The policy response to the coronavirus outbreak has moved at extraordinary speed. Australia is rapidly approaching a near total lockdown of the kind that would have been unthinkable two months ago.
The economic impact of this shutdown will be immense and last for months, at least — more likely years.
This has led some to claim that the cure is proving worse than the disease and we should be looking to restart the economy sooner rather than later. Yet it would be a mistake for Australia to follow this thinking.
Simply allowing large swathes of the population to catch a potentially fatal virus — even if the symptoms are typically mild for younger, healthy people — seems incredibly risky. In the absence of either a vaccine or proven treatment options, the most likely outcome is the complete overwhelming of our health system and hundreds of thousands of deaths.
In effect, the bargain we risk taking is 150,000 or more deaths for a milder recession. Would the public really accept that deal?
Unfortunately, the default alternative has been that the government should step in and simply absorb the economic losses for everyone. Cashflow packages for businesses, industry rescue plans for the hardest hit industries, wage subsidies for workers, and massively expanded welfare for everyone else.
How quickly we have abandoned self-reliance. Taxpayer support should be the last port of call, and only for those who cannot look after themselves. It should not be the first.
The socialisation of the costs of pandemic is not the only way of dealing with the crisis. There is a role for government to play beyond the public health arena, but it is not that of acting in loco parentis for the whole country.
The primary role for government, and more specifically the Reserve Bank, is to provide an overabundance of liquidity in the short term, and in the longer term boost inflation and growth to make paying off debt easier. Far from being concerned about too much inflation from quantitative easing, we should be targeting a higher base level of inflation to get the economy moving again.
At a minimum we should be wary of allowing a public health crisis to be the catalyst for a permanent shift in our view of the role of government.
This is an edited extract of an opinion piece published in the Canberra Times as Coronavirus: How quick we are to abandon financial self-reliance
Home > Commentary > Opinion > Beware of a permanent shift
Beware of a permanent shift
The economic impact of this shutdown will be immense and last for months, at least — more likely years.
This has led some to claim that the cure is proving worse than the disease and we should be looking to restart the economy sooner rather than later. Yet it would be a mistake for Australia to follow this thinking.
Simply allowing large swathes of the population to catch a potentially fatal virus — even if the symptoms are typically mild for younger, healthy people — seems incredibly risky. In the absence of either a vaccine or proven treatment options, the most likely outcome is the complete overwhelming of our health system and hundreds of thousands of deaths.
In effect, the bargain we risk taking is 150,000 or more deaths for a milder recession. Would the public really accept that deal?
Unfortunately, the default alternative has been that the government should step in and simply absorb the economic losses for everyone. Cashflow packages for businesses, industry rescue plans for the hardest hit industries, wage subsidies for workers, and massively expanded welfare for everyone else.
How quickly we have abandoned self-reliance. Taxpayer support should be the last port of call, and only for those who cannot look after themselves. It should not be the first.
The socialisation of the costs of pandemic is not the only way of dealing with the crisis. There is a role for government to play beyond the public health arena, but it is not that of acting in loco parentis for the whole country.
The primary role for government, and more specifically the Reserve Bank, is to provide an overabundance of liquidity in the short term, and in the longer term boost inflation and growth to make paying off debt easier. Far from being concerned about too much inflation from quantitative easing, we should be targeting a higher base level of inflation to get the economy moving again.
At a minimum we should be wary of allowing a public health crisis to be the catalyst for a permanent shift in our view of the role of government.
This is an edited extract of an opinion piece published in the Canberra Times as Coronavirus: How quick we are to abandon financial self-reliance
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