tax relief for property owners
  • Cash assistance for renters
  • Repayment of rent in arrears

All states appear to be encouraging negotiations between renters and landlords. Victoria has also proposed a dispute resolution process through Consumer Affairs Victoria . Queensland, Victoria and New South Wales have all announced land tax rebates for some, but not all, landlords, which in each case will amount to hundreds of millions of dollars of assistance. Victoria and Queensland have each also announced cash assistance for vulnerable renters, although the Queensland scheme provides only four weeks of payments .

In each case, it seems likely that the short-term goal will be achieved – renters will not be evicted from their homes as a result of COVID-19-induced financial hardship, and will be given an opportunity to adjust lease terms to their new financial circumstances. However, the longer-term consequences will be partly determined by the position taken on the final policy decision  – whether renters will be required to repay the rent reduction, following the end of the moratorium.

In Queensland, rent in arrears will not have to be repaid. New South Wales, on the other hand, will require repayment , and Premier McGowan has indicated that Western Australia will follow their lead. The Victorian government has, thus far, been unclear on this question.

Clearly, this issue is a tricky one for the states. The median rent for a house in inner Perth amounts to just over $12,000 over six months . If tenants are not obliged to pay the full amount of rent during the moratorium, then landlords may incur losses into the thousands of dollars. Politically speaking, state governments will also be wary that property investors can be a powerful force ( as the 2019 federal election showed ).

However, it is renters that are clearly in the more vulnerable position. Housing affordability was already a major issue in most Australian capitals. Renters are more likely to be in precarious or casualised employment, the jobs most at risk in the current climate. There is also pre-existing and significant wealth disparity between property owners and renters, inequality that is unsurprisingly intergenerational . In many state capitals, property owners have been the beneficiaries of enormous capital growth over the past several decades, while younger people have faced flat wage growth. Forcing impacted renters to pay the full amount of rent in arrears, especially without additional financial support (as is the case in New South Wales), has the potential to only exacerbate these issues.

While the measures announced will mitigate short-term pain, the states should not view assistance for renters as a job done. Victoria and Queensland have demonstrated that state governments can provide financial support to those most vulnerable in the short term, but, depending on the scale of rent reductions, further measures may well be needed. The question of how to support vulnerable renters without unjustly penalising landlords therefore remains.

In considering how to manage the rental issue in the longer term, the states may well look to each other for ideas. However, they should take care that they are not imitating poorly thought-out approaches, or measures that heap further costs on those already struggling to build financial security.

Adam Hannah is a Lecturer in Public Policy at The University of Western Australia. His research focuses on the role of political ideas in reshaping health care and welfare systems, and has recently published on this topic in journals such as 'Public Administration, Policy and Politics' and the 'Journal of European Social Policy'.


UWA Public Policy Institute