COVID19: Getting Australia Safely Back to Work
NEW REPORT; THE COSTS OF LOCKDOWN RESTRICTIONS ARE LARGER THAN THE BENEFITS. WE MUST FIND WAYS TO LIVE WITH THE VIRUS WHILE RESUMING NEAR-NORMAL BUSINESS ACTIVITIES. INTRODUCTION BY NICK CATER
When governments become absorbed in crisis management, it pays to step back from the daily news cycle and look at the bigger picture. This report attempts to do just that.
It was completed before the recent spike in Victorian COVID-19 cases during a period when the incidence of community transmission in Australia was negligible. The outbreak reinforces the report’s underlying assumption that the virus cannot be eradicated by social distancing measures, however severe they are enforced.
There are good reasons, however, to challenge the scale of the Victorian Government’s response. The risks from the virus are significantly less than the best advice led us to expect in March at the acceleration phase of the first outbreak.
The mortality rate is considerably lower than forecast. Our health system is far better prepared and equipped. Social distancing rules are well understood and widely practiced. Those most at risk from the virus are easily identified and protected.
What is more, the Victorian outbreak is extremely small by world standards. On July 12, the death toll in Victoria from COVID-19 stood at 23. If the death rate from COVID-19 in the UK had applied in Victoria, more that 4,200 would have lost their lives.
Australia has so far withstood the COVID-19 pandemic better than almost any other developed nation. It did so be taking precise action at an early stage of the contagion.
Having been spared from the worst of the pandemic, we now have the opportunity to spare our economy from the worst of a global recession by swiftly removing restrictions on economic activity and reinstating core freedoms and rights, temporarily suspended in the face of a true clinical emergency.
In March the Menzies Research Centre commissioned a team led by Professor Henry Ergas to examine the benefits and costs of the measures available to control the spread of COVID-19.
They find that the strong measures introduced in late March and early April were a prudent response to the apparent threats at a time of limited information. The best expert advice at the time pointed to the loss of up to 150,000 lives if business was to continue as normal.
Those early predictions proved to be wildly inaccurate, however. The actual death toll is lower by a factor of 140. Even if the number of deaths per million in Australia had matched those in Belgium, which has the highest date rate in the world, the total number of deaths would be fewer that 23,000.
Over the course of the last three months the risk has reduced dramatically while the capacity of our health services to handle outbreaks has considerably increased. Additionally, we now know a lot more about the nature and extent of the COVID-19 threat, both clinical and economic. At the same time though, cost of restrictions on economic and social activity has increased, considerably altering the cost-benefit ratio of pursuing the lock-down policy.
Ergas and Branigan’s recommendation is that the changed situation demands a change in public policy:
‘… the greatest public policy failure would be to retain the world-view of January-April 2020 when there was still very little information about how the global pandemic would play out, including the likely Australian death toll, after new information has become available.’
The steps to open up the economy and reinstate core freedoms and rights, cherished by all Australians, have been pursued by the federal government with the broad support of the states. These actions recognise this changed environment. Yet some state administrations remain unreasonably cautious. The closure of state borders is the most egregious example of a costly policy with benefits that are marginal at best.
What is more, those costs are borne unevenly, falling heavily on sectors like hospitality and tourism while on others barely at all. For some, the cost of pursuing a safety-first strategy is the loss of a job or the collapse of a business. For others there is no obvious cost at all. And at the core of it is, in some instances, an indefensible curtailment of liberties and lifestyles.
As this report notes, however, the long-term costs of reduced economic activity have barely been considered. The cost of measures that prolong the recession or accumulate large amounts of public debt will be paid for over the life of a generation or longer.
The removal of restrictions carries some risk to public health. Steps can be taken to mitigate these, however, for example through better protecting the most vulnerable Australians, the over 70s in particular. We can now be confident that the risks are considerably lower than they were two months ago and our state of preparedness is much higher.
The clear message from this report is that the policy response should take account of the cost of restrictions as well as the benefit. The costs of lock-down measures will be higher than they were in March, while the benefits will be lower now that the true infection rates of COVID-19 are known.
We cannot afford to wait for the virus to be eliminated entirely, a goal that is unachievable without a medical breakthrough. The imperative of resuming close-to-normal economic activity to save jobs and businesses is too strong.
The goal must be mitigation, not eradication. We must remove the restrictions on economic activity with clear guidance to encourage business to operate in a COVID-safe manner. The chief caveat that our international borders must be closed to passenger arrivals for the foreseeable future.
Further spikes in community transmission will be almost inevitable. But we can draw confidence from two national assets: our tolerant liberal democracy and our world-class health system. The value of the first is too infrequently considered. As Ergas and Branigan write:
‘Our tolerant liberal democracy is, perhaps, the more important of these two assets. Citizens have, voluntarily, temporarily and incredibly, allowed the state extreme and at time coercive control over their lives. Ultimately in our democracy however, protection from this disease must be by consent, and there is clearly a time limit on that consent.’
Australia’s achievements in containing the virus with a swift entry to lockdown and the clear consent of citizens now affords us the opportunity of a relatively swift recovery. It is a luxury available to only few other nations. We cannot afford to squander it, nor to let dangerous economic and control precedents be set for future events without profound interrogation.
Nick Cater
Executive Director
Menzies Research Centre
26 June 2020