Covid-19: message from an economist
The deadly virus is infecting more people faster than it has so far. The highest rates of infection are in underdeveloped nations and the horror on our televisions is truly scary. Even in some developed nations with strong medical traditions there is evidence of a revival of cases. Over 10 million cases globally have been measured but various experts say the true picture is two or three times that. One pundit opted for ten times the measured number.
The developed world’s second wave is being blamed on the carelessness of people as they relax thinking the worst is over. Certainly this seems to be the reason for Victoria’s (actually, Melbourne’s) rise in numbers. The regional and rural part of the state still have almost no people catching a case of the covid.) The direct evidence is that the latest upsurge of cases seem to be Melbourne based, family groups of immigrants who do not speak English well or in some cases cannot read English at all. At the end of Ramadan, such people had traditional family feasts, where they gather in large groups.
Apparently no one in these groups, not even their religious leaders, knew the rules and/or were prompted to remind their flocks to maintain great care and keep to the limitations the government had applied until they were relaxed. Or they just didn't care.
Our political leaders need to worry about the costs of closing businesses verses the implied costs to the old people who are sadly most likely to die. As the numbers of infected people and deaths become lower the temptation is to relax the rules to allow the resurgence of business. Of course, some production was never turned off, such as coal and iron ore for our Chinese friends and food for both Australians and overseas clients.
But the costs of closing thousands of small and medium businesses is very large, and the restrictions on people’s freedom becomes more and more irritating. So eventually the dam must burst and people visit their friends and relatives, or meet them in pubs or restaurants.
We have only recently been told that about 30 % of returning Aussies allowed back into the country refuse to be tested. What reason do they give? I must complain about this prime piece of silliness. If they keep refusing either they need another 14 days in an hotel at their own expence or in prison. If mulishness persists they could be required to return from whence they came.
Here are my views on the overall state of play.
1. The Australian economy is reopening though with Victoria lagging and small states with closed borders. This is a most inefficient way to get the economy working again, and until Australians can travel freely within the Australian borders, economic recovery will be halting at best.
2. My guess is the recovery will be a largely flat bottom part of an ‘L’ shape letter. No chance of anything better until restarting the economy is fair dinkum. Necessarily this will involve spot fires of illness such as we are seeing in Victoria now. This is a cost for rescuing our economy!
3. The Australian government has kindly provided a lot of money to keep many, but not all, unemployed people living in modest comfort. These payments are meant to be phased out in September, but the 6,000 Qantas people laid off (and many others in a similar quandary) will only have their redundancy payments to carry them forward.
4. It seems that Australia’s government debt (more accurately taxpayer’s debt) is likely to be over one trillion dollars when the pandemic is over, or we have become used to occasional flareups. The debt will take at least 20 years to pay back and those payments will greatly stifle the economic recovery we so badly need.
5. One hope is a global debt forgiveness agreement, known in the good book as a ‘Jubilee event’. As a creditor nation, China would not be amused.
6. The Atlantic summarises: ‘At least four major factors are terrifying economists and weighing on the recovery: the household fiscal cliff, the great business die-off, the state and local budget shortfall, and the lingering health crisis.’
7. There’s more: ‘The Trump administration has repeatedly argued that there is a trade-off between the country’s economic health and its public health. But economists and physicians have repeatedly argued that that is untrue: Ending the pandemic would have been the single best thing the federal government could have done to preserve the country’s wealth, health, and economic functioning. The Trump administration, in its hubris, obstinacy, and incompetence, failed to do it.’
8. I sincerely hope that we can do better than this. Australia seems to have handled suppression of the pandemic far better than the USA. Sadly it is not fully suppressed, and we must expect occasional flare-ups as is happening in Victoria now.
9. My overall conclusion is that unless and until the entire population behaves as advised, or a good innoculation is created and administered we cannot hope to have an economic recovery without further, occasionally rather heavy, outbreaks of Covid.
10. Our leaders must explain this and get on with creating conditions that allow business recovery.