Only decisive leaders can change course of history

The COVID-19 pandemic will change the norms, expectations and behaviours by which publics, governments and institutions have lived. The impact on our community exceeds that of the global financial crisis and the long-run legacy is likely to be greater. More detailed planning for a national­ emergency lasting six months is an imperative.

This is because the nature of the beast is clear — a pandemic provoki­ng an economic crisis ­provoking a financial crisis. The heart of the problem is a virus that demands a shutdown in human contact, with different opinions among medical experts about the best methods. But the trajectory towards human contact shutdown leads to economic shutdown.

The prescription of “social distancin­g” means the normal operatio­n of most institutions is threatened and being modified — from hospitals, business, airlines, sporting codes, parliament, entertainment and cafes. There is a fear in the community about daily life, family welfare, sickness and death now matched by alarm about jobs, incomes, business survival and ­financial future.

The international outlook is bleak. The world economy is heading into a steep downturn; markets remain extremely volatile and unstabl­e; central banks around the world are being driven into unconventional measures to maintain liquidity; more nations are going into border restriction lockdowns. The global economy was vulnerable before this event and it is showing in the magnitude of the correction.

The pressure on political leaders is intense and probably has no parallel apart from wartime. The creation of a national cabinet, Scott Morrison’s idea — involving the Prime Minister, state and federal leaders — is a decisive event. When this crisis is over, it will be seen as one of Morrison’s most ­important calls. The story of the 1918-20 Spanish flu pandemic that killed about 13,000 Australians precipitated a crisis in the young Federation over commonwealth and state powers that almost tore the country apart. A national cabinet­, designed to unify federal-state decision-making, is critical.

The rapidity with which COVID-19 spreads means governments are locked into a perpetual “catch-up” mode. The constant debate and dispute is whether more severe lockdowns — that seems inevitable — should be fast-tracked despite the economic meltdown that will result.

Comparisons with the fight against AIDS in the 1980s are tempting but largely false because every person is a potential victim from COVID-19, whose victims can double within a few days.

The national cabinet was meeting late yesterday and expected to make decisions about limits on indoor­ gatherings, access to aged-care residents and policies for remote­ communities. This is a further­ shift towards social shutdown. The shift to working from home is now being implemented almost universally. The official advic­e on schools is not to close “at this stage” but this is likely to change, as has so much else. Harsh realism is now the Morrison governme­nt message.

Finance Minister Mathias Cormann said on Tuesday that “many businesses will close and many Australians will lose their jobs” — an extraordinary yet justified comment­ pointing to a sea change in the economic challenge and the urgency for another package likely to come under the heading “economic support”. Trade and Tourism Minister Simon Birmingham, in constant consultation with the sector, said: “Ultimately, we’re not going to be able to save every single­ business or every single job.”

Cormann and Birmingham are foreshadowing a package likely to be unveiled this week. Once again, speed is crucial given the rapidity of deterioration. Yet this comes, incredibly, just five days after the applauded $17.6bn fiscal package whose entire purpose was to support­ jobs, keep business in business and offer cash to households.

The debate about denying a technical recession is fading. That goal is now so yesterday; the future challenge is greater. Morrison said last Thursday: “If more is required, more will be done.” Not only is more now required — more will be required beyond that.

The government will surely enter a calculated but sustained process of fiscal support in response­ to the deepening downturn. It will be driven by events. It will also be driven by the limitations on monetary policy — ­another big difference from the global crisis 12 years ago — which means politicians and fiscal policy must do more. This week’s package will be geared to business owners and workers but will also “scale up” some of last week’s decisions.

One in 13 jobs in our economy comes from tourism and hospital­ity. International arrivals have ceased; domestic travel is being heavily cut. Qantas and Virgin are under pressure, possibly for some time. Qantas has cut international capacity by 90 per cent and ­domestic capacity by 60 per cent until the end of May.

Birmingham said it was important that “those airlines are there for the recovery phase”. In this situation, government and banks must sustain a range of otherwise viable enterprises that face a cash drought. But many small businesses caught in the downturn and without deep pockets will fold. The key to the coming package is to ­ensure it is targeted to the areas of justified support.

In a statement on Monday, ­Reserve Bank governor Philip Lowe signalled urgent action — the bank will act to counter the crisis­ by purchasing government bonds, in an embrace of quantit­ative easing to keep liquidity in the system and restore investor confidence. Market analysts also expect the bank will cut the cash rate further, to 0.25 per cent, rock bottom.

Morrison said: “This is nothing like the GFC. This has gone well beyond that now. I mean in the GFC we didn’t have to shut down the borders. In the GFC we didn’t have to stop mass gatherings of the public.”

Asked by Neil Mitchell on Melbourne radio station 3AW if Australia would need to go into total lockdown like Italy, Morrison said no options were ruled out.

Basic to the government’s respons­e is whether it can slow the virus to protect the health system. Deputy Chief Medical Officer Paul Kelly said on Monday that 80 per cent of people who contract the virus will have only a mild illness. But 20 per cent require more serious healthcare and some will die. For children and young adults serious illness is “very rare” but for people aged 80 years and older the death rate is “quite high”.

Discussing scenarios last week, NSW Chief Health Officer Kerry Chant said preparations were under way for 20 per cent of the eight million people in NSW to catch the virus. She forecast that 5 per cent of people affected — up to 80,000 people — would require intensive care.

Kelly said everything the government is doing is about “flattening the curve” to ease pressure on the hospital system. Australia, however, has only just more than 2000 intensive care beds. Kelly said the goal in relation to infections was to “have less over a longer time”.

Health Minister Greg Hunt has said the government’s modelling is evolving. Questioned about the spread of the virus, Kelly said: “I think Angela Merkel said 60 per cent of Germans the other night. My colleague Kerry Chant talked about 20 per cent. It’s something in that range. I’m not going to speculate on the actual numbers. But this is an infectious disease.” Kelly said the death rate was about 1 per cent, so “you can do the maths”.

Hunt said yesterday the best guide to the death rate is South Korea (because it has a better idea of how many people have the virus), where it is 0.87 per cent. That may be encouraging but if the above scenarios are remotely accurate­ the human and economic toll has far to run.

There are two observations on our tribulations. The world has been vulnerable in financial terms since the GFC. Everyone kept saying this, warning about a future crisis, but few acted on the warning. Now that vulnerability is being exposed and the price will be high.

This is a genuine crisis and genuine crises can only be countered­ by open-ended and high political­ declaration. It is important to follow the medical and economic advice. But officials are officials. They cannot change the course of history. That is the job of leaders acting with decisiveness.