Coronavirus: We are not fighting COVID-19 but staging a skilful retreat

Australia's economic response has been modelled on what Labor, under Kevin Rudd and Wayne Swan, did with the global economic crisis of 2007-08.

Treasury and our other economic institutions had war-gamed what might happen if the world bond market, swollen in particular with dodgy American real estate securities, went belly up. The fear was of a sharp contraction to the Australian economy; in effect a seizing up of the engines from a lack of liquidity.

The advice from Treasury was to pump money quickly into the economy, focusing on households and promoting investment. The strategy was a great success, even if the then opposition was critical of the volume of spending, and even if it pretended that Australia's success in surviving the crisis owed rather more to China's fiscal responses than to our own.

The Rudd-Swan strategy was being derided as late at last week. We can all smirk at how closely the Coalition government's belated stimulus matches the one it so attacked.

Both were intended to do a similar sort of job, but it may well prove that the differences between the current crisis and that faced by Rudd are just as significant as the similarities.

Both involved a developing paralysis of the world economy, but, though Australia could not completely insulate itself from the GFC, its financial institutions were not as caught in the global fallout as those of most of the rest of the world. Our banks, in particular, had remained sensibly capitalised, and had not gone aggressively into American real estate.

READ MORE:

The government took measures to reinforce public confidence in our banks, and its handouts and spending of about $10 billion was successful in keeping retail demand up, in and dealing with local areas of unemployment until world economic recovery began.

A criticism was that some programs particularly with the libraries and school halls took time to swing into action and might have been scaled back when it was clear that the medicine was working. Neither this, nor the roof insulation program, were sinks of profligacy, waste, incompetence, and, in the case of the pink batts, industrial manslaughter, as the Opposition charged and, as to a degree, many in the population now believe.

But this is rather more a measure of Labor's strange unwillingness then to defend itself from criticism and a sustained media campaign, or to promote how its rescue strategy had lasting positive results for households and local communities.

This time about, the fresh stress on the economy is from a different sort of international shutdown. It has come from closed borders, from an international collapse in tourism, from closures of shops, public places and entertainments and places of public congregation.

In Australia, it has had dramatic effects on our sale of educational services to Chinese students, particularly at universities. But it has also disrupted export sales of minerals and agricultural products.

For other nations, quarantine zones, imposed from within or without, have virtually stopped industry and commerce. China, where the Coronavirus seems to have originated, has taken ages to gear up again, and manufacturing activity may still be at only 50 per cent of where it was five months ago. Because our economy has been so closely aligned with Chinese growth, we are already experiencing the slow down.

But it may get worse before it gets better. South Korea, Japan, Iran and Italy are already seriously affected, but a further drop in world growth and trade is inevitable as COVID-19 spreads out in the European and American populations.

The federal stimulus money is well directed towards holding up domestic growth. On this, moreover, it is joined with money going into recovery (but not reconstruction) after the disastrous bushfires, and even some of the aftermath of drought, now largely broken. The disadvantage and disruption among our trading partners may even give entrepreneurs new opportunities in the marketplace.

But Australia's wealth and growth are very much tied into world economic activity. It is pretty much beyond Australia's own capacity to get the international engines humming again, let alone at the rates that have sustained our growth. China may be back in the marketplace sooner than some people expect, but its demand for Australian iron ore and coal may be at considerably lower levels until demand for Chinese goods increases in Europe and America. In most of those nations, the threat from COVID-19 is certain, but still rather more potential than being realised. As is the situation here in Australia.

Most people expect that the pandemic will have done its worst by the end of 2021. It will probably still be present in most countries, but rather more as a smouldering log than as an active fire.

Before that, however, it will have caused enormous social and economic disruption. Restoring economic activity and trade after a credit crisis might be quicker and easier than after the damage caused by disease. Australia may be able to keep its own pulse running, but find itself having little power to effect recovery, even among key trading partners.

If that is the case, Australians should prepare themselves for explanations of their difficulties coming from Scott Morrison, Josh Frydenberg and Mathias Cormann, sounding suspiciously like the excuses they derided from Wayne Swan, Julia Gillard and Kevin Rudd.

Labor could almost borrow its jeering script from the lines prepared for Joe Hockey and Tony Abbott by Peta Credlin. Spending blowout? Letting the one-off stimulus migrate into structural deficits? An ever prospective, never achieved budget surplus? A collapse in revenue? A further blowout in national debt?

All, of course, unexpected and unable to be planned for? But if Labor was to be accorded no excuses with a similarly unexpected GFC, why should the Coalition, who ever claim themselves to be the better economic managers, get any leeway?

READ MORE:

The public will probably be more forgiving if things go awry in managing the COVID-19 epidemic than they will be in managing its economic fallout. It is, after all, novel, and the management has been fairly competent so far, even if, in my view, there has been too much consideration given to extreme measures, including school, street and arena closures.

