Ditching Covid bubbles key to investment, growth, jobs

NSW Premier Gladys Berejiklian made a vital point on Thursday that all politicians should grasp; that is, Australia “can’t live in our bubble forever … we need to coexist with Delta”. Lockdowns in NSW and Victoria are costing the economy about $2bn a week, with no end in sight and other states prepared to batten down on the strength of a single case. Josh Frydenberg also had a blunt message on Friday. If Australians wanted to live a life without lockdowns, he said, they needed to accept that people would die of Covid-19. State leaders needed to be straight with the public. “We can’t live in lockdown forever,” the federal Treasurer said. Neither can the states, business or the public continue to rely on government stimulus, put on the plastic for future generations of taxpayers to repay, to cushion the impact of ongoing lockdowns.

However severe the NSW Covid outbreak, the state government is on the right track proposing a “freedom plan” to reopen bars, restaurants, gyms and other venues to the fully inoculated once the vaccination rate across the state reaches 70 per cent. The productive economy must return to generating wealth at full throttle as soon as practical. In normal times, a fall in unemployment to a 12-year low of 4.6 per cent would delight any treasurer and economists. But, as Mr Frydenberg said on Thursday, there’s no cause for celebration. The participation rate fell and the Australian Bureau of Statistics warned the figure should not necessarily be viewed as a sign of strengthening in the labour market. The full impact of lockdowns would show up this month, next month and even later. The ABS survey covered the two weeks to July 11, when Sydney was enduring a milder lockdown and before construction was paused for 14 days. Even so, hours worked last month fell by 7 per cent in NSW and the number of people employed but stood down on zero hours increased by 230,000. Hours worked in Victoria fell by 8 per cent in June. NSW is entering its ninth week of lockdown with the strictest restrictions to date; Victoria has spent more than 200 days in lockdown across 18 months.

Confidence will be a key ingredient in post-Delta recovery. As Mr Frydenberg argued in The Australian on Friday, the economy is in a stronger position to recover than it was a year ago, when it came roaring out of the blocks after the first Covid shutdowns. Household and business balance sheets have accumulated $290bn this year as a result of government support and a savings ratio that is about three times its pre-pandemic level. Consumer confidence is stronger than last year and, while banks have been providing loan deferrals again for mort­gages and business loans, the take-up to date is only about 3 per cent of what the banks experienced at the peak of the crisis last year. As reported on Saturday, corporate Australia is set to deliver investors a bumper $30bn in dividends and share buybacks in a major transfer of wealth.

But in a worrying sign for future economic activity, Deloitte Access Economics partner Stephen Smith pointed out this week that ongoing lockdowns “can be kryptonite for investment, and unfortunately that is now coming to pass”. In the March quarter, business investment was 11 per cent of gross domestic product, a 30-year low. Restrictions in Sydney, Melbourne and Canberra were putting a stop to current investment activity and weighing heavily on future plans, Mr Smith told Tom Dusevic. Investment was a vote of confidence in the future and the uncertain length of the lockdowns made for an uncertain future, Mr Smith said. “This was meant to be a time of recovery, but we are at risk of seeing business investment spending go backwards in the second half of 2021.”

On the positive side, after a slow start the nation’s vaccine rollout is emerging as a strong reason for hope. More than half of the eligible adult population have had one jab; almost 30 per cent are fully vaccinated. In a sign of what is possible in Australia, Patrick Commins writes on Saturday, other countries with high vaccination rates that have transitioned to living with Covid-19 are enjoying solid economic recoveries. This is why, in an open letter to business leaders and owners published on Friday, News Corp Australasia boss ­Michael Miller calls on them to champion the vaccination rollout as part of an urgent nationwide effort to “get Australia working again”. Mr Miller said Australia urgently needed to rediscover our “ sense of purpose and unity”. Business, the engine room of the economy, “cannot be stuck in suspended animation for a moment longer than necessary”, he said.

As vaccination rates reach 70 and 80 per cent, political leaders must stick to national cabinet’s plan and open their economies. It is in the interests of taxpayers’ prosperity, wellbeing and mental health for them to do so.