Australia’s economy has been battered by the coronavirus, but the ruinous disease has left the country with a clean slate to build a stronger, fairer economy.
And if government takes the right steps now to reskill workers, support businesses and drive competition, the nation could exit the crisis stronger than ever, research from Deloitte Access Economics suggests.
The research outlines three possible ‘scenarios’ for Australia’s economic future – each one charting Australia’s return to normal based on how the coronavirus pandemic is managed.
Two of the three scenarios show Australia faces significant economic pain in the months and years ahead, with the worst outcome showing unemployment stuck at 9.4 per cent in 2022.
But modelling for the third – the ‘mild scenario’ – showed targeted reforms could keep a lid on unemployment and turbocharge the economic recovery. (Others disagree.)
“While Australia’s recovery remains in its very early stages, there are clear opportunities for the country,” the group’s lead partner for macroeconomic forecasting and policy Kristian Kolding said.
The pathway to return to normal is no snapback; and will take more than doing nothing.
“Reforming the economy to boost productivity and growth will get us back to normal quicker and allow us to do better than normal. That’s the right and responsible thing to do.”
Reforms have long been needed
Australia’s economy was already beginning to slow by the end of 2019, and GDP growth would have already turned negative if not for the boost it received from sizeable population growth over the year.
Deloitte’s modelling shows that a return to even that “anaemic” level of growth will not happen quickly under the current suite of policy settings.
But if the right changes are made, Mr Kolding and his team said Australia could not only accelerate that initial recovery, but improve its overall performance.
“Good, effective policy reforms and implementation means we can lift our ambitions to do better than just return to normal,” the report noted.
Deloitte’s researchers said government should strive to create a more equitable and sustainable economy built on “productivity, facilitating new business formation, having a compatible and incentivising taxation system, and spurring on entrepreneurship and innovation”.
Those types of changes (explored in more depth later) will also change the way Australians work.
This means we will need comprehensive reskilling programs to bring down unemployment and get workers back into jobs sooner.
What needs to change
Deloitte’s report identified a number of reforms that will help push the economy towards the ‘mild scenario’.
Several of these were required before the crisis, but now need to be implemented at an accelerated rate.
Foremost of these is the “digitisation” of Australia’s economy, the report said.
By incorporating artificial intelligence and data analytics software, businesses can become more efficient and insightful, creating better products and workplaces, the report said.
This will pose a challenge for some workers, though, and both government and employers must find ways to upskill workers for this process to be a success.
Shifting to green energy is another trend already under way that now provides a path forward for Australia’s economic recovery.
“In reducing emissions, and decarbonising the economy, Australia can grow local jobs and economic opportunities,” the report said.
Australia has great opportunities to lead the way to become a world-leading energy powerhouse, grow a world-leading green hydrogen industry, powered by our rapidly growing renewable energy sector.”
The report said government should also build more infrastructure, cut red tape and relax regulations for businesses, reform our health and social care systems, and have a smart immigration policy that creates jobs and boosts economic growth.
“Our biggest concerns lie in the crisis in investment and the importance of returning population growth, including immigration, to levels which can drive economic growth and jobs,” the researchers said.
“A focus on the skills, innovation, and the deep cultural links migrants bring will be important to underpin demand and supply in our economy for the future.”