Battered Aussies eye NZ Covid strategy
Supporting the economy was and remains Scott Morrison’s argument but how do the numbers stack up?
As a second wave of coronavirus gathers pace in Victoria and might yet emerge in New South Wales, Australians are looking across the Tasman and wondering if we would have been better off following an elimination strategy like New Zealand.
Not only might this strategy have lowered death and illness and allowed us to get back to a more-orless normal way of life, it might also have been better for the economy.
Supporting the economy was and remains Scott Morrison’s argument for trying to suppress the Covid-19 virus in Australia rather than trying to eliminate it. The idea was that we would have a shorter and less severe lockdown, which would do less damage to the economy than the severe lockdown required for elimination.
“There will always be cases that come because Australia has not completely shut itself off from the world,” the Prime Minister said after yesterday’s National Cabinet, comprising the PM and the state and territory leaders. “To do so would be reckless.”
But the longer, harder lockdown hasn’t done any more damage to the New Zealand economy than the less stringent lockdowns around Australia.
New Zealand’s GDP looks on track to fall about 4.6 per cent this year, according to Westpac forecasts. That’s only a bit steeper than the 4.2 per cent fall Westpac has pencilled in for Australia. And when we take into account the fact that about 20 per cent of NZ’s GDP is from tourism, compared with only 3 per cent for Australia’s, then New Zealand’s economic performance is remarkably strong. Additionally, consumer spending and job ads are higher in New Zealand than they were before the pandemic hit.
What’s worse, the suppression strategy hasn’t worked as a health measure, and this will inflict further damage on the economy.
Melbourne has re-entered lockdown, with Premier Daniel Andrews warning the lockdown could go for longer than six weeks if the number of new cases continues
What’s worse, the suppression strategy hasn’t worked as a health measure.
to rise. In addition to the loss of life, the thousands of additional people suffering the ill-effects of the virus and the ongoing disruption to daily life, the economic cost of the second wave in Victoria is huge.
Data from the Morrison government released recently put the economic cost of the lockdown at A$3.3 billion ($3.5b), which will shave three-quarters of a percentage point off the country’s GDP in the current quarter.
That estimate assumes the current lockdown lasts for six weeks, but with case numbers remaining stubbornly high that doesn’t look at all likely.
It’s not just Victoria suffering the economic impact of the second wave. The whole nation watches for the latest coronavirus numbers from Melbourne and each new daily record saps confidence from businesses and consumers everywhere.
Business owners are wondering if their own city will be hit with another lockdown that sees their sales plummet once again. They’re hardly going to employ more staff or invest in their businesses under these circumstances, thereby adding another blow to the economy.
And yet business groups continue to reject calls for an elimination strategy.
“To put a big stop into the economy would mean, for many businesses, quite simply that they wouldn’t reopen,” Ai Group chief executive
Innes Willox said last week.
“They wouldn’t re-employ at the same level and they’d be dealing with ongoing uncertainty for much longer than just a stop period.”
This is typical of the Australian business lobby. They put their own interests ahead of the community’s and of the broader economy’s and will pursue the short-term sugar hit of rising profits over long-term, sustainable growth.
The problem is, businesses are already dealing with ongoing uncertainty and who knows how long this might last? Until the end of the year? Next year? Until we have a vaccine, whenever that is?
Maybe trying to knock the virus over once and for all, in combination with a rigorous quarantine operation, might be best for the people and the economy in the long term, even if it causes considerable pain in the short term. New Zealanders managed without takeaway coffee for a few weeks. It would be nice to think Australians could also put up with this first world hardship if it means saving lives and livelihoods.
It has to be better than yo yo-ing in and out of half-hearted lockdowns every time there’s a new outbreak.
The result of the two different strategies is that Australia and New Zealand are in very different places at the moment.
As New Zealand enters its election campaign, Jacinda Ardern and Judith Collins will be debating on how best to drive the economic recovery.
Scott Morrison, meanwhile, is nursing the Australian economy through the second wave and trying to minimise damage.
Thoughts of an economic recovery in Australia are a long way off.