TIM HARCOURT. Eight things we need to do for Corona recovery

May 22, 2020

Bill Kelty, the former Australian Council of Trade Unions (ACTU) Secretary (and my old boss) recently praised Prime Minister Scott Morrison in The Conversation and his: ‘Go big, Act fast and keep the lights on’ approach to Coronavirus.

Intuitively, Kelty was recommending the same approach suggested by leading international economists. Kelty however did warn about getting the order right in terms of not stimulating the economy now, but said it was better to have isolation first to get over the public health crisis (flatten the curve), then to continue on to stimulus, recovery and reconstruction.

It’s important to listen to Kelty given his role in the Hawke-Keating reform era of the 1980s and 1990s when Australia transformed itself from a closed underperforming economy to an open, dynamic economy much admired by international economic commentators (often described as ‘from Down Under to Down Wonder’).

In his interview, with Michelle Grattan, Kelty told Morrison ‘Don’t try to do 20 things‘.mThis was similar to his advice to the ill-fated Opposition leader Bill Shorten who spooked the electorate with too much policy detail at the 2019 Federal Election but now it’s to an incumbent government).

So, according to Kelty, instead of doing 20 things the government should do just 5, namely (paraphrasing):

  1. Support a small real increase in the minimum wage, phased in by the Fair Work Commission;
  2. Continue the wage subsidy, Jobkeeper beyond September and expand it to add casuals but reduce the benefit of those earning more under Jobkeeper than their original wage;
  3. Issue national recovery bonds to finance the extra $200 billion stimulus spending;
  4. Improve training in the labour market especially in aged care and the environment, promote a positive environment for enterprise bargaining, boost wages for nurses and teachers;
  5. Maintain the superannuation guarantee schedule of 10 per cent of wages, eventually up to 12%.

Kelty’s five points are necessary on the domestic front, but I can add three more to encompass Australia’s position as an open trading nation in a global economy plus the changing climate and demographics (adding three to the Kelty five makes it eight so it’s still manageable and well under 20).

Here’s 6, 7 and 8 to follow on from the five Kelty points.

Sixth, have a reset but not a rejection of globalisation. Trade will be important again especially in rocks and crops (mining and agriculture) and Australia has gained a lot from globalisation. But with little international travel possible in the next 18 months, we will have prioritise our domestic economy and keep trade going by other means.

There’s the 3 ‘D’s’: diplomacy, diversification and digital trade.

First, it’s a matter of trade diplomacy, keeping our relationships going as a responsible member of the international community including the World Trade Organisation (WTO) and the multilateral system. Managed trade between big economic superpowers can only hurt small open economies like Australia with a highly efficient export sector. And trade wars hurt everyone in the end.

Second, it’s matter of trade diversification and not being reliant on one trading partner, especially if there is a lot of government fiat and geopolitics mixed in with commercial relationships.

Third, given restrictions to travel and the tyranny of social distance (as well as the tyranny of distance) we should use digital trade options as much as possible to keep in contact with our customers and clients. Past experience with SARS, September 11, and even the odd volcano, shows that we can keep our relationships going through thick and thin, even when physical travel is not possible.

Of course, globalisation includes foreign direct investment (FDI) and we are likely to see some caution there (when geopolitics and national security becomes considered along with commercial considerations) leading to more diversification. Similarly, with global supply chains in manufacturing where they’ll be more diversification and a lot of production – particularly in medical equipment and technology – brought back onshore.

This is likely to help revive the regions in Australia, a theme explored in The Airport Economist Regional Australia special episode for the Department of Foreign Affairs and Trade (DFAT). Regional Australia is a policy issue very close to Bill Kelty’s heart given his regional development report in the 1990s and his long-standing interest in regional jobs in partnership with Lindsay Fox.

Seventh, we can use the opportunity of recovery from Covid-19 to look at climate innovation in the Australian economy and the contribution green exporters are making to reduce emissions beyond our shores and to reduce our carbon footprint and create employment at home in Australia. This includes renewable energy, electric cars and trucks, carbon neutral mining and manufacturing, solar power, green hydrogen, green building and architecture, recycling and similar innovation on carbon storage and capture. This will be featured in The Airport Economist Climate Innovation special episode to help Australia ‘put the green in the green and gold.’

Eighth, we can use higher education and the learning economy to help drive economic recovery from Covid-19. This can be done by streamlining higher technical vocational and professional education including online learning (that’s been a terrific success particularly at the Australian Graduate School of Management, AGSM in the MBA, Executive MBA and Executive programmes),

The universities can also turbo charge industry involvement corporate partnerships and public policy leadership and diversify international student sources and subjects and help existing international students with assistance packages and internships in trade councils and chambers of commerce. And assist with student internships and training especially in regional Australia.

Improving the Jobkeeper package to apply to universities sharing with industry partners in emerging areas like climate innovation – clean energy, green building and architecture, regional development and the like – would also be beneficial to training and skill development.

In conclusion, the post-Covid-19 economy won’t look like the 2019 economy and with this plan we can use the crisis to help Australians adjust to the environment of the mid-21st century in terms of the challenges of globalisation, climate change and the changing demographics of the nation by using higher education and the learning economy to help create opportunity for future generations.

This is a positive Australian agenda – we are better running a proactive progressive agenda – and a much better alternative than the austerity approach used in other nations after the global financial crisis of 2009 and nearly all nations after the Spanish flu pandemic of 1918–19.

Don’t let history repeat itself. As Bill Kelty showed us when he worked with the Hawke-Keating reform agenda in the 1980s and 1990s, we are much better than that and we still are in 2020 as we tackle both a public health and an economic crisis all at once.

Tim Harcourt is the J.W. Nevile Fellow in Economics at UNSW Business School and host of The Airport Economist TV series www.theairporteconomist.coma and The Airport Economist Podcast

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