Coronavirus: total economic shutdown not in anyone’s interest

In recent times Coatsworth has contradicted some of the alarmist predictions of ABC health reporter Norman Swan, who featured on Four Corners this week with a claim that Australia could end up like Italy. Unlike Swan, Coatsworth is an infectious diseases specialist.

No one knows the future development of any pandemic. This is true of what was called the Spanish flu (H1N1) in 1918-19. And it’s true of this pandemic, despite the development of modelling. A model only can be as good as the data fed into it. And, at the moment, information about novel coronavirus is fluid.

On the basis of current knowledge, Scott Morrison has been correct in attempting to keep as much of the Australian economy open as possible. The more of the economy that is closed down, the more difficult and more protracted will be the economic recovery.

Never before in Australian history has the government consciously closed down large sections of the economy. It’s true that the national cabinet — comprising leaders of the commonwealth, state and territory governments — has taken action broadly in line with that of other OECD nations. But there is a difference at the margins.

Some commentators (it is close to a universal view at the taxpayer-funded ABC) are advocating a total shutdown of the economy. This, presumably, would not affect some jobs in the public sector but it would destroy many of the remaining ones in the private sector.

The “lockdown now” view was heard loudly on the ABC’s Insiders program on Sunday. David Speers was in the presenter’s chair and the panel comprised Guardian Australia’s Lenore Taylor, the Australian National University’s Mark Kenny and the Herald Sun’s James Campbell. All are former or past journalists and, as far as I am aware, none has run a ­business.

At the invitation of Speers, Taylor was first off the rank declaring “it would be smart to err on the side of caution and dial the economy down further”. Then Kenny advocated the same outcome for the sake of “clarity”, meaning “people who immediately lose their jobs” would be subject to the same government-funded provisions as the people who already have lost employment. He argued that there was “an interesting confluence of both employees and employers actually calling for a shutdown”. Well there may be some, but this is hardly a loud voice.

Then it was Campbell’s turn. He maintained “there is an economic case for further shutdowns” since “businesses are in a worse and worse condition the longer trading goes on”. Campbell added: “If we think the train is going to the station marked complete shutdown, we should basically go there as quickly as possible.”

It was one of those oh-so-common ABC panel discussions where everyone agreed with everyone else and alternative views were not heard. What the Insiders panel, in their unanimity, failed to understand is that no one is keeping businesses open against their wishes. The real issue is whether as many businesses as possible should be allowed to trade if they are financially viable and fit within the guidelines for handling the pandemic.

Such businesses include construction, home renovations, retail, manufacturing, road building, mining, hairdressing and the like. Why should employers and employees in these areas lose their livelihoods because governments feel the need to respond to a trio sitting on a couch on a Sunday all agreeing with each other that what Australia needs in the crisis is a total shutdown. The Prime Minister is correct in saying that every employer who can employ people is involved in an essential industry.

In the late 1920s and 30s the burden of the economic crisis was borne to some extent by all Australians, in accordance with the concept of equality of sacrifice. This is documented by C.B. Schedvin in Australia and the Great Depression (1970). Starting just before the worst of the economic downturn and continuing on, there was a reduction in the basic wage of about 10 per cent and a further cut of about the same amount because of the reduction in the cost of living adjustments to the basic wage.

The rationale was that those in work — in both the private and public sector — were doing better than the jobless. In any event, the onset of deflation meant prices were falling along with wages and real wages held up relatively well. At the time, Australia had a centralised wage system and authorities could adjust income in a way that was less difficult than today. However, more needs to be done to bring about some degree of equality and sacrifice at a time of COVID-19.

At this stage, some members of the national cabinet are failing in the equality of sacrifice stakes.

On Wednesday, Brad Norington revealed in The Australian that the Queensland Labor government was going ahead with the proposal that its 224,000 public servants receive a 2.5 per cent pay rise along with a $1250 one-off cash payment. That night former Liberal National Party Queensland premier Campbell Newman appeared on Sky News’ The Bolt Report. He described the deal as “outrageous” and said Annastacia Palaszczuk was “continuing to level land tax on small and medium businesses, even if the business is effectively bankrupt due to the economic downturn” while increasing public service pay.

On Thursday Palaszczuk backed off to some extent by stating that the pay hikes had been “put on hold”. Whatever that may mean, it does not go close to amounting to an equality of sacrifice between public sector employees and private sector businesses and employees who are out of work through no fault of their own. Australia appears to be ahead in the field in medical response to the pandemic but not, at this stage, in the social response.