Paul Barratt AO, Chair, Australia21
Image by David Veksler
As the various jurisdictions that make up our Commonwealth of Australia begin to take incremental steps to reduce the level to which their residents are subjected to “lockdown”, some of our political leaders continue to speak optimistically of the economy returning to “normal”, after a period of “hibernation”, but there is good reason to believe that the second-order effects of the COVID-19 are so profound that it is difficult to see life ever returning to the world we knew before the virus struck.
Consider the following:
Hundreds of thousands of people have lost their jobs and it remains to be seen how many businesses will fold
For many Australians the impacts of COVID-19 represent a third blow on top of the effects of protracted drought and the disastrous bushfires of the spring and summer
Some important sectors, notably the universities and the arts have been left to sink or swim
Our borders are closed and likely to remain so for a long time precisely because of what has been achieved in combating the virus. This means the outlook for the tourism industry and for international education, two major sectors of the economy, is bleak. Likewise for those sectors which rely on backpacker labour or other temporary international labour.
Immigration, a major driver of economic growth, will collapse at least for the next year or two
The effects of reduced net immigration are expected to be compounded by a reduction in the birth rate
The collapse of international aviation has disrupted important inbound and outbound supply chains
The impact of COVID-19 on our major trading partners means that world trade will recover very slowly
Many countries will be reconsidering self-sufficiency issues in the light of their difficulties in obtaining essential supplies, with obvious implications for their commitment to free trade, and hence for patterns of trade
Because of the economic support measures to which the Government has rightly committed itself, a nation which already had extraordinarily high levels of household debt will emerge from this period with levels of public debt that are very high by Australian standards.
All of these factors make it very unlikely that the economy will “snap back” as the Prime Minister appears to contemplate. Furthermore, I would question whether we should want it to. Since its foundation in 2001 Australia21 has been researching and publishing on complex issues that are important to Australia’s future, always with a view to making Australia a better place. Accordingly, after the massive disruption we are experiencing, I would see the recovery phase as an opportunity to examine past policy settings critically and ask whether we want to continue with them. We should be asking, “What kind of Australia do we want?” before we set out on a long and expensive process of trying to recreate the Australia of December 2019.