It's a difficult question, but one that must be asked. Are we kidding ourselves?
Are we just assuming that COVID-19 can be brought under control, and then kept there, while we disengage from support and stimulus, and then move on to focus on recovery from the most significant economic collapse since the Great Depression?
The current situation, the second wave of the virus in Victoria, should surely cause us to think otherwise. Why isn't it likely that this Victorian second wave will be repeated in other states and, perhaps overall, repeated several more times across the country?
While we recognise, given the rapid spread of the virus internationally, that it will be impossible to open our international borders fully until an effective vaccine is developed and deployed globally, what if this process takes many years - indeed, what if an effective vaccine is never developed? The world still doesn't have an effective cure for the common cold.
Alarmist? Maybe. But in any reasonable scenario planning exercise it can be instructive to include such a "worst case" scenario.
Although the government has relied on "medical advice" in setting border closures, lockdowns, and social distancing, it must be recognised that much of this advice has been "learning by doing" - the WHO makes "interim declarations" as knowledge of the virus has been evolutionary, as we saw this week with some 200 scientists emphasising that the virus can also spread by aerosol transmission, thereby requiring additional and somewhat different policy responses.
While, by world standards, we have been very successful, to date, in containing the virus, and while the Treasury/RBA are suggesting that we have done somewhat better economically than first thought, it would be most unwise to get too confident and complacent, as we are probably yet to see the worst of it. As it is, the government has been forced to back down on its original assessment that our economy/lives would simply "bounce" or "snap" back once we "flattened the virus curve". Further, they have had to recognise that what they had claimed to be "temporary" and "easily reversible" stimulus/cushioning policies will not, in the reality of such a significant economic collapse, be so easily terminated.
There will need to be a permanent increase in Newstart to replace JobSeeker; JobKeeper will need to be phased down, at least; and other industry assistance probably extended, including mortgage and rent deferrals, and overall liquidity. Beyond this, the government has promised to detail a recovery strategy to rebuild/reset our industrial and other structures.
However, as we await these decisions and this strategy, the government has already been forced to commit more assistance to Victoria. The danger is overconfidence and complacency right across the country, risking a number of additional "spikes" in the virus, as lockdowns and other restrictions are eased, and people are increasingly anxious to return to their more "normal" lives. In turn, this will probably require the government to offer a number of further support initiatives as the virus is reignited across the country. Not much of a prospect is it - more permanent lockdowns, or a series of lockdown/let outs?
It is very important to offer hope by defining and embarking on a pathway forward ...
However, while the government will have, out of necessity, to deal with second, and subsequent waves of the virus as they occur, it certainly should also move quickly and decisively to initiate its recovery strategy. It is very important to offer hope, by defining and embarking on a pathway forward, even if the road itself is bumpy, buffeted by further waves and spikes of the virus.
The fundamental requirement is to restore business and consumer confidence. Failing to lead a recovery strategy, as a priority, leaving people to drift through lockdowns/let outs will risk building a resistance to the reform essential to delivering a genuine and sustainable recovery.
Unfortunately, being uncertain about our economic conditions, the government seems hesitant to move in this way - they seem committed to acting sequentially, with the July economic statement to detail the transition from existing assistance, only to lay out the recovery strategy more completely in the October budget.
I fear that time is of the essence, and the threat of multiple waves of the virus a concerning realistic possibility.
Please assure us Mr Morrison that you have a handle on all this!
John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.
