COSTS OF COVID

The Australian government has allocated billions of dollars to finance and contain responses to the initial outbreak, and the ongoing containment, of Covid-19 and its developing strains.

State and federal expenditures run into billions of dollars. Australia already had a deficit of over $1 trillion, even prior to the outbreak.

Covid costs will stretch the capacity to address such large deficits against the need for a net expenditure to maintain a functioning and effective response to further health outlays.

There is a view, emanating predominantly from the UK, that the Covid and other strains debt could be managed outside the realm of consolidated (general) government debt.

In this respect research centres on separating the Covid debt from the general debt by transforming associated pandemic debt into consolidated annuities or bonds.

Public bonds that could be individually bought, managed and traded with a fixed interest rate. Similar to other bonds traded in wider financial markets.

What makes these changes functional, safe and reliable is their government ownership and, most importantly, the opportunity for movement of such a large extra commitment to consolidated debt.

Debt that otherwise would inherently draw negative responses to burgeoning consolidated debt. Responses that could, and would, make necessary post-Covid recovery even more difficult.

Record government debt would disadvantage spending on health services and community recovery. But encapsulating Covid debts into saleable financial market instruments would ease that pain.

Consolidated Annuities (Consols) have worked in past crises. Governments could legislate to convert our Covid debt into effectively trade-ready Consols, with a commitment to repay as, and when, the economy recovers.

The capacity to effectively maintain health services across the country is, alone, a very good reason to examine this very important and timely opportunity.

Peter Willans

Coningham