Recovery will be one step at a time, the last one a doozy

There are three scenarios for a return to normal life in Australia, but the final step will be the hardest.

We’re a nation of nuggety individuals unused to denying ourselves the pleasures of the Australian way of life.

There was every reason to be sceptical about Australia’s prospects going into lockdown. Here is a nation that is intrinsically questioning of authority, that has not experienced national adversity via a recession in almost 30 years, and that had more or less lost faith in the concept of good leadership in politics, in business and in the church.

Yet, despite an early, worrying setback at Bondi, we did comply and we did place our faith in state and federal leadership, in the selfless dedication of essential workers and, most important, in each other to the extent that we are now emerging from the lockdown with some impressive results.

We have roughly four coronavirus deaths per million whereas Britain, for example, has more than 400 deaths per million.

The question is whether we can manage the recovery as well as we have the lockdown.

A lot is at stake. If Australia can recover without a bruising second wave of infection it will deliver a powerful statement about Australian unity, resilience and quality of life to the rest of the world. Entrepreneurs, students, tourists, immigrants, trade partners and investors will most surely clamour to participate in the Australian story of the 2020s.

So what does recovery look like?

I offer three pathways to, through and beyond the lockdown and into recovery.

There is the “Snapback V”, where we fall off a cliff, plummet to the bottom, then bounce or snap back to where we left off. The bounce comes as we get back to work. The problem with this scenario is that it assumes all businesses will recover and that all workers will be reinstated; either that or new (or expanded) businesses will emerge from the lockdown and soak up excess labour.

And given that so much of the Australian economy is reliant on tourism, travel, trade and international students, which all depend on other countries also opening up at this time, it is unlikely that a full and immediate snapback is possible, let alone probable.

Then there is the “Happy Tick” which is, as you may have gathered, the optimistic scenario. We fall off a cliff (tick), plummet to the bottom (tick), then bounce back into an even more prosperous position than we previously held. This would require all the snapback conditions — meaning all businesses and workers are reinstated after lockdown — as well as something extra.

It is possible that Australia’s successful handling of the coronavirus (as measured by the number of deaths) creates a perception that our nation is secure, hygienic, well managed and offers all the benefits of a First World economy positioned in a sunny (if somewhat remote) location.

In this scenario, Australia has a positive story to tell a world recoiling from the ravages of coronavirus. Business migrants, entrepre­neurial types, investor funds, students and skilled workers are attracted here, helping to catapult Australia to the furthermost reaches of the Happy Tick’s upward trajectory.

However, this is unlikely to be the pathway during the coming 12 months because it is dependent on the free flow of tourists and visitors from countries still affected by the virus. Although I must say that I would not rule out a surge in the Australian economy by the mid-2020s based on the logic of this nation being regarded warmly as a safe, remote destination.

In many respects this was the logic that underpinned Australia’s successful postwar immigration program in the 1950s. The fact Australia was well removed from troubled Europe was an incentive to migrate.

Then there is what I think is the most probable pathway forward, namely the “Staircase Recovery” where business and others respond to the staged reopening of the economy.

The first steps are likely to yield immediate results; schools, the public sector, big business, established businesses in secure markets and their workers all returning to the workplace will contribute to a discernible and immediate uplift in economic activity. There will be a buzz, an excitement, as things seem to be returning to “normal”.

It’s the later stages, where the staircase rises are shorter, that will determine the extent of recovery. Judging from past recessions a severe downturn can extend across a full year, with unemployment peaking immediately after the recession has technically ended. But the coronavirus downturn has been created by different drivers; the recovery will be controlled and stepped, with the final step being the most difficult to navigate and deliver.

And the reason is that the final step requires the recovery of international (as well as domestic) tourism, the retention of trade relationships, the reinstatement of international student flows, and the restitution of the hospitality, arts and entertainment industries.

The point is that we have less control over the drivers of the last step.

Indeed, the step that finally takes us back to “normal” depends on whether other nations have managed the virus, we have freedom to assemble in numbers that support the entertainment industry, and whether the lockdown has killed off many or just some of the cafes and restaurants that are now so central to the Australian way of life.

All of these pathways assume, of course, that any second-wave outbreak is manageable and that our culture of civic compliance — epitomised by social distancing — is maintained during the far looser recovery phase.

There are two ways of looking at the Australian response to the coronavirus.

We are a nation of nuggety individuals unused to denying ourselves the pleasures of the Australian way of life. We complied with the lockdown because we genuinely feared contracting the virus. Now that we feel the danger has passed we will revert to form and largely ignore the social-distancing protocols, leading to a disastrous second wave and the loss of Australia’s perception as a safe harbour.

Another interpretation is that because we have not endured adversity on a national scale for almost 30 years the threat of the coronavirus was amplified in the Australian mind. With no reference points to place the threat in context we dutifully complied and looked for and found and admired heroes, our frontline, to get us through these darkest of days. The immediate threat may have passed but many Australians regard this experience as their generation’s equivalent of war, of the Great Depression, and are determined to follow through.

As confronting as this may sound, I think Australian society has been strengthened by the lockdown; we have found real heroes; we have restored faith in our leadership and in each other; we will climb our way towards a glorious recovery.

The question, I think, is not so much what does the pathway to recovery look like. It’s more: what learnings, skills, adaptations, re­imagined values can we, should we, take forward in the recovery process to build an even better Australia in the months and the years ahead?

Bernard Salt is managing director of The Demographics Group.