March 16, 2020 05:39:47
The footage was an extraordinary testament to human determination in the face of adversity.
In early February, within the space of little more than a week, the world marvelled as China built the 1,000-bed Huoshenshan and the 1,600-bed Leishenshan field hospitals in Wuhan to cope with a rapidly escalating health crisis that was spiralling out of control.
It was extraordinary for other reasons too, and particularly, at just how blase and dismissive the developed world has been to the imminent threat the virus posed to its own citizens and the ongoing danger it presented to our economic wellbeing.
As the disaster unfolded, complete with grisly images of bodies lining the floors of crowded hospital wards, and eerie vision of empty streets, Wall Street’s relentless boom continued, dragging developed world markets higher.
US President Donald Trump openly scoffed at the suggestion that this was a threat.
Now, the daily number of new cases globally has outstripped China during its peak, prompting the World Health Organisation last week to declare a pandemic, suddenly bringing into focus that the danger has landed on our doorstep.
It wasn’t until the weekend, four months after the outbreak first became public in China, that our Government finally announced that all overseas arrivals would be required to self-isolate.
Why has this taken so long?
Perhaps it was arrogance; that this somehow was what can go wrong in a country that, while the world’s second-biggest economy, still only has aspirations for first-world status.
When Beijing forcibly shut down the engine room of its economy and decreed a lockdown for all residents, the rest of the world looked on with bemused curiosity. Even as the disease spread beyond China, Western leaders — including our own — were reluctant to make the tough calls to isolate us from the contagion.
Rather than heed the lessons from China, the West ignored them.
Dragged into action, the belated reaction here overwhelmingly has focussed on wealth rather than health.
The $17.6 billion stimulus package announced last Thursday by Prime Minister Scott Morrison and Treasurer Josh Frydenberg, while a dramatic about-face on how to deal with an economic crisis, treated health care as a secondary issue.
But the more Australians who succumb to the virus, and the more who die, the greater the cost emotionally and financially and the longer the economy will take to recover.
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In a world that turns on instantaneous news, the lethargic response has been replicated across the globe.
China was in denial and misled its people until it was too late. Iran dismissed the problem outright. Italy and now much of western Europe’s delayed reaction to the threat has now exposed the inherent weakness in their health systems.
That has led to medical system overload, unnecessary infections and virus casualties along with preventable deaths from other diseases hospitals could no longer treat.
Meanwhile, until a fortnight ago, central banks globally maintained an air of bravado, constantly reiterating that the international economy was motoring along just fine, although perhaps a little slowly given the supply disruptions to industry from China’s shutdown.
Most ignored ominous signs that financial markets — debt markets as well as stocks — were about to seize, and without drastic action, a rerun of the global financial crisis could be upon us. More on that later.
Are we taking this seriously enough?
There are good reasons governments don’t want to appear alarmist. You need only look at the irrational stockpiling of household items like toilet paper to see what mass panic can do.
But denying it as hype and a hoax, as President Donald Trump has done, or urging Australians to head to the footie and insist on schools and workplaces remaining open, as Mr Morrison has done, has helped create a dangerous climate of confusion and misinformation that has hindered adequate preparation.
Recent US surveys indicate the vast bulk of Republican supporters remain unconcerned about the virus.
While Australia has been quick to impose travel bans, a significant proportion still believe that COVID-19 is nothing more than the flu and that the whole issue is a media beat-up.
The Federal Government, however, clearly has awoken to the imminent danger posed by the looming economic storm, even if it dithered with a formal response.
After a decade of ridiculing the Rudd government’s global financial crisis response, last week’s economic rescue plan generally was hailed as well-targeted.
But it is unlikely to be anywhere near enough to save the country from recession.
The graph below from investment bank UBS highlights just how much stimulus the Rudd government was forced to inject to keep the economy growing as the global financial system teetered on the brink of destruction just over a decade ago.
The solid bars on the left are the totals — as a proportion of GDP — the Rudd government pumped into the economy compared to the proposed response for COVID-19 outlined by the Morrison Government in the shaded blocks on the right.
The Coalition has always maintained Kevin Rudd and then-treasurer Wayne Swan overspent in their quest to emerge from the global financial crisis unscathed.
But if Mr Morrison is correct in his assertion that this crisis is more difficult to confront and tougher to defeat, he may need to scale up his response quicker than anticipated.
Health response should be the priority
Lost in the stimulus announcement was any real discussion about the adequacy of the health response.
Despite decades of federal whittling of health services, of the $17.6 billion total stimulus only around $2.4 billion has been allocated to health care.
Around 10 per cent of that will be used to establish 100 coronavirus clinics while $100 million has been allocated to providing a video consultation service.
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Some health professionals, however, claim the initiative involves mere cost shifting.
GPs and others delivering the telehealth service must bulk bill.
Patients accessing the service, because they don’t want to attend a surgery for fear of contracting COVID-19, ordinarily would have paid a full fee but now will be bulk billed.
As a result, frontline medicos and other health professionals who charge in excess of the Medicare rebate could find themselves out of pocket during a health crisis, impacting their ability to pay staff.
The cost shifting occurs because the patient would have gone to the doctor anyway and incurred a Medicare rebate.
Now, because they are teleconferencing, it will be billed as part of the COVID-19 response budget.
Whatever the merits of their argument, it seems inconceivable that frontline medical practitioners facing an onslaught have been tasked with picking up the tab on what appears to be an already slim budget outlay for such a crisis.
There’s another virus lurking in the background.
On Friday, Australian money market interest rates suddenly and inexplicably surged.
This is a disaster for an economy facing serious headwinds and defies all logic, given the Reserve Bank cut rates a fortnight ago to a record low of 0.5 per cent with another cut expected next month.
This will force the RBA to create and spend vast billions of dollars buying up government bonds to prove that it hasn’t lost control of Australian interest rates.
This will be a long and expensive exercise.
But it is part of a broader global trend.
Lending markets have seized. Two of our banks, Macquarie and NAB, pulled capital raisings totalling almost $2 billion last week.
Money has become scarce and lenders scared.
With corporate revenues in freefall and global stock markets plummeting, there are serious concerns about the ability of debt-laden corporations to maintain interest payments.
That, in turn, raises questions about the health of the financiers who’ve provided the loans.
And the problem is, no-one really knows who is exposed and for how much.
The fuse has been lit for a rerun of the global financial crisis. The time for government dithering has passed.
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