COVID-19: the economic road ahead – how do we recover?
The Prime Minister is right.
It’s won’t be enough to just go back to business as usual in a post COVID-19 world. The impact of the pandemic on our economy will be extremely significant, estimated by the IMF and Treasury as a drop of 6.7 per cent in Australia’s GDP with an expected 10 per cent unemployment rate. To put this in perspective the Global Financial Crisis, thought by many to be the biggest economic shock of our lifetimes, reduced our GDP by just 0.5 per cent.
To recover we need growth. Our economic recovery plan needs to rebuild our economy and immediately bring our unemployment and underemployment rates down to as close to pre-COVID levels as practical. For this to happen we need to get businesses back to full capacity fast, so they will be able to re-engage with staff who have been stood down or had hours reduced as a result of the crisis
So how can we do this?
Crucially, we must continue with National Cabinet. This unprecedented forum of Federal and State government leaders has bipartisan support and has sent a strong message to Australians that the nation is united, and we are all working together to tackle this crisis. The National Cabinet will play a crucial role in ensuring we lift consumer and business confidence and take decisive action to implement a cohesive policy response, required to rebuild our economy and recover from this shock.
We must also focus on what we as a country do well. The Australian economy rebounded quickly after the GFC due to our large resource exports. Supporting our resource companies to ramp existing operations back up to pre-COVID-19 levels will be crucial, but so too will the recommencement of exploration and evaluation studies for shovel-ready advanced projects that will provide a medium-term pipeline for further growth.
The post-GFC investment in major public infrastructure in WA also played its part in driving down unemployment. These investments, including Elizabeth Quay and the Perth Stadium, attracted criticism at the time for being an expensive ‘monument building’ exercise by the government of the day. Few would now argue the benefits of the projects and it is investment of this scale that will again be required to supplement investment from the private sector.
There is also a need to diversify – the crisis has highlighted the dangers of our reliance on overseas markets for some critical services and products. While no economist would advocate protectionism, the crisis has taught us that overseas supply chains are complex to navigate in a pandemic. Given we will likely have restrictions in place for at least the medium term, revamping Australia’s manufacturing sector and encouraging companies to repurpose operations will be important to create jobs and ensure supplies of critical products.
Education is another of Australia’s main exports. Work has already begun to support the education sector with the Government encouraging Australians to ‘binge on study not Netflix’. Encouraging vocational study will help to build the skills needed to grow local manufacturing, while university short courses can assist both the tertiary sector to rebuild and other sectors of the economy that may have previously relied on overseas workers.
One of the first rebuilding steps, once border restrictions are lifted, must focus on getting domestic tourists back on the road. The tourism sector – now effectively shut down – contributes $61 billion per annum to the Australian economy and employs 660,000 people. Domestic tourism accounts for 70 per cent of that figure. Australians could keep the industry afloat by converting just half their international travel spend into local holidays.
These are unprecedented times. But with early signs we are flattening the curve and saving lives, we must now focus attention on returning to a functioning, and thriving, economy.
Careful management of the lifting of restrictions on businesses and individuals, which will dominate the conversation in National Cabinet in the weeks to come, will be critical to successfully restarting the economy as we emerge from the COVID-19 crisis.
Jennifer Kirk is an Associate Director in Cannings Purple’s Government Relations team and spent more than seven years in Canberra working for the Commonwealth Department of Finance, the Department of the Prime Minister and Cabinet and the Commonwealth Treasury. If you need help mapping out your government engagement, contact Jennifer.
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