Yahoo Finance When should the Government ease restrictions?
The Morrison government has implicitly engineered a recession to reduce the number of deaths from COVID-19.
This is a fact, free of emotion and value judgments.
The government knew it would cause a recession as it rolled out the life-saving COVID-19 health measures over the past few months and there is little doubt that it was the right thing to do.
It is also true that any relaxation of the lockdown and social distancing rules will mean the economy will be stronger, but the risk will be more deaths from COVID-19.
122 economists sign a letter
A group of 122 economists (at last count) have signed a letter arguing against an early relaxation of social distancing measures in Australia.
They say “some commentators have expressed the view that there is a trade-off between the public health and economic aspects of the crisis. We, as economists, believe this is a false distinction.”
There is no doubt they mean well, but it seems they have not thought that issue through.
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The government has chosen to reduce the number of deaths from COVID-19 but as a trade off there are between 3 to 3.5 million Australians unemployed or underemployed, up to a quarter of a million business are closing and Australia is experiencing the deepest recession since the 1930s Great Depression.
At the same time, tens of thousands of people are unable to pay their rent. Many more are having trouble with their mortgage payments, which risks morphing into a banking crisis after the ‘mortgage repayment holiday’ ends in October.
These facts highlight the folly of the letter.
Governments trade off health and the economy every day.
Decisions of what drugs to include in the pharmaceutical benefits scheme are one such example. Decisions are made by the government whether to include hugely expensive medicines on the PBS to save a few lives.
The 122 economists for some reason, do not look at the health costs of the ‘lock down induced recession’ in areas outside the COVID-19 space. Already, there is evidence of higher risks of suicide, domestic violence, drug and alcohol abuse from the millions unemployed and in financial and personal ruin. And this after just a few months of lock down.
Unlike the daily death count from COVID-19, there are no measures of the ill-health that has resulted from mass unemployment and business failures.
It is clear from anyone without the luxury of a secure job and a huge income that there are millions of Australians unemployed, working zero or near zero hours, arranging bankruptcy for their businesses and struggling with the red tape to get a few dollars from the government. They are suffering from horrific mental anguish and humiliation.
Many are working for free, hoping that it will lead to a paying gig sometime in the future.
The fall out for many will be with them the rest of their lives unless the economy can genuinely snap back in the next few months.
The 122 economists suggest the economy can be helped with “strong fiscal measures”.
This is, of course, blindingly obvious. To be sure, the government has been stingy with its measures to date and regardless of changes in lockdown laws, more stimulus should be delivered.
But this too will come at a cost. The economists do not mention the explosion in government debt that this will leave when the health crisis is over.
A better idea would be to supplement further strong fiscal measures with a gradual and careful relaxation of the lock down measures.
Both can be done simultaneously. And if done well, could help lift employment and limit business closures and improve the health of the economic victims of COVID-19.
The success of the lockdowns in Australia of holding back the spread of COVID-19 has far exceeded even the most optimistic forecasts from 4 to 6 weeks ago.
The lockdowns and measures have been fantastically successful and it is a forecasting error we would all like to make.
Those arguing for some gradual and measured tilt back on the lockdown measures understand that this will help the economy. As Australians often do, we did well and/or got lucky.
We should take advantage of our unexpected health success to help those folk whose lives are at peril from unemployment and business failure.
For those lucky to have maintained their employment, the pain of these millions of Australians is only imaginable.
Let’s have some bold policy ideas.
In addition to more fiscally strong measures, the government can look to carefully wind back the lock down measures.
Jobs will come back.
Livelihoods will be saved and health outcomes would improve.
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