There's also too much talk of deploying Border Force not as a passive agent of quarantine on the perimeter, but as some sort of armed militia trying to push, or move, people around inside the country itself.

This is not leadership stuff, whether from the medical establishment or governments. But it fits some notions that because COVID-19 is a threat to the nation's security, it must be attacked by guns, intelligence, coercion, retired cops of no great distinction and the Department of Home Affairs.

The language of war is particularly ill-adapted for local, national and international efforts to deal with epidemic disease, the more so when it is clothed with references to the foreign origins of the horrible virus, and the need to defeat it. That's one of a good many reasons why doctors sighed, and stock markets crashed, when President Donald Trump addressed the nation with his response to the developing COVID-19 pandemic.

Australia is one of a number of countries that has had a more considered and calm response, driven more by epidemiology than by politics. But while Prime Minister Scott Morrison deserves some credit for this, he cannot smirk too much, because the fate of Australians at risk, and of the world pandemic, will still be governed as much by what happens in America, or Europe, or soon, perhaps Africa or South East Asia and by anything Australia is able to achieve over the next year.

Australia, as an island, has more capacity than most to attempt controls on the entry of those carrying the virus, but even then, such controls will eventually fail.

Even in metaphor, one does not defeat an epidemic disease, least of all in the short to medium term. Rather one manoeuvres in retreat to buy space and time so as to minimise the size and nature of the inevitably extending grip of the disease upon the population.

Time to prepare with screening devices, so that those in contact with the virus can be identified and efforts made to reduce the risk of transmission into the general population. Time to gain understanding of the virus and its modes of transmission, so that strategies for containing it, and for treatment of the victims, can be developed. Time, perhaps, for developing an effective vaccine so that those most at risk - in this case older people, particularly with compromised respiratory systems - can be protected. Time perhaps for an epidemic to lose some of its virulence, whether because of the development of resistance, or mutation, or a weakening of infectivity with each succeeding transmission.

And time as well to slow the rate at which the virus - and the illnesses, sometimes fatal, that it causes - spreads into the general population. In almost all countries of the world, including Australia, it is by now virtually inevitable that the virus will sooner or later jump the quarantine and containment lines, and that it will be virtually impossible to identify and isolate those carrying, and spreading and shedding, the virus.

Many of those with the virus will have no obvious symptoms, though some may develop them a few days after infection. One can slow things by trying to reduce the opportunities for people to pass on the virus to others for example by trying to avoid large gatherings, encouraging social distance and frequent hand-washing. Or, as in Italy, closing down most of the shops, other than supermarkets, and virtually closing down the tourist industry.

But whether in Italy or Australia, Peru or Pakistan, the likelihood is that more than half the population will have been exposed to the virus by the end of next year. In some places, quite possibly including the United States, it will be even earlier.

Some might think that if exposure is inevitable, it would be better that a community accept the virtual certainty of near universal exposure and get it over with. But this runs the risk of overwhelming public health facilities with very sick people, reducing the quality of care able to be given. It is better to attempt to contain the spread of the virus for as long as possible, even as one knows that the barriers will eventually fail and nearly everyone will be exposed. That way, the call on the system for hospital beds, for doctors, nurses and other health professionals, will be spread over time and within the resources which are available.

In the meantime, of course, countries without the resources, the facilities or the health professionals to deal with severe cases will face higher levels of infection, and, probably higher death rates. T

hose who have pretended that the epidemic has largely passed them by such as Indonesia and those who have very little idea of how far the disease has penetrated into their area, and very little idea of what to do about it will probably be in crisis more quickly.

Nations such as the US, which took some action but did not use the lead-time they were given, will probably end up with higher rates of infection and higher rates of death. The US may be repelling some risks by border controls, but has been woefully negligent in failing to screen at-risk individuals. The Trump administration has also run down some of its once excellent, indeed world-leading, research centres. The US already has a two-tier health system: when the disease takes hold in the general population, many of its facilities will be swamped, with only the wealthy able to be sure of proper treatment.

Trump and the Republican Party have been trying, if without all of the success they wanted, to dismantle Obamacare, at best an inadequate safety net falling well below the standards and coverage in socialised health systems in virtually all first world countries.

They wasted time ridiculing the idea that Coronavirus was much of a threat, insisting that it was no more than an influenza. They also accused Democrats of creating false news and spreading hysterical alarm and despondency about the threat. Since then, even Trump has recognised a crisis, and is pretending that he has been masterful in fighting it.

Many Trump supporters find it hard to blame him for anything, but some of his key constituents are particularly vulnerable to pandemic COVID-19. While I expect that Trump will be re-elected, the health impact of the pandemic may prove the event most likely to change the politics of the November presidential election.

We have removed our paywall from our stories about the coronavirus. This is a rapidly changing situation and we want to make sure our readers are as informed as possible. If you would like to support our journalists you can subscribe here.