It’s bad, but we can rebuild
The pre-pandemic set-and-forget model of sub-optimal growth and wage stagnation has outlived its usefulness, argues Shaun Carney.
Even in the best of times, events can be counted on to come along occasionally that upend our expectations. But these are the most extreme times the majority of us will ever live through, and that can make the violence of the inversion something to behold. Yesterday’s truth becomes tomorrow’s punchline.
Cast your mind back just two months as the Covid-19 pandemic started to spread through Australia, and the Morrison government put together its first set of economic support packages. Remember the predictions of a V-shaped recovery, in which the economy would take one big hit and then steadily rebound, uninterrupted? And putting our economy into ‘‘hibernation’’ so that it would emerge refreshed and intact in the spring?
Only two months after these predictions were put forward confidently by political and economic experts, they now sound as outdated as Gangnam Style. Which leads you to wonder how much of what we’re being told to expect right now will come to look moth-eaten or irrelevant in, say, July, let alone September, when Australia’s JobKeeper programme, which is propping up millions of jobs, is due to come to an end.
Of one thing we can be certain. The day will arrive when the pandemic is over. Covid-19 will be with us forever but somehow – through a vaccine, or treatments, or the establishment of herd immunity, or something else – the overwhelming fear of imminent contagion will recede.
Beyond that, everything else is marked by uncertainty. I wouldn’t presume to be able to predict what Australia will look like as we feel our way through this crisis.
But I feel pretty sure what it won’t look like. It won’t look the same. How can it? The damage being done to incomes, businesses, aspirations, even lives, is already too great.
Surely the latest unemployment figures – and the companies that are falling over or dwindling away with the mass spread of joblessness – show us at last how big the challenge of recovery will be. For reasons that elude me, a good deal of the commentary from politicians and the media still operates under the assumption that the dreadful economic consequences that have flowed from the necessary lockdown measures to flatten the Covid-19 curve are something like a recession but not quite a recession.
That assumption looks as outmoded as the V-shaped recovery curve. The economic numbers so far in Australia and the United States and Britain and Europe are comparable not just with a recession but with a depression.
We shouldn’t panic in the face of that, but we should expect that the federal government and the states will throw themselves into the economic remodelling project that confronts them. Rather than clinging on to old ideological tropes, they’re going to need to embrace new thinking across the board.
Like it or not, we’re going to be a guided economy for many years, just as we were after World War II. If there’s one genuine comparison between the pandemic and war, the task of economic reconstruction is it.
The reopening of the economy and society after the first period of lockdown, as tentative as it is, is actually an experiment – one that, if it goes wrong, could have a lethal effect. It seems silly not to own up to that. It doesn’t mean we shouldn’t attempt to reintroduce what we used to regard as normal activity. At some stage, we had to try to get things moving and see how it would play out.
But let’s not kid ourselves that this automatically means the worst is over. Wishing for it to be better is understandable, but wishful thinking can’t be a basis for policy. When it comes to this coronavirus, we’re still at the stage where we don’t know what we don’t know. The overseas incidence of what could be a Covid-19-linked complication, paediatric inflammatory multi-system syndrome (PIMS), which has killed a number of children and babies, is chilling.
There are likely to be all manner of unexpected issues arising as the pandemic works its way through the population. That’s why it’s disappointing to hear some with a comfortable parliamentary income apparently not thinking through the consequences of what they’re recommending. For example, government backbencher Jason Falinski has called for JobKeeper to be turned off as soon as possible, probably when schools are fully operational.
The problem is that six million workers and 800,000 enterprises are signed up to the programme; JobKeeper is stopping our economy from falling off a cliff. And what implications could PIMS have for having schools and preschools running at full capacity?
Exactly one year ago, the
Coalition notched up what Scott Morrison described as his miracle election win. Running Australia then looked a lot easier. In essence, the prime minister’s re-election pitch was that the country essentially ran itself and didn’t need any major policy work.
The pandemic has changed all that. A new Australian economy will have to be built out of the wreckage of 2020. It’s a big job, but a big opportunity too. The pre-pandemic set-and-forget model of steady but sub-optimal growth coupled with wage stagnation had outlived its usefulness anyway.
Our future beyond the pandemic hangs on how much courage resides inside those who lead our national government. Their task is to reimagine a different Australia, unencumbered by ideological rigidity and their natural policy timidity. – Nine
Shaun Carney is a vicechancellor’s professorial fellow at Monash University, Melbourne.