\ CfS Statement: From lockdown to recovery – Committee For Sydney

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CfS Statement: From lockdown to recovery

April 9, 2020

The question on everyone’s mind is: how long is this going to last? And what comes after? What we all want is to move on from lockdown and start the recovery, but it’s becoming clear that there is a phase in between – call it the transition phase – when Sydney will be partly open, partly closed.

The choices we make during that transition phase will dictate how big impacts of the pandemic turn out to be. Here’s our thinking about the phases of our response to Covid-19.

Phase 1: Lockdown

The core focus of Phase 1, where we currently sit, is on public health, trying to stop the community transmission as quickly as possible. Overall, Australia has handled this better than most countries. Yes, there have been some gaps, including a lack of transparency in public health modelling and some confusing isolation rules. But overall, people trust the government to deliver this phase, with 80% of Australians agreeing the rules are fair and reasonable, and 86% staying home more than normal. This shows up in the results of Australia succeeding in flattening the curve – so far.

On the economic front, this phase has been described as “hibernation” – a new term for economics. The goal is not so much fiscal stimulus because people literally cannot go to work, but rather social insurance that replaces income for people via temporary programs, JobSeeker and JobKeeper.

Fundamentally, lock-down is a way to buy time for the public health capabilities to ramp up and scientists to move towards a vaccine. But it can’t go on forever and we will need to transition to a new phase before there is a cure.

Phase 2: Transition

After the lockdown ends, but before it’s safe to go about business as usual, is an awkward, in-between phase. Because COVID-19 can surge back at any time, we can’t turn the economy back on entirely. It’s still not going to be safe to gather in large numbers. Some businesses will be able to reopen, some not. And we may have to go back into lockdown if the infection rate spikes. This phase ends when there is a vaccine in mass production or population-level immunity, whichever comes first.

Many industries will not be back during this phase. Global travel will remain largely closed. Foreign students will be slow to come back. It seems unlikely that bars, restaurants, concerts, or sporting events – the entire “experience sector” – can function as it did before the crisis.

Public transport has maintained service so far, but ridership is dramatically down. Will people come back? Will they be allowed to? In Shenzhen, already in the transition phase, ridership is capped at 50% per bus. As a first step, Sydney will need a massive acceleration of the bicycle network, to allow people another way to get around with some physical distancing.

Government spending can help during this phase – much better to pay people to do socially important things than to pay them to stay home. Infrastructure projects can be accelerated.

The most important thing Government can do to open as much of the economy as possible is to provide clarity about which industries will be allowed to re-open prior to a vaccine, and to provide codes of conduct for each industry about how to operate safely during the pandemic. This will require an institutional capacity to communicate, train, monitor, and enforce. The more successful Government is at creating this system, the more successfully we will navigate the transition.

If the public health system is able to put in place mass testing of the population, ideally repeatedly, we can open things up more. We may even get to the point where we have “immunity passports” that allow people who test positive for the antibodies to go back to work. If we can convince Australians to adopt new hygienic habits, even better.

Phase 3: Recovery

True recovery starts when there is a vaccine or population-level immunity, whichever comes first. This is when we really get to remove most of the restrictions on interacting and power the economy back to life.

Continued investment in major infrastructure projects will be essential to restore aggregate demand and get people back to work. Funding will be difficult because Government will already have gone into debt to fund the two previous phases, but maintaining a pipeline of work will give business confidence and help keep people in employment.

Many businesses will have gone bankrupt. Working through those bankruptcies and making it as easy as possible to start or restart companies will be a major focus.

Some industries will be slow to recover or may never regain their former size. Sector specific strategies for hard-hit industries like tourism and universities will be needed.

At the same time, other industries will come back stronger, and new ones will be created. There will be enormous opportunities, but also enormous social dislocation. Many people will end up moving into new careers. Australia’s economy, after 28 years of uninterrupted growth, will be changed permanently by recession.

The most important idea here is to enable new companies, and new industries to be created and be successful. For the most part we cannot and should not try to predict which industries they will be in – although there may be certain sectors where Government will want to “place bets” via industrial policy.

To enable this future economy to emerge, Commonwealth Government needs to act to fix some of the underlying policy settings: expanding the employee share scheme and early stage innovation tax exemptions; expanding eligibility for R&D tax incentives; and so on. These reforms and others have in many cases been suggested for years but were considered too difficult. Now they are necessary.

Phase 4: The New Normal

After the recovery, we will begin to figure out how this experience has changed Sydney and the world.

What will be the long-term impact on Australia’s public health system and how will it cope with infectious diseases going forward?

How will the pandemic reshape city life? How can high streets come back after the recession? Will design for social distancing become a permanent feature of city spaces or not? Will there be a mode shift away from buses and trains?

Will people fly less and travel less? Will business and leisure travel to Australia come back to its previous levels or not? If not, what does this mean for an island nation that works hard to stay connected to the world and relies on visitors for so much of its national income?

And as global companies seek to diversify the location of their manufacturing operations, can Australia gain market share? Will this end up fuelling advanced manufacturing in Western Sydney as we hope?

Globally, will a new trade network emerge with a ‘clean bloc’ of countries willing to open trade and migration amongst themselves?

We’ll be looking at these and other questions over the coming months.

From lockdown to recovery

Sitting at home today, wondering how long this crisis will last, it’s clear that we are at the start of a long journey. Each stage presents us with distinct challenges. We are focused now on the transition and laying the groundwork for the recovery. And we are starting to think about how this experience will change Sydney for the long run.

During the coming days and weeks, if you have thoughts about what we should be doing to keep the economy moving while we ride this out, and lay the foundations for our recovery, please reach out to me: gabriel@sydney.org.au.

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