Terry McCrann: Nation’s lockdown roadmap will come at a cost

The Victorian experience has won. Australia’s new reality is brutal — and it’s now official policy right across the country.

National Cabinet has given official imprimatur to more snap lockdowns (Photo by Lisa Maree Williams/Getty Images)

Queensland has confirmed what I wrote earlier in the week: all states will copy Victoria’s “Covid safe” template and move to a hard lockdown at the first sign of new infections in the community.

Indeed this was explicitly adopted as policy by the National Cabinet Friday. All states, territories and the federal government ‘locked it’ into policy, with the 70/80 vaccination triggers.

It is critical to understand how this frames the economic outlook at least into and probably all through 2021 – especially against what is likely to be greater volatility out of the two countries that matter most to us, and indeed the world: the US and China.

Friday made it official: only at 80 per cent pervasive – full (two-shot) - vaccination will we enter a post-lockdown Australia; at 70 per cent we will still have some form of lockdown and state border closures.

Of course, it remains to be seen just exactly whether, and how, this plays out in actual virus realities and in each state.

If a state decided it wants to keep locking down even at 80 per cent vaccination, even 90 per cent vaccination, it would – and I certainly wouldn’t rule such a possibility out.

Critical though is the Federal government’s ‘big money stick’. It works two-ways.

Explicitly, Canberra is saying: we will continue to write out big money JobKeeper-style and other direct business support cheques in ‘approved’ lockdowns under the 70/80 agreement.

Implicitly, Canberra is saying: if a state wants to lock down outside that agreed metric, we won’t. It’ll have to foot its own bill.

Again of course, we would have to see how that plays, especially as we get closer to the federal election mid next year.

NSW Police on patrol at Bondi Beach in Sydney. Picture: NCA NewsWire / Flavio Brancaleone

We’ve already seen how Canberra buckled with JobKeeper, ‘revising’ it from the $500/$325 of JK Version 2.0 paid in Victoria’s Lockdown 4.0 and only to be paid after the first week, to now $750/$450 paid under JK Version 2.3 after the two recent Victorian (5.0) and NSW lockdowns.

It was the parallel experiences in real-time in these two lockdowns that prompted me to argue that the Victorian experience ‘won’; that it cemented all-future lockdowns would adopt the “go early, go hard, go households” mantra of former Treasury secretary Ken Henry during the Global Financial Crisis.

Now, I don’t claim any great prescience in making what was really a statement of the bleeding obvious – especially as at least four of the six premiers were already firmly in the Victorian ‘go early, go hard’ camp.

The key change is that NSW – nearly one-third of the national economy – would be joining them in its next virus challenge; assuming of course, that it does emerge from this current lockdown.

The immediate economic future was already locked in with NSW’s lockdown. Thank goodness Victoria’s only lasted 12 days; it would have been devastating if well over half the national economy had stayed in lockdown longer.

The best guide to the impact is what happened last year. When Victoria was in lockdown through the September quarter, it lopped close to 2 per cent off national economic growth.

But that growth still came in at a pretty robust 3.5 per cent. But then we were springing back from the June quarter plunge and we still had JK1.0 across all of Australia including the 70 per cent that had opened up and arguably no longer needed it.

This September quarter we are not springing back. We only have JK2.3 in NSW (after 12 days having it in Victoria). The economy will go negative – perhaps by 2-3 per cent.

It was though expected we would get a big spring-back in the December quarter when NSW came out of lockdown, just like what happened when Victoria acted as a super-charger coming back from its lockdown.

Obviously that won’t happen if NSW stays locked down into the last quarter. But even if NSW does come back, National Cabinet has given official imprimatur to more snap – albeit hopefully short – lockdowns.

Yes, broadly, better a hopefully short snap lockdown than a delayed long lockdown, Victoria and now NSW-style.

But that’s brutal for both not just business confidence but business reality. And now it’s official policy right across the country and policy well into – at best – 2021.

Now enter China and the US.

Again, as I explained through the week, our entire economy is now totally hostage to China in a way we have never seen before in our history.

I don’t know about you, but that does not fill me with a warm glow.

It’s a dependence which operates on two levels.

That China can keep its economic formula of pouring a lot of concrete at home and acting as the world’s factory not only going but growing. And that it’s happy to pour tens of billions of dollars into our pockets.

While the US determines our – and the world’s - financial future.

An ‘interesting’ 2021 beckons.

Originally published as Terry McCrann: Nation’s lockdown roadmap will come at a cost