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Economy

State of the Nation 2021 – Treasurer Josh Frydenberg highlights the long-term economic effects of COVID-19

Australia has “remarkably dodged a bullet” on the economic impacts of COVID-19, but the economy will almost certainly look different on the other side of the pandemic, Treasurer Josh Frydenberg told an audience at CEDA’s 2021 State of the Nation forum.
 

The Treasurer said the rapid adoption of technology, increasing migration to regional areas and increased scrutiny of supply chains would be some of the lasting impacts of the pandemic. 

Mr Frydenberg emphasised the strength of the Australian economy through the pandemic, comparing it favourably with other advanced economies.

“At the start of the pandemic, Treasury told me that unemployment could reach as high as 15 per cent and the economy could contract by more than 20 per cent,” he said.

“They feared that the combination of this contraction in economic growth as well the rise in unemployment would have a long-term scarring impact on the Australian economy.” 

He credited the “unprecedented” economic support rolled out during the pandemic with Australia’s relative economic stability, pointing to recent positive jobs figures that showed Australia’s employment market was now stronger than before the pandemic.  

“It has been a very tumultuous period of the past 18 months – but it was also a time when the country came together and I think Australia has performed incredibly well,” Mr Frydenberg said. 

Energy “the most vexed policy area”

When asked about resistance to the clean energy transition in parts of the political community, the Treasurer reflected on his time as Energy Minister. 

“Of all the policy areas I’ve worked, in energy has been the most vexed, because it has been subject to cultural battles rather than economics, engineering and the environment,” he said.

“You are solving for three things, lower emissions, lower prices and ultimately a stable energy grid in a period of rapid change.”

He also addressed criticism of the Federal Government’s decision to support a new gas-fired power station in New South Wales. 

“Our focus as the energy system transitions is to try and keep it stable,” Mr Frydenberg said.

“Having been the Energy Minister during the closure of Hazelwood [power station] and seeing the massive spike in the wholesale price, we didn’t want to leave it to chance when Liddell closes in NSW to see a repeat of that experience.” 

Speaking to why the government has been reluctant to join other nations in committing to a net-zero emissions target by 2050, the Treasurer emphasised the importance of “spelling out the cost or program to get there”.    

“The public don’t disagree with the notion of reducing emissions over time, people have bought into that… but the public want to know what does it mean for them,” he said. 

“A lot of these countries that have committed to net-zero 2050 have not set out a plan to get there. This is not something our government has done because when we make a commitment, we try to back it up with a plan.”