Finance Finance News Risk versus reward: Australia’s coronavirus strategy divides the country

Risk versus reward: Australia’s coronavirus strategy divides the country

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Australia’s national cabinet should pursue coronavirus elimination over its current suppression strategy, economists have argued.

But Prime Minister Scott Morrison calls it a “very risky” play and potentially an “illusion”.

Mr Morrison described elimination as “unsustainable” on Wednesday, before telling reporters on Thursday that such a strategy would cripple the economy.

“You’re talking about hundreds of thousands more people unemployed for a start and other businesses closing and livelihoods destroyed,” Mr Morrison told a press conference.

The national cabinet had always pursued “aggressive suppression”, he said, but the costs of total elimination would outweigh the benefits.

He claimed such a strategy would involve stopping shipping, imports and exports, and preventing people returning to Australia.

“All you need is one break and it rushes through your community very quickly because people become even more complacent,” Mr Morrison said.

“You can’t mortgage off your economy for what would prove to be a very illusory goal by that process.

“That is certainly the health advice that I have and it’s certainly also the economic advice I have.”

But the Grattan Institute’s Dr Stephen Duckett disagreed.

He told The New Daily a “go hard, go early” strategy is “more economically rational” than dealing with ongoing uncertainty.

Six states and territories have effectively succeeded in following the New Zealand model, he said, and a nationwide elimination strategy could restore economic activity to near pre-pandemic levels.

Although pursuing an elimination strategy would be risky, Dr Duckett said Western Australia was already on the precipice of restoring its local economy, because it hadn’t registered a locally acquired case since April.

He said the long-term costs of suppression, due to ongoing uncertainty and disruptions, were greater than the short-term costs of a short and severe lockdown.

“This current ‘yo-yoing’ strategy means the virus will circulate through the community for a long time with inevitable flare-ups that, if lucky, would be controlled with contact tracing and local lockdowns,” Dr Duckett said.

Arguing for elimination versus suppression is not simply about health versus economics, you’re considering long-term risks versus short-term benefits.”

University of New South Wales economics professor Richard Holden agreed, telling The New Daily a “false dichotomy” has cast doubt over the economic costs of eliminating the coronavirus.

“There’s been profound confusion about the difference between the economic cost of the virus and the incremental economic cost in the short term of the lockdown,” Professor Holden said.

Eliminating coronavirus across the country could boost consumer and business confidence. Photo: Getty

“Treasury’s numbers, which were hastily put together to illustrate the week-by-week cost of the lockdown, is not just the cost of the lockdown – it’s the cost of the virus, plus the lockdown.”

Professor Holden said regardless of the path Australia pursues, fiscal stimulus including JobKeeper would have to be extended – but the certainty of diminished case numbers would bolster consumer and business confidence.

A short, sharp government co-ordinated lockdown to get things under control is actually beneficial for the economy,” he said.

Research from the University of Chicago released last month found that consumers’ fear of contracting coronavirus, not government-ordered lockdowns, could be behind the biggest falls in economic activity.

Economists Austan Goolsbee and Chad Syverson compared foot traffic between cities with differing levels of coronavirus restrictions and found foot traffic in locked-down cities fell 60 per cent.

But the shutdown orders only explained less than a 10th of that decline, they argue.

“We estimate the vast majority of this drop is due to individuals’ voluntary decisions to disengage from commerce rather than government-imposed restrictions on activity,” they wrote.

Here’s what an elimination strategy could look like

Amid a second Victorian wave that has resulted in more than 2100 active cases, University of Queensland virology expert Associate Professor Ian Mackay said elimination is still within Australia’s grasp.

“A recurring return to lockdown would be demoralising for hard-working people trying to stop it – and that will lead to more economic damage, mental health damage, and community willingness to comply with governments would be slashed,” Associate Professor Mackay told The New Daily. 

He said an elimination strategy would require governments to engage in a widespread campaign that clearly explains the benefits of eliminating the presence of the virus in the community.

“If New Zealand can do it, so can Australia,” Associate Professor Mackay said.

“We should be ramping up messaging about how to prevent infections – including hand washing, using masks and physical distancing – protecting vulnerable populations in high-density areas, and focusing on protecting people that have to go out and work, not just the medical heroes.”

Plenty of opposition to elimination proposals

In spite of renewed calls for elimination, Australian employer association Ai Group argues any change in strategy would fundamentally “tank the economy”.

“Pursuing an elimination strategy would require us to close ourselves off from the rest of the world indefinitely and it would require draconian restrictions on Australian citizens and businesses,” Ai Group chief executive Innes Willox said.

“Imposing the costs of an elimination strategy on top of a winding back of fiscal stimulus would sap businesses confidence.”

A Department of Health spokesperson told The New Daily on Wednesday that “true elimination [of coronavirus] in Australia is unrealistic in the absence of a vaccine”.

“We have pursued an aggressive suppression strategy with knowledge this will lead to periods of elimination in parts of the country,” the spokesperson said.

NSW Premier Gladys Berejiklian rejected the elimination strategy on the ABC’s 7.30, declaring the state cannot afford to “lock down, reopen and lock down again”.

“As much as we’d love to have elimination … it’s not going to happen in New South Wales,” Ms Berejiklian told viewers.

But Victorian chief health officer Brett Sutton said elimination would be “worthy of consideration” once the state’s outbreak has been brought under control.