After two years of lessons, swot up for post-Covid test

Shoppers in Sydney for the Boxing Day sales. Picture: Gaye Gerard

It has been nearly two years since Covid-19 up-ended our lives. Virtually no one saw it coming and there were minimal plans in place.

Several years before, the federal government had undertaken a virtual emergency planning exercise. The choice was between the emergence of a pandemic and a major cybersecurity threat. It opted for the latter.

At the end of 2019, with a federal election behind us, the economic outlook was relatively rosy. While the year had not been a spectacular one in terms of gross domestic product growth, by December the rate of unemployment was 5.1 per cent and it looked as though the economy would grow faster in 2020.

Needless to say, the onset of the pandemic imposed an enormous negative shock on the economy. Having gone for nearly three decades without suffering a recession, we experienced one last year, and the most recent quarterly GDP figure showed significant negative growth (for the September quarter).

At first it seemed the federal government was in charge, with the swift decision to close the international borders, initially to those travelling from China. But it became apparent relatively quickly that it was the state governments (on the advice of their previously anonymous chief health officers) that would call the shots. They were assisted by the largely impotent federal government, which was simply required to fund the huge compensation packages for individuals and businesses damaged by the health-related restrictions imposed.

One thing we clearly learnt from the pandemic – although some of us had known this for a while – was about the deeply dysfunctional state of our federation.

To be sure, there are some good reasons to have localised health responses, but the closure of state borders put paid to the notion that we are one country with unfettered movement of people.

Another thing we learnt is that it was always a myth that “we were all in this together”. For those who could work from home there were challenges, but pay packets were largely unaffected. For workers whose employers had to close or restrict their operations, it was a different story.

The federal government’s relatively generous JobKeeper scheme cushioned the blow; indeed, some part-time workers found themselves better off financially. We learnt from the operation of this scheme (and others) that design matters a lot in terms of achieving targeted support and value for money for the taxpayer.

Had more thought been put into the verification of the conditions for payment as well as ensuring transparency of the participants, a great deal of money – perhaps as much as $30bn – could have been saved.

At a broader level, we learnt that politicians were only too keen to turn on the spending tap, with both federal and state governments prepared to throw money at all sorts of ends with very little attention paid to value for money. In the case of the federal government, real spending rose by 12 per cent in 2019-20 and by 17 per cent in 2020-21.

Spending as a proportion of GDP was a peacetime historic high of 31.6 per cent in 2020-21, having been less than 25 per cent going into the pandemic. Net government debt rose by around $200bn in the past two financial years, and net debt is expected to peak at close to $1 trillion. It’s little wonder that fear of debt and deficit as a political tactic has lost its oomph at this stage as voters witnessed politicians spending money like water.

We also learnt about disrupted supply chains as our previous unquestioning assumption about the availability of goods was tested. To be sure, most of us realised that many goods we bought at cheap prices were imported. But it turned out that supply chains are complicated beasts and include the availability of shipping.

Suddenly we became concerned that Australia did not make an array of the goods that were needed in the pandemic, such as personal protective equipment. We were able to manufacture the AstraZeneca vaccine in Melbourne but it will be some time in the future before we will produce mRNA vaccines.

But the fear is that these supply chain disruptions may be used as an unjustified reason for protecting domestic producers well beyond the specific requirements of the pandemic. If this were to be the case, it would involve a reversion to costly protection that was effectively eliminated by the 1990s.

Our dependence on the free movement of people, internationally and across state lines, became apparent quickly. For those service industries that were required to or were permitted to keep operating, the dependence on migrant workers to fill low-skilled jobs was revealed. The closure of the international borders meant new temporary migrants could not enter the country and many who were here at the start of Covid returned home. For the past two years, net overseas migration (long-term arrivals minus long-term departures) has been negative.

Notwithstanding the appeal of the proposition that Aussies could do these jobs, the reality is that many positions in agriculture, aged care, healthcare and hospitality have been close to impossible to fill. It was not surprising that the federal government introduced various bespoke schemes admitting agricultural workers from overseas lest crops went unpicked.

Movement of people, domestic and international, also is essential to the operation of certain businesses, including in the accommodation, hospitality and tourism sectors. Some of the hardest hit businesses have been those starved of customers as a result of government-imposed restrictions. While government assistance was available, this sector will look different when the restrictions (or threat of restrictions) are finally removed.

The past nearlytwo years have caused many of us to be wary of the notion that politicians simply have acted to protect us. Notwithstanding good intentions (but with an eye to the politics), it has become increasingly clear that many political leaders have just made stuff up, have acted on the basis of faulty (and secret) advice, have oversold vaccinations and have been prepared simply to change their minds.

Far too little recognition has been given to the costs of the lockdowns and other restrictions, including on mental health, other health conditions, educational progression and businesses. The prism was the privileged WFH public servant and little understanding of those in different situations.

We have all learnt a lot in nearly two years, some of it good but mainly bad. Our post-pandemic responses to these lessons will be very important to the economic outlook for the country and the national psyche.