Shrewd exit plan will lead Australia back to business

Australia has taken a sensible middle path in dealing with the coronavirus pandemic, and so far it’s working for us. Across the Tasman, New Zealand is moving out of its dislocating and strict lockdown, having opted for a strategy of eliminating COVID-19. Sweden’s so-called herd immunity approach of allowing the virus to spread through the working-age population has taken a huge toll; its death rate is 70 times our own. Scott Morrison said on Friday the idea a country could hit herd immunity without wiping out hundreds of thousands of people was not based on evidence. So while we’ve successfully flattened the curve on cases, avoiding immense strain on hospitals, the Prime Minister is correctly focused on also flattening the curve on unemployment, business closures and income support.

To this end, Mr Morrison revealed, the national cabinet is giving Australians an early mark. Next Friday, the group will consider adjusting several baseline restrictions. Chief Medical Officer Brendan Murphy outlined progress across a broad range of medical goals on our pandemic health intelligence plan. From surveillance to community compliance with social distancing, to building up the health workforce and its ability to deal with an infection outbreak — including drugs, personal protective equipment, intensive care capacity and respirators — preconditions have been satisfied. Contact tracing, however, remains the missing element. Officials are rightly fixated on the importance of the new COVIDSafe app. Mr Morrison described more rapid uptake of the app as the “ticket to opening our economy”.

A nation quite used to hard yakka is essentially operating at 80 per cent, which means companies going bust, workers on reduced incomes and families under immense pressure, given the very high levels of household debt. It’s likely we are already at 10 per cent unemployment — emergency wage subsidies and a doubling in welfare payments have cut-off dates. Official forecasts have gross domestic product contracting by 10 per cent, but the total number of hours worked is set to plummet by 20 per cent: an economy in idle; an engine with a dead cylinder.

The economic pain will continue well into next year, and perhaps for years, as some bank executives fear. Net overseas migration is expected to drop by 30 per cent this financial year, and next year be 85 per cent off its recent peak of 240,000, Mr Morrison said. As well as public spending, exports and migration have been the linchpins of economic growth. Without more people, we would have recorded a recession in the past year or so. This will put a clamp on economic recovery, retarding both income growth and business confidence.

The key driver of net overseas migration is international students; they spend big on college and university fees, rent, other living expenses and travel. It means we should expect a second, third, even fourth wave of disruption as the lagged effects of this and fewer tourists hit us.

The jobless rate may not be close to 5 per cent for several years. We’ll be carrying private and public debt, and the world trading system is going to be fraught. That’s why we need a clever, pro-growth plan out of the mire.

Reopening the economy, however, won’t be simple. We have to avoid a stop-start pattern, where we open up sectors too soon and are forced to put a lid on things later. The return to normal has to be carefully plotted, step by step, with a bias towards high-value, low-risk activities. Opening schools has to be at the top of that list. Easing restrictions on overseas travel and travellers is going to be near the bottom because of the risk. The national cabinet will soon outline a way for workplaces, industry by industry, to be made “COVID safe”.

The coronavirus still will be at large over winter, but testing, tracing and outbreak-ready hospitals will mitigate the risks. As Mr Morrison said, we can’t “keep Australia under the doona”.

But the ambition has to be to come out of the crisis stronger, smarter, more flexible and strategic, and clearer about the true sources of our prosperity. We believe the best path back is by enabling businesses to expand, invest, innovate and hire. That’s an orthodox approach, one policymakers became complacent about for a range of reasons. Tax, red tape and workplace reform became too hard, especially in Canberra; far easier to ride the up escalator of commodity booms, steal low-hanging tax revenue through bracket creep, and offer bribes at election time to key groups. Amid this upheaval we, and others motivated by the national interest, glimpse a rare opportunity to aim higher. Chancers, playing to type, see another opening: to grift, extract rent or inflame enmities. The worst among us just want to hide, hibernate or retreat from the challenge.