ActivePaper Archive Three steps can return us to normality - The Age, 5/25/2020

Three steps can return us to normality

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A huge Team Australia effort has supported people and businesses during the lockdown. But we are only at the end of the beginning. How well we manage the wind-down of these support programs will determine whether Australia has prevented or merely delayed mass bankruptcies and job losses.

Recessions gather pace like falling dominoes. When one person gets into financial trouble, their unpaid bills and lower spending spreads the economic pain to those around them. The purpose of government financial support is to shore up the first dominoes.

Huge government initiatives like JobKeeper and JobSeeker have been designed to keep people in work and ensure they have money in the bank to pay their bills.

Big business has also chipped in to prevent a collapse. The banks have allowed more than 703,000 people to defer loans worth $211 billion. Many telcos, energy companies and other utilities are offering payment extensions, waiving fees for late payments and providing discounts for people who lose their job. These business hardship measures are like a second household stimulus and they contribute billions of dollars to family budgets each month.

While it is still early days, this Team Australia effort has meant thousands of businesses have kept their doors open and millions of workers have retained their jobs. Real-time economic data from AlphaBeta (part of Accenture) and illion shows consumer spending has bounced back in the past week and confidence is starting to rise. But here’s the catch. All of these measures are temporary. Government financial assistance programs are scheduled to end. Banks will require repayments to recommence. Payment holidays will expire and bills will be due.

The economy could dive again unless we develop a plan to ease businesses and workers off government support and engineer a rebound in growth and jobs after the lockdown is over.

That plan must have three elements. First, we need to ensure the government support ends with a tapered decline rather than a sudden stop. This will mean ensuring government programs are staggered. It also means converting big programs like JobKeeper into a more targeted approach that extends support for the industries and regions for whom the crisis is likely to be protracted, such as international tourism.

Second, the government will have to replace the generous financial support with new programs to build activity and confidence in the economy. Jobs and spending won’t return automatically once the lockdown ends. At the end of JobKeeper, businesses will take back their workers only if they believe there is enough demand in the economy to keep those workers busy.

Third, the government will need to reform and pivot the economy for future growth. Even before the crisis, Australia was suffering from a trifecta of weak wages, productivity and GDP growth. And the crisis has accelerated the preexisting shifts towards automation, online commerce and digital consumption. We will need to reform our economy to equip our people with the skills for the future and create the conditions for business investment, innovation and growth.

Governments and businesses have supported Australia through COVID-19. Now the challenge is to turn off the tap without letting the economy sink. Creating an effective plan to restart growth won’t be cheap, but luckily the government just found $60 billion to help pay the bill.

Dr Andrew Charlton is founder of AlphaBeta (part of Accenture) and was economic adviser to prime minister Kevin Rudd during the global financial crisis in 2008-09.