Economic and Political Outlook 2021
Check out CEDA's new report featuring insights from economists and political commentators on the year ahead.
A debate is currently raging in Australia and globally about the economic costs of halting the COVID-19 pandemic and whether the increasingly restrictive actions of government are worth the potential health benefits they achieve. However, from the perspective of health economists, this crisis has further exposed the inextricable links between health and the economy.
Deep divisions of opinion are now becoming widely publicised. President Donald Trump’s recently tweeted that ‘we cannot let the cure be worse than the problem itself’ and announced that his country ‘could be open for business by Easter’, clearly signaling an economic crisis first, health risk second perspective. Contrast this with Prime Minister Scott Morrison’s announcement following National Cabinet on Friday that he plans to support Australian businesses to ‘hibernate’ through the winter within days.
An IPSOS survey of 10,000 adults conducted between 12-14 March across 12 countries found that concerns about employment and businesses have rapidly increased since February, particularly in countries with the largest number of cases including Italy, France, the UK and the US. For the citizens of these countries, concerns about the economic costs associated with COVID-19 appear to have overtaken the concerns relating to the devastating health consequences of the virus itself.
A reasoned commentary by the economist Henry Ergas published in The Australian on 27 March urged federal and state governments not to ignore the economic costs of increasingly restrictive policy decisions in response to the spread of COVID-19.
Health economists are very familiar with the need to account for these considerations and to carefully weigh up the costs and consequences of alternative courses of action. As a health economist I have spent the majority of my career doing just that, working closely with health professionals on the ground in Australia and internationally to evaluate the costs and consequences of different interventions and supporting decision-making at all levels of the health system about how to best allocate budgets to achieve the greatest health benefits.
What makes the COVID-19 crisis so different and why it is so difficult for health economists and others to provide reasoned policy advice is the scale of its rapid advance across countries all over the globe and its consequent infiltration into all aspects of human society.
At the moment there is no effective treatment available to halt the spread of COVID-19. We are faced with a fast moving, complex and uncertain situation. While a suite of policies have already been rapidly introduced by federal and state governments, new potential policy options are being considered on a daily basis in an effort to address the crisis caused by COVID-19.
We do not have the luxury of time to generate the evidence needed to carefully and reliably inform economic cost and health benefit equations.
This does not mean, however, that health economic principles should not guide the difficult choices to be made in the days and weeks ahead, such as who should be prioritised for testing and who gets access to ventilation facilities if, on occasion, we do not have enough.
We can also learn from the experiences of other countries including China, Singapore and Taiwan who have successfully contained the spread of the virus and flattened the curve in a relatively short period of time by combining mass-testing, technology (including social media campaigns) and social distancing. Business and economic commentators in China are now starting to report a degree of normalisation with workers returning to employment and some sectors reportedly operating at 70-80 per cent capacity by the middle of March.
Some early positive evidence suggests that the social distancing measures recently introduced in Australia are starting to reduce the incidence of new cases. The Federal Government has signaled that further restrictions to daily life may be necessary to reduce the increasing burden upon our health system and slow the spread of the virus.
In practice, to pitch the economic costs and potential health benefits associated with increasingly restrictive actions of government against each other as representing two competing priorities is to simplify a complex problem. The reality is that the two are inextricably linked; without a healthy workforce there can be no economic productivity. In this regard, the sooner that the COVID-19 health crisis is brought under control, the sooner that the economic recovery can begin.