Stimulus measures introduced by Prime Minister Scott Morrison are working but may need to be continued past September. (ABC News: Matt Roberts)
The mathematicians are at it again.
Given the circumstances, they’ve been relatively discreet. But the arguments that until now have been circling behind the scenes are beginning to bubble to the surface.
In raw numbers, it goes like this. So far, just over 100 Australians have lost their lives, most of them elderly and with other health issues.
On the other side of the ledger, the breathtaking economic loss is about $4 billion a week in lost productivity, federal and state stimulus packages of about $170 billion and Reserve Bank support of more than $100 billion.
The economy is in the midst of the greatest slowdown in a century with unemployment likely to remain at recession levels until at least the end of next year with this week’s GDP data likely to show our economy shrank in the three months to the end of March.
The health emergency, that included predictions that tens of thousands of Australians could lose their lives, never eventuated.
Apparently, according to these amateur actuaries, the risks were overblown and didn’t justify the enormous cost.
It is an argument so devoid of logic, it’s difficult to know where to begin.
There’s almost a sense of disappointment that more Australians haven’t died; that all that money has been spent for nothing.
It ignores the fact that we don’t exist in isolation, if you’ll pardon the pun.
Perhaps it is best to look at it from a different perspective.
Our sterling performance on health may have come at enormous cost.
But every other country, even those that bungled the health response such as China, Europe and America, has suffered a cataclysmic economic meltdown.
So has Sweden, which has adopted a business-as-usual approach.
Across the planet, almost 370,000 people have died, and the global economy has shuddered to a halt.
We could never have avoided a COVID-19 induced recession even if we had done nothing on the health front; kept our borders open and not enforced social distancing.
The costs ultimately would have been equally horrendous.
It’s just that far more Australians would have died and our health system would have been stretched beyond capacity.
From our perspective, that’s what you call a win.
What’s a life worth?
Most developed societies consider life to be priceless.
But health resources are scarce and expensive and decisions about how much to spend come down to what is called the Value of Preventing a Fatality.
Not everyone can be saved and decisions are made daily about how much to spend on health and where to spend it.
As distasteful as it is to put a number on a life, statisticians often arrive at around $4 million as an average.
A younger person is worth more because they have longer to live and have more to contribute.
Older people? Well, you get the picture.
But the cost of COVID-19 is not contained just in the brutal statistics of how many people have died.
It is a virus that mostly has afflicted the elderly and infirm, although large numbers of healthy young people have succumbed as well.
Others, however, have been indirectly impacted.
As health resources across the US, Europe, China and the UK were stretched, countless others died from other illnesses or accidents because doctors were deployed in the emergency.
Without the measures taken by the Federal Government, that could have been the case here too.
The stimulus worked, so what now?
The costs continue to mount.
While the supposed $60 billion accounting mistake technically should give the Federal Government more latitude, Prime Minister Scott Morrison until late last week was adamant all the employee payment subsidy and the doubling of unemployment benefits would cease on September 30.
It’s now becoming clear that’s no longer a viable option.
Withdrawing all stimulus — including free childcare, bank standstill agreements on mortgage repayments along with landlord forgiveness on rent — at the same time would inflict a major blow to the economy.
The Federal Government’s stimulus measures are working.
Research by economics consultancy AlphaBeta and credit check tracker illion, indicates that within weeks of the massive cash stimulus hitting the bank accounts of millions of unemployed Australians, almost half had been spent.
The bulk of that spending, which has helped keep consumption on track and enabled the economy to limp through the crisis, has been on necessities: food, clothing and housing.
But it’s also fuelled a second debate about the extent of the stimulus and rorting of the system.
Well-heeled barristers were plugging into the JobKeeper scheme. As were highly paid funds managers.
While those concerns are legitimate, they ignore the reason for the stimulus in the first place.
Cooked up in probably less than a fortnight, the whole idea behind the stimulus was to inject cash into the system.
Speed was of the essence. There were always going to be mistakes, and avenues for rorting were always going to be well explored.
The greater objective was keeping the economy afloat and the population housed and fed. By running the schemes through the Tax Office, anyone overpaid would face a tax bill down the track.
There’s a certain irony that the Coalition now finds itself defending its very own stimulus packages after sooling the tabloid press onto the Rudd and Gillard governments during the darkest days of the global financial crisis over precisely the same issues.
Back then, the criticism was that dead people were being paid.
Australians living overseas received cheques. In a crisis, there’s no time to iron out the bugs.
A cost or an investment?
Domestic restrictions are being lifted across the nation, but it could be quite some time before there is a resumption of normal international activity.
So, while we may see a partial recovery in hospitality, the hit to tourism will continue. When coupled with education, that’s our third biggest export industry.
Areas such as North Queensland that rely entirely on tourism have suffered close to 100 per cent unemployment.
Then there is construction. In addition to the broader economic downturn, the sudden loss of several hundred thousand migrants will hit the housing industry, particularly construction, hard.
The two sectors combined are looking at shedding around 800,000 jobs.
This was borne out in last week’s capital expenditure figures which not only show how much has been spent but the intentions for capital spending in the year ahead.
As this graph from investment bank Morgan Stanley shows, residential construction already was in decline nationally. The trend was particularly strong in NSW.
Construction was already slowing down before the coronavirus pandemic hit. (Supplied)
So, expect Mr Morrison in the next little while to announce added and targeted stimulus measures to support those sectors that take longer to recover.
Cue the Reserve Bank governor Philip Lowe last week.
While the Prime Minister has been banging on about the metaphorical road in, the bridge across and the road on the other side, the RBA chief has made it plain the Government should consider real roads and bridges as part of the recovery program.
Appearing before a Parliamentary hearing last week, Dr Lowe said with interest rates at rock bottom, it was up to the Federal Government to provide assistance.
With September 30 looming as, what he termed a “critical point”, the JobKeeper scheme may need to be extended.
On top of that, he suggested the Government consider longer term support measures such as infrastructure projects.
It’s a message he has been delivering for two years but which, until now, has fallen on deaf ears.
The cash splash and job support payments provided an anaesthetic. What’s required now is longer term therapy.
Given the enormous growth in our cities since the turn of the century, primarily due to immigration, these measures could help ease the choking congestion that have crimped productivity.
Infrastructure upgrades would also provide employment and add to growth, as well as better functioning cities and a more productive workforce.
Perhaps it should be seen as an investment rather than a cost.