The Australian government has given the Australian economy a big blast, dedicating around $18 billion to propping it up throughout the onslaught from the coronavirus pandemic.
The stimulus plan involves loads of money for small to medium businesses, funds for apprentices and $750 payments to more than six million eligible Australians.
This stimulus is being compared to the one during the GFC, and not always kindly. As many people have pointed out, a $750 payment is not as much as Kevin Rudd cracked out during the Global Financial Crisis. Back then we had $900 payments kept the economy afloat, and the money flowed less to businesses and more to households.
But is it fair to compare?
In the GFC the problem was simple: a lack of confidence in the financial and economic systems. Money in our pockets helped restore that confidence. It was a serious problem, but simple.
This problem is more complicated. The virus is a very different enemy from a financial market collapse and we need to treat it differently.
HOW MUCH CONFIDENCE IS TOO MUCH?
The virus would like it if people felt inspired to go out to restaurants, to nightclubs and to supermarkets. It wants us to mix and mingle, to shake hands, to kiss, fly on planes, press up against each other in sweaty concert crowds. It wants us to touch elevator buttons and hold railings on buses.
That makes our situation vitally different to last time. The stimulus will be self-defeating if it leads to activity that makes the virus worse.
Australia needs to do two things at once: run the economy as best we can so we don’t all lose our jobs; and also keep the virus in check so we don’t overwhelm the health system and have grandparents dying in hospital corridors.
Is it possible? Writing in top medical journal the Lancet, experts gently suggested the goals of economic vibrancy and physical health are not compatible.
“Governments will not be able to minimise both deaths from coronavirus disease 2019 (COVID-19) and the economic impact of viral spread,” wrote Roy Anderson from the Department of Infectious Disease Epidemiology, Imperial College London, and his co-authors.
He makes a decent point there. China controlled the virus outbreak surprisingly swiftly, but it did it by pretty much turning off its whole economy. This graph from the RBA shows just how little was going on in China in the last month. The government focused intently on a lockdown.
So are we looking at the virus correctly?
We are, in part, treating this like an economic problem. Lots of headlines are about the stimulus or about the effect on the stock market.
But the core issue is not economic. It’s about a virus we’ve never seen before getting into human cells, taking them over, making our immune systems run amok, and killing some percentage of the people who contract it.
To fight the virus we probably need to do something a bit like China. And for a while, the economy needs to come second. Not a distant second, but second.
HOW TO DO BOTH
We must find ways to run the economy that are not face-to-face. We need a stimulus that converts us all into nerds and introverts.
I’m thinking about things like computer games, online shopping, remote working, and Slack channels. Such a thing wouldn’t have been possible at all 20 years ago. But now?
Luckily the last two decades years of technological development have made this more possible than ever. Anyone who can work remotely should do so to reduce the risk to the nurses and doctors, plumbers and delivery drivers who can’t.