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The debate about when Australia should emerge from lockdown is currently dominated by advice from health experts, but the mounting economic costs of lockdowns will and should play an increasingly important role.
At the moment, there is a strong consensus to maintain lockdowns to buy time until a sufficient share of the population is vaccinated. The alternative would be an overwhelmed hospital system and a much higher death toll because the moderately sick would not receive essential care.
Treasurer Josh Frydenberg and Prime Minister Scott Morrison, considering human and economic impacts of the pandemic.Credit:Alex Ellinghausen
Yet once Australia’s vaccination rate rises closer to the levels of those in Europe and the United States, an even more difficult debate must begin about how quickly to relax restrictions.
The federal government has asked states to implement a plan endorsed by the national cabinet and underpinned by modelling by the Doherty Institute.
The model forecasts that after 70 or 80 per cent of the eligible population is vaccinated, we should be able to reopen slowly without overwhelming the hospital system and with only a modest death toll.
Many people question the Doherty model and argue the threshold for reopening should be higher or hospitals will be swamped, as is occurring in many states in the US.
Prime Minister Scott Morrison has suggested state premiers who refuse to open at 80 per cent vaccination rates are “croods”, a reference to a 2013 animated film about cavemen who are too scared to come out of their safe hole in the ground.
Every jurisdiction in the world is struggling with this difficult debate. There is no right answer. It will involve sophisticated modelling and difficult moral choices about how many deaths we are willing to accept.
The economic damage to individuals, businesses and government finances as a result of prolonging lockdown must also figure in the debate.
At some point, the lives saved by lockdowns will be fewer than the lives destroyed by all the social ills that come with economic pain.
The economic reckoning has been mitigated by federal disaster payments to individuals and state-based support for businesses, but many are falling between the cracks.
Many of the costs of lockdowns have not yet shown up in the economic data but retail sales fell 7 per cent in July and “hours worked” fell sharply in NSW. Many economists are predicting the economy will contract this quarter and unemployment will rise.
The recovery is likely to be slower than after the lockdowns last year because the national plan foresees restrictions being maintained for some time. This time, we will be “living with COVID-19”, unlike last year, when it was all but eradicated.
Calculating the economic benefit of easing restrictions is very different for Western Australia, Tasmania, Queensland and South Australia – none of whom are currently in lockdown – compared to Victoria and NSW, where people are champing at the bit to open up.
NSW will not suffer if it opens its borders to WA but if WA opens its borders it risks a significant outbreak and reimposition of restrictions. It is understandable if they are more cautious about opening their borders.
The good news is that the rapid pace of the vaccination program offers encouragement that all states will feel comfortable reopening their borders in a reasonable time frame.
The economic pressure for them to reopen will grow with time. Queensland’s tourism industry, for instance, will not recover until borders reopen.
It might seem insensitive to even mention the economy when talking about human life, but the high costs of lockdowns must be placed in the balance in deciding when to start relaxing restrictions.
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