WA Premier Mark McGowan. (Image: AAP/Richard Wainwright)

Dan Andrews and Mark McGowan

Even their political foes would concede that Victorian Premier Dan Andrews and WA Premier Mark McGowan have had a very good virus. A combination of strong wills and good luck have meant that their states (along with South Australia) have led Australia’s COVID-19 response.

But as most of Australia starts to emerge from economic hibernation, Andrews’ Victoria continues to double down, in particular with school reopenings.

The difficulty for the increasingly popular Andrews is that his position becomes harder to justify as the success of his strategy becomes more apparent. There remain only a dozen Victorians in hospital with COVID-19 and almost 90 active known cases.

Andrews’ general views were best articulated by Brett Sutton (his chief medical officer), who noted with regard to Victoria’s controversial golfing ban:

There is no science here … I understand that people think, ‘Look, if I play golf I would do it right and I wouldn’t pick up a new mate every week in the car and be in close contact and I wouldn’t go round in close contact with a bunch of other people on the course’. That is a rational, law-abiding person, but I have to think about what it would mean to allow it across the board for all of the people who would comply with that and who wouldn’t comply with it.

The problem for Andrews is that his approach to keeping schools closed has very different implications to his approach to stopping rich guys from playing golf.

It’s even harder to justify the notion that kids shouldn’t be at school on the basis that it increases cadence of travel and contact, when the far less essential building industry remains fully operational. If anything, there’s about to be a significant glut of residential and commercial property coming on the market.

The NSW plan of slowly returning kids back to classes appears to be the prudent one, with Victoria’s inconsistent approach becoming an increasingly harder sell.


Also having a very good virus are the big global tech companies. Amazon’s success is no surprise, acting as a conduit to connect billions of customers to essential supplies amplified by the shrewd purchase of Whole Foods.

Nor is Netflix’s success, whose business model was almost written for this situation. But while Amazon slowly moves towards a US$2 trillion valuation (it’s currently US$1.2 billion) and Netflix is up 39% from recent lows, the power of fellow FAANG (technology giants Facebook, Amazon, Apple, Netflix and Alphabet, which owns Google), Facebook, continues to grow.

While a relative FAANG minnow at only US$576 billion (Microsoft is US$1.3 trillion), the brute power of Facebook’s influence is significant. As NYU professor Scott Galloway noted on his podcast Pivot last week:

There’s 3 billion people using one or more of [Facebook’s] apps. There has never been a religion, an economic construct, a nation, a flag, that has ever been as big and as powerful as Facebook. There are more people that have a relationship with Facebook than Jesus, Allah, Communism, capitalism … it’s bigger than a continent. And their ability to find new ways monetise is striking.

But it’s not only powerful, it’s also incredibly agile:

While every media company in the world with the exception of Facebook and Google is trying to figure out how many people they furlough, how they do chapter 11 (bankruptcy) again … Facebook is accelerating time around progress. Everyone is trying to stop time … Facebook is doing deals in India to monetise WhatsApp.

In Australia, the power of Google and Facebook are pronounced. The profitability of the Australian media sector has been largely destroyed (Seven, Ten, Fairfax and News Corp newspapers and Foxtel all victims) while Australia’s consolidated revenue diminishes due to the complex tax ownership structure of Facebook and Google. And COVID-19 appears to have added a gallon of petrol onto that spot fire.

Investment banks

Also having a very profitable time amidst the devastation: escorts with financial calculators, otherwise known as investment banks. In particular, their equity capital markets divisions, which to paraphrase Matt Tabbai, have always been the most abhorrent part of the vampire squid wrapping its face around humanity.

Investment banks (which in Australia are led by the US bulge bracket firms of Goldman Sachs, Morgan Stanley, Citigroup and JP Morgan, along with UBS, Credit Suisse and Macquarie) have become the masters of profiting from gloom as well as boom.

One of the greatest scandals of the global financial crisis was the amount woefully under-prepared large businesses needed to raise from shareholders to repair their over-leveraged balance sheets (ironically, much of the leverage was inspired by banks encouraging capital intensive acquisitions or our tax system which encourages large dividend payout ratios).

Fast forward a decade and it appears that Australian executives and their asleep at the wheel boards either didn’t learn their lesson or simply don’t care. Leading proxy firm Ownership Matters calculated that underwriting fees paid to banks for the 33 capital raisings since the crisis began amounted to $305 million.

Bear in mind, the banks don’t really underwrite anything. In virtually all cases, the order book is pre-filled and companies are selling shares for as much as 40% below their current market value. As Ownership Matters founder and the father of corporate governance in Australia Dean Paatsch wryly observed, “investment banks are really just the most expensive call centre operators in the world … their offer is frequently sub-underwritten, it’s just a fantastic racket. It really is”.