Mr Morrison, we need to see your five-point recovery plan

Business Council adviser Ken Henry Cartoon: Eric Lobbecke

As the national cabinet meets on Friday to relax social restrictions and plot the country’s long haul back to work, there’s a gap in the government’s response to the COVID-19 pandemic.

During the 2008-09 global financial crisis, Treasury mapped out short-, medium- and long-term initiatives to tackle the fallout, creating a platform for new measures to be introduced as others wore off.

With COVID-19, if there’s any working group beavering away on a recovery blueprint in some Treasury basement or the Department of Prime Minister and Cabinet, it’s a complete mystery to the outside world.

People who ought to know say there has been no sign of any serious engagement on the issue between Canberra and the business community.

The initial response to the pandemic has been sound, leaving aside some early jitters. However, a top-20 ASX company’s list of five urgent priorities to cushion the impact of the coronavirus and help sustain the economy is a window into mounting concern among business leaders.

“It’s all very well to lift restrictions so people can slouch off to work and maintain social distancing,” the architect of the list told this column. “But unless we have a serious reform and reinvigoration agenda, we’re in danger of becoming a growth-challenged zombie economy like Japan has been over the past few decades.”

The first item on the list is ­immigration — which is understandable given net migration ­accounts for about two-thirds of the nation’s growth.

It’s no stretch to imagine that residential property construction and sales could slump to about 30 per cent of previous levels as a result of the current uncertainty and evaporating demand.

The flow-on is significant to construction trades, business services, retail sentiment and other areas, and there will be an overhang of distressed borrowers in the housing market for some time.

So, what’s the plan?

The next item is the university sector, which employs well over 100,000 people and relies on overseas students for about one-quarter of its income. If this flow takes a big hit, as many keen observers ­expect, the impact on the universities and their support services will be enormous.

Again, what’s the plan?

With job losses likely to peak at about two million, high-contact industries such as tourism, the arts and hospitality — but also manufacturing — are also expected to suffer disproportionately.

The third item on the agenda should therefore be job preservation in such vulnerable sectors.

The fourth issue is the implications of the Reserve Bank’s balance sheet effectively funding the commonwealth. While the US is in a similar position with the Federal Reserve, demand for the greenback in global markets is underwritten by its status as the world’s reserve currency.

We’re not so fortunate, so investors might be less willing at some point to buy Australian government debt.

Finally, there’s the overriding need to stay connected and in the loop as medical science kicks off a huge wave of research on vaccines and treatments for COVID-19. Australia has to ensure it maintains access to cutting-edge products so it can prepare for mass vaccination, or face a resurgence in the virus. Alternatively, there’s the tight suppression or elimination strategy.

On the rare occasions that the Morrison government has publicly discussed long-term crisis ­recovery, there have been mere airy references to looking at new and old reform proposals with fresh eyes.

“The Productivity Commission has given us a blueprint of ­micro-economic reforms with 28 recommendations in the ‘Shifting the Dial’ report, 22 of which are ­either the sole or joint responsibility of the states,” Josh Frydenberg told this column.

“Commonwealth and state governments are working together to boost the nation’s productivity in important areas of infrastructure, health, skills and industrial relations reform, including cutting red tape and deregulation,” the Treasurer said.

Shifting the Dial was a comprehensive review of productivity sent to the federal government in August 2017. It falls a long way short of a crisis recovery plan.

In sifting through its reform options, Frydenberg also said the Morrison government’s focus would be on practical solutions to the most significant challenges the nation faced. They included reskilling people who had lost their jobs, upskilling those in ­existing jobs for the digital environment, and equipping those who are entering the workforce for the first time with the skills they need to get a job.

They are sensible initiatives by themselves. But come September, when the JobKeeper allowances close out, you’d like to think there’s a serious back-up plan to tackle unemployment.

At the very least, it would be a demonstration of leadership and help to reinforce fragile community confidence.

Henry’s on the case

Ken Henry has scored a new gig as adviser to the Business Council of Australia on COVID-19 recovery scenarios.

The BCA confirmed Dr Henry’s role on Wednesday, saying he was a respected economic voice and was among a range of experts being consulted by the big business lobby group.

The scale of the crisis meant that the BCA was also considering the best way to manage its policy work on the issue.

A decision was likely to be made in the next week or so, with a new committee or taskforce one of the options.

Dr Henry, a former Treasury secretary and chairman of National Australia Bank, will contribute to the BCA’s policy on reform options to help the economy recover from the pandemic.

Professional services firms EY and Port Jackson Partners took on a similar role last month, building models for the BCA that demonstrated the government’s social-isolation measures had slashed industrial output by 25 per cent.

The conclusion was that maintaining current restrictions for months would have “serious, long-lasting consequences on a range of fronts”, with a significant number of people likely to become disconnected from the labour force and suffer long-term social and economic costs.

Older and less-qualified people were particularly vulnerable.

The report also warned that, in addition to the 2.3 million people expected to be unemployed, underemployed or receiving a government wage subsidy, “even larger second-order costs would begin to accelerate”.

“Increasing numbers of businesses will fail, never to reopen,” it said. “Organisational capital may be lost. And there may be a drag on future innovation.”

It also said the construction industry faced a pipeline that was “drying up”.

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