Coronavirus: We need a strong economy, but people come first

Written by the Hon. Tony Abbot, 28th Prime Minister of Australia

While other countries have had tens of thousands of confirmed corona virus cases and many thousands of deaths, so far Australia has had under-7000 confirmed cases and just over 70 deaths.

Either the “lucky country” has been lucky indeed; or, more likely, our policy has been more effective than elsewhere in limiting infection and transmission of this new and frightening disease.

In early February, we were one of the very first countries to impose restrictions on travellers from China. And back on March 13, after a meeting of the PM with all state and territory leaders – the first meeting of the so-called national cabinet – when known cases were just 198 with three deaths, we started serious social distancing.

That quickly led to sporting events being cancelled; churches, theatres and cinemas shut; cafes and restaurants largely closed; everyone who could working-from-home; and gatherings of more than two people banned (other than for essential work); and of course, to very heavy quarantine of all incoming travellers and people known to have been exposed to disease.

Exercise, with no more than one other person, has always been permitted – thank God!

Now, scarcely a month later, not only has the “curve been flattened”, but the number of active cases is declining.

That’s the good news.

The bad news is that while we’re winning the fight to preserve lives, and all credit to the Morrison government, the fight to preserve livelihoods will be vastly more protracted and is not yet going nearly so well.

With the tourism, hospitality and entertainment sectors all-but-shut, education mostly on-line, retailing much curtailed, and everything other than modest local travel at a standstill, economy-wide spending is down at least 20 per cent on the same time a year ago, GDP is tipped to fall by about 10 per cent over the coming year, and unemployment is tipped to touch 20 per cent – although some of that might be masked by the government’s $1500 a fortnight subsidy to the workers whose businesses have been hit hard by the enforced economic shutdown.

So far, the Australian government has budgeted to spend well over $200 billion on people and businesses impacted by corona virus. That’s close to the world’s biggest fiscal package – hence the national government’s annual budget deficit, that had been all-but-eliminated, is now tipped to exceed $100 billion, with federal government debt tipped to hit $1 trillion within a couple of years.

So, with our hospital system now geared up to deal with the pandemic and with testing and tracing much better organised, the challenge now is to reopen the economy – and to wind-back the government spending – as soon as possible without unleashing the full force of the disease (and thereby overwhelming our hospitals).

Living with the virus most likely means a gradual and maybe-initially-only-partial reopening of schools, universities, cafes, restaurants, gyms, and retailers – and with international travel long- subject to heavy quarantine except from countries that are substantially “corona free”.

So not only will be there a big initial hit to the economy – there’ll likely be long-lasting change, with some sectors like international tourism doubtless taking years to recover.

In this new world where goods can continue to move around, but people much less so, the political task will be not-to-inflict any more gratuitous economic harm, over, and above what’s needed to continue to keep people reasonably safe from disease.

Inevitably, parties of the centre left will be more inclined to keep government spending up, and the economy chloroformed for longer – because big government is their natural inclination and they will justify it on the grounds that it’s better to be safe than sorry.

For parties of the centre right, keen to restart the economy, the risk will be the accusation that they are putting wealth before health – even though, in Australia, about 3000 people die from suicide every year, there are about a quarter million hospitalisations for mental illness every year and there are thought to be about 300,000 episodes of domestic violence every year – and this could all be expected to worsen dramatically if economic stress remains very high, because we know that “wealth means health”.

In a world where economic life is harder, issues like climate change and identity politics will probably become less important. And it should be easier to wind back much of the green tape that’s held people back, and some of the culture war institutions that have divided us. And as long as people know that it’s only their national government from which help can come, patriotism will be up and globalism down.

But the current part-holiday from standard party politics won’t last long. Once battle resumes, for the centre right, there should be less dogma about the size of government and more of an appeal to the strength of our country and the quality of our citizens.

While subsidies to business can be readily enough withdrawn, personal benefits such as the double-dole that’s now being paid in Australia will be much harder, especially as the recipients will be able to say that it was government policy that threw them out of work in the first place.

Instead of just withdrawing the payment – on the grounds that the immediate crisis has passed and it’s no longer affordable – I’d be inclined to turn it into a wage subsidy for older people and a part-time environmental job with local government for younger people.

I’d make it about improving society rather than about improving the budget. Eventually, the budget will improve because people will earn their pay (and won’t need subsidies) and people will choose their job (and won’t just stay where they’re allocated).

But the successful political leaders will be those who make it less about economics and more about ensuring that people have purpose in their lives.

It’s true that governments can’t give to some, what they don’t get from others, hence the need to be prudent and frugal. But it’s a moral vision of self-reliant individuals and cohesive communities that will win the political argument, not a Scrooge-like concern over dollars and cents.

Of course, you can’t have healthy communities without a strong economy to sustain them but economics is a means to that goal of human flourishing, not an end in itself.

It’s the strength of our commitment to those communities and to the society they-make-up that will be the key to political success in the new world ahead.

To adapt Bill Clinton, it’s society stupid!

This is the transcript of former Prime Minister Tony Abbott’s remarks to a recent IDU Webinar. An edited version was first published in the Australian here.