Economic recovery is their only target, but do they have a plan?

Jul 21, 2020

The consensus is in: the economy rules, okay? Finally, what remains of the national cabinet is essentially united.

Restrictions are not to be reimposed any further, and those still in place removed as quickly as possible. The latest slogan is that we cannot turn the economy on and off like a tap. Well, we can of course, but we won’t. The price would be too high.

There may be some tweaking, but it will be with the primary aim of enhancing commerce, not public health. Although, fortunately, many enterprises have recognized that keeping people alive and out of hospital makes pretty good business sense.

And the situation is indeed dire. According to the latest estimates, by the middle of next year the deficit will have hit $230 billion, with net debt climbing to$610 billion – 31 per cent of GDP, both easily unenviable post-war records.

Those figures are horrendous. But perhaps the most worrying factor is the collapse of confidence. The Westpac survey revealed a drop of 6 percent in June alone, with worse to come. If hope is being abandoned, we are in for a long and painful road before recovery is even on the horizon.

And for this reason alone, it is perplexing, to say the least, that many of the commentariat urging the need to break the shackles and get back to the new normal are undermining the very foundations required to give it a fighting chance. The relentless slagging of Victoria’s premier Daniel Andrews and his handling of the crisis is ensuring that confidence will only be further eroded.

It looks almost like conscious sabotage – not just to the economy, but to the government the mainstream media generally supports. And the marketer in Scott Morrison realizes this, which is why he has not joined in the chorus of denigration. He knows that even if he can live without Andrews, he cannot live without Victoria, given that the garden state contains almost a quarter of the national economy.

However, he either cannot or will not restrain his media cheer squad, particularly the zealots of the Murdoch press. For The Australian, the crusade against Andrews has become yet another of its holy wars – the man must be exterminated and only when he is dead and buried can normal politics be resumed.

So in another effort to give respectability to naked self-interest, our national daily proffered a shill from the Liberal Party’s PR firm Barton Deakin to spruik a fringe economic theory he calls “the sunk-cost fallacy.” Like much economics, it is no more than jargon for the bleeding obvious: don’t throw good money after bad.

The author of this weighty thesis, one David Alexander relates the cliché to COVID by suggesting that the strategy of suppression has failed and therefore a different tactic is needed – presumably the let it rip approach favoured by countries like Sweden with its huge infection and death count.

So why spend any more hard-earned revenue? And there would be a bonus: most of the deaths would be the old and frail, unproductive, recipients of welfare. Think of the extra dosh we could save. A bit tough on the victims and their nearest and dearest, perhaps, but toughen up cupcakes. Think of the profits.

However, Alexander is himself embracing a fallacy, because the suppression strategy of the past did not fail. Mass testing, quarantine, lockdown, hygiene, social distancing and border closures succeeded in shutting down the first wave of the virus: the curve was well and truly flattened, to the point where most restrictions were lifted.

Now the second wave is upon us, the clusters are emerging. But there is every reason to suppose that repeating the same harsh dose would be equally successful. And yes, there would be – will be – a price: no such thing as a free lunch.

But on any rational cost-benefit analysis, it would be a price worth paying if it would take us back to where we were a few short weeks ago, when salvation beckoned. Which brings us back to the vital need for confidence – for reassurance that all the governments involved know what they are doing.

And once again, last week provided a useful example. The COVIDSafe app, the telephone device sold to the public as a necessary tool to combat the virus, has widely been derided as a dud. As many of us suspected at the time, it has failed to trace any of those actually infected with the virus.

At the time Morrison declared it absolutely vital – 10 million Australians, 40 percent of the population, were needed to download it before restrictions could be lifted. In fact, he had to walk away from that ultimatum before reaching the goal. But the figure did reach 6.65 million, and one in four of those owning telephones, not a bad result and one that proved that if the authorities acted swiftly and decisively, the public would respond.

And from that point of view, it was a success – confidence was boosted, the essential ingredient in working our way out of the panic in the pandemic. This is the model Morrison and the premiers must follow —  do not be distracted by voodoo magic solutions and the obsessions of media mercenaries, keep focused on what the public will believe and accept.

Announcing JobTrainer is a useful start, and this week our Panglossian treasurer Josh Frydenberg will tell us how we are to get through the fraught days until the October budget. And you can bet he will put the best possible spin on it – no gloom and doom, just silver linings, rose-coloured glasses, rainbows all the way.

Our leaders have obviously concluded that the punters will not wear another prolonged and arduous shutdown, which fits with their own desire to make economic recovery their main target. Now they must concentrate on explaining, cajoling, reassuring the masses that they have a plan, they know what they are doing and that it will work.

Of course, it may not – as someone has mentioned, these are unprecedented times. But at least they will not die wondering. Coronavirus remains the biggest danger, but uncertainty comes up a good second.

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