Hewson's View: Consequences of response to COVID-19

There is no doubt that the Morrison government has now acted decisively in response to the pandemic COVID-19, in terms of both the health and medical challenges, and in dealing with the consequences of those responses for our economy and broader society. But, while it was the first country to identify the virus as a pandemic, it took some time to close our borders (which has been the major source of infection, so far) and to limit various activities, mostly by implementing "social distancing" policies.

There have also been a number of stages in implementing various packages to "stimulate/cushion" our economy. To date, we have had the largest total response, with the various packages and initiatives now totalling about 16 per cent of GDP, compared with the UK and Germany around 15 per cent, the US roughly 10 per cent, Singapore 8.5 per cent, and China just 3 per cent.

Our nation wasn't prepared for a pandemic, so policy responses were necessarily made in haste, on the basis of very rudimentary information and modelling about the virus and the "curve". Moreover, what would be relevant economic data was some weeks, or even months, away. Needless to say, a lot of the decision making had to be made "on advice", but without a relevant precedent on which the "experts" could draw. Many judgements were therefore necessarily made just on gut feel, certainly limited experience.

So, not surprisingly, consequences may be missed, or misread, and economic packages may exclude some in need, despite the expectations created at the time of the government's announcement. The devil is always in the detail of the implementation. For example, as announced, the JobSeeker benefits paid some casuals much more than they otherwise would have earned, and the JobKeeper package ignored over a million casuals, as well as backpackers, who stood to lose their jobs, but didn't meet the specified criteria.

There was a similar weakness in the provision of bushfire relief. While many, many businesses were affected adversely by the fires, only those that were "directly affected" (that is actually burned down) were initially eligible for assistance. These schemes are often easily abused. The hallmark example was the Pink Batts scheme as an element of the Rudd response to the GFC. The number of installers multiplied like rabbits - anyone with a ute, a ladder and batts was in business, with disastrous consequences, even loss of lives.

There are also important issues of the equity in relation to the policy responses. For example, many can't accept that while over a million workers stand to lose their jobs, and many hundreds of thousands of businesses will fail, public servants (excluding medical and hospital employees and first respondents) and, importantly, our politicians retain all their salaries and benefits, in what promises to be our deepest recession at least since WWII.

While Morrison has claimed much about his National (wartime like) Cabinet, it excludes the opposition, and the responses of individual states have varied, as with say border and school closures. None of this has been helped by mixed messages from governments and "experts", and generally poor information flow to the public and business. We are left to wonder just how long restrictions etc will last (to the effective development and deployment of a vaccine?) and just how long and deep a recession we can expect. The latter hasn't been helped by delaying the budget from May to October - we need regular statements from Treasury as to our economic conditions and prospects.

Early estimates of the likely budget deficit are as high as $200 billion.

The remaining "Big Question" is how all of this is to be paid for, which is also of considerable inter-generational significance. Early estimates of the likely budget deficit (reflecting both the additional expenditure and the collapse in revenue) are as high as $200 billion (which dwarfs the modest surpluses that were claimed to be in prospect), with national debt to rise to over a trillion dollars.

The budget task will also be compounded by expectations created - increases in Newstart and pensions and other benefits, free child care, and so on, although designed to be "temporary" will be difficult to terminate - experience suggests that now a "benefit", tomorrow a "right". And yes, "bounce" now "snap" back are good slogans, but to what, and how fast? Attitudes, confidence, work, industrial structures, and expectations will all have been changed fundamentally by this pandemic.

Who will pay?: Australia wasn't prepared for a pandemic, so policy responses were made in haste. Photo: Shutterstock

Who will pay?: Australia wasn't prepared for a pandemic, so policy responses were made in haste. Photo: Shutterstock

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.

This story The consequences of response to COVID-19 first appeared on The Canberra Times.