Road to economic success paved with virus outbreaks

Australia is emerging from a pandemic deep freeze with a three-stage plan to ease restrictions on movement, social gatherings, recreation and commerce during the next few months. Chief Medical Officer Brendan Murphy says the initial phase will be tentative, “baby steps into normalisation”. Each jurisdiction will have to chart its own path back using the framework that national cabinet issued on Friday. South Australia, Western Australia and the Northern Territory will be at the head of the pack. The first stage will see pubs, playgrounds, pools, restaurants and shopping centres reopening their doors. Businesses will appreciate more clarity, especially retailers, a bellwether of economic health and confidence. But the second and third stages, currently in outline form, will need to be finessed.

We have flattened the curve of coronavirus infection. But with one million people thrown out of work by a robust health response, Scott Morrison maintains success is not simply another day with a handful of cases. Success is getting enterprises back on track and workers off income support and on the tools. According to Treasury, the road map will support 850,000 jobs and over $9bn in activity. This week, the agency said the shutdown was costing $4bn a week in lost participation, productivity and consumption. That’s equivalent to four million median-income jobs evaporating into the COVID-19 mist. This early escape, relatively speaking, means the damage could be less severe.

In its May statement on monetary policy, the Reserve Bank of Australia considered three scenarios; even on the most optimistic forecast, the jobless rate would not be back to around 5 per cent until the middle of 2022.

Authorities accept that in coming months, hot spots of infection, such as the cluster centred on Cedar Meats in Melbourne, will appear. Professor Murphy warns the virus is still in the community; we’ll have to learn to live with it. Already, Australians have changed their behaviour, especially on hand hygiene and physical contact. As well, the practice of turning up to work with a cough or cold will change; the definition of hero is being reworked. The constant challenge will be to snuff out fresh outbreaks; so testing, tracing and trapping capability are paramount. Again, the COVIDSafe app is central to detection and rapid medical responses. In the face of a substantial outbreak, the Prime Minister said expert health advice would likely guide premiers in adjusting restrictions, case by case.

In effect, the nation will soon be de-federated. States and territories will be on different journeys, as we’re seeing on schools. Even within stages, there will be opportunities for bespoke policy. That could be extremely confusing for people who have become accustomed to looking to Canberra for the ins and outs of correct behaviour. That raises the messaging bar for state leaders. Not only that, it shifts the usual optics of accountability. Any deviation from the mean, so to speak, will be owned by the government in question. If Victoria maintains restrictions on schools, for instance, it will face the consequences — not only in learning outcomes but also in the ability of parents to work and of businesses to properly operate.

In a sense, the RBA has set out an aspirational case for recovery via its sunniest scenario. That can improve confidence of consumers and business in the still difficult months ahead. The Morrison government’s strategy is for a business-led revival, with Canberra stepping out of the way. At a budgeted $214bn, or more than one-10th of gross domestic product over three iterations, its temporary emergency fiscal splurge is one of the largest public spending programs in the world. Now we have to reboot confidence. That can come only if the private sector can operate with more certainty; the new road map is necessary, but not sufficient. For companies to start taking orders and bookings, hire workers and buy stock, and invest in capacity and new tools, they’ll need to be sure the most severe restrictions are behind us.

Of course, governments can help by taking the shackles off businesses: counter-productive taxes, disincentives to hire, onerous regulations that stop expansion. In these strange times, we’ve learned to work more flexibly. Unions have been partners in this redesign of workplaces and rules. As the RBA has often urged, we need a better industrial relations system. On the other side of COVID-19, global and local markets will be subdued and the competition more cutthroat. Policies that enhance the business environment will keep a floor under confidence. That will help us to navigate a new path to paying off what we’ll owe the world, and restore the intricate web of relationships that drive our prosperity and society.