The novel coronavirus has caused more economic upheaval than any event since the Second World War.
Offices have been closed and supermarket shelves stripped bare.
Airlines have ground to a halt and hundreds of thousands of workers have lost their jobs. And that’s just the beginning.
Prime Minister Scott Morrison last week said the short-term goal is to protect as many jobs as possible during the “hibernation” so the economy can bounce back once the virus is contained.
But what happens beyond that?
Is it reasonable to expect economic ‘normality’ to resume after such a catastrophic event?
The late neoliberal economist Milton Friedman once said: “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
And so, amid all the anxiety and uncertainty about our future, The New Daily asked several economists to dust off their best ideas and paint a picture of what the post-coronavirus economy might look like.
The government has announced a wage subsidy scheme worth $130 billion. Photo: AAP
Full employment must be the aim
The COVID-19 crisis has demonstrated the inadequacy of crucial aspects of our social and economic system, particularly relating to employment and unemployment.
Before the resurgence of neoliberalism in the 1970s, Australian governments accepted responsibility for maintaining full employment, and provided support for all those unable to engage in paid work, whether through age, disability or unemployment on an equal basis.
The full employment goal was not always achieved, but it remained central to public policy.
Over the period since the 1970s, government has passed the responsibility for economic management to the Reserve Bank and required a primary focus on low inflation.
The treatment of benefit recipients, except the old, has been steadily less generous and more punitive.
Meanwhile, governments have focused obsessively on largely meaningless measures of budget balance.
The failures of this approach have been evident for years, but it has taken the COVID-19 crisis to lead to any change.
Within a matter of weeks, dogmas that have been in place for decades have been abandoned.
The most important requirement for the post-coronavirus economy is that we should not attempt to return to a pre-crisis ’normality’ that was unsustainable in almost every respect: Social, economic and environmental.
Rather, the income support measures adopted in response to the crisis should be maintained, and the government should accept the maintenance of full employment as its core economic responsibility.
John Quiggin is an economics professor at the University of Queensland. He is the author of several books including Zombie Economics: How Dead Ideas Still Walk Among Us.
Thousands of Australians struggled to access Centrelink support after the closure of bars and restaurants. Photo: AAP
Bigger social safety net is key
The coronavirus will fundamentally transform our economy.
It is up to policymakers whether those transformations lead to a more prosperous and sustainable economy.
Although the crisis has exposed the risk of interconnected global supply chains, we should not turn our back on globalisation.
Its benefits far outweigh the risks.
The government’s moves to strengthen the social safety show how woefully inadequate it had become, and how this undermines macro-economic activity.
The extent to which this stays in place will help drive more equitable and sustainable economic growth into the future.
There are signs of great innovation stemming from the crisis that have the potential to lead to step improvements in productivity and changes in how we work.
Businesses will be able to reduce office footprints, for example, as more workers work from home.
The use of tele-medicine will save doctors and patients time in accessing healthcare. There are many more examples emerging.
The biggest risk to our economy recovery remains household debt, which is unsustainably high in Australia.
Government will need to do a lot of the heavy lifting once the pandemic is over to get the economy back to full production. As long as it is able and willing to do this, the future does not look as bleak as it may appear.
Angela Jackson is an economist at Equity Economics. She previously worked as a senior adviser and deputy chief of staff to the Australian minister for finance and deregulation from November 2007 to September 2010.
Potential re-emergence of Australian manufacturing
As production output slows and factories close overseas, policies designed to dismantle domestic manufacturing over recent years reveal our vulnerability in dependence on imports.
Reconstruction will necessitate its reboot to produce emergency healthcare goods and plug intermediate input holes that emerge under more strained international supply chains.
Disease containment forecasting will demand proactive, hands-on economic planning, likely for several years.
Business investment will play a marginal role in reconstruction.
Huge public investments in higher-value, high-wage production (through state-owned enterprises and joint ventures) and expansion in public services will be central.
Rebooting and reorganising production will likely take years while fighting the pandemic.
Universal income guarantees could provide much-needed security and support civic engagement in community-led efforts, including mutual aid groups.
Significant expansion in public sector employment (an increase on the dismal 15 per cent share) will be critical to creating jobs that anchor our future post-COVID sustainable economy.
Highly restrictive industrial relations laws will be a continued barrier to the co-ordination needed to fight the disease and plan our future reconstruction.
Previous crises in history show without adequate democratic infrastructure, state-led economic recoveries can send freedoms backward.
Industry and unions can work together to expand capacity and scope of existing industries to replace imports, increase exports, and create new industries – including renewable power infrastructure and social housing.
Alison Pennington is a senior economist at the Australia Institute’s Centre for Future Work. (This response has been edited for brevity.)
Big government is here to stay
We are seeing just how important the role of government is in the economy.
With strong economic leadership from the government, as we are seeing especially in the likes of the UK, Canada, Germany, Sweden and New Zealand, the personal pain of the recession will be minimised so that when the recovery finally comes, the pick up will start on a stronger footing.
For Australia, the unemployment rate will be materially higher, even a year after the virus has passed.
We are likely to see persistent easy economic policy – not just in interest rates, which will remain low for many years, but also the government’s budget settings will likely be slow to withdraw stimulus in an effort to eventually reduce the budget deficit.
The key role of the government post-crisis will be job creation.
People will need to be retrained and re-skilled.
The government will need to create jobs either through a revamping of the currently depleted public service but also indirectly through infrastructure spending.
Get set for big government.
Don’t be afraid, it will be a good thing.
Stephen Koukoulas is the managing director of Market Economics. He was a senior economic adviser to former prime minister Julia Gillard.