Economists have warned Prime Minister Scott Morrison against winding back social distancing measures too early despite the hit to the economy.
In a letter addressed to Mr Morrison and members of the National Cabinet, 35 of Australia’s most prominent economists warn him of the risks of relaxing restrictions prematurely including the possibility of a “second-wave outbreak” that would be extremely damaging to the economy.
It comes as the Grattan Institute released a new report predicting Australia’s jobless rate could rise as high as 16 per cent, despite $130 billion in wage subsidies from the JobKeeper program.
“Some commentators have expressed the view that there is a trade-off between the public health and economic aspects of the crisis,” the letter states.
“We, as economists, believe this is a false distinction.
“We cannot have a functioning economy unless we first comprehensively address the public health crisis.”
The letter recognises the measures put in place in Australia have reduced the number of new infections.
“This has put Australia in an enviable position compared to other countries, and we must not squander that success,” the letter states.
“We recognise that the measures taken to date have come at a cost to economic activity and jobs, but believe these are far outweighed by the lives saved and the avoided economic damage due to an unmitigated contagion.
“We believe that strong fiscal measures are a much better way to offset these economic costs than prematurely loosening restrictions.”
The letter notes the PM’s comments that the borders would need to remain under tight control for an extended period.
“It is vital to keep social-distancing measures in place until the number of infections is very low, our testing capacity is expanded well beyond its already comparatively high level, and widespread contact tracing is available,” it says.
“A second-wave outbreak would be extremely damaging to the economy, in addition to involving tragic and unnecessary loss of life.”
RBA board member Ian Harper signed the letter, along with former member Warwick McKibben, and other academics including Chris Edmond of Melbourne University and Deborah Cobb-Clark of Sydney University.
The coronavirus has caused businesses to close and lay off employees around the world and new figures show up to 3.4 million Australians could be out of work as a direct result of social distancing.
The Grattan report calculated between 14 and 26 per cent of Australian workers could be out of work in the coming weeks as a direct result of mandatory and voluntary spatial distancing. That percentage equates to between 1.9 to 3.4 million Australians.
The report, Shutdown: estimating the COVID-19 employment shock, estimates unemployment will rise substantially in the coming months, but the Commonwealth Government’s new JobKeeper wage subsidy will obscure much of the impact. It predicts the unemployment rate will rise to between 10 and 15 per cent.
About 840,000 people are employed in food and beverage services in Australia, and the report calculated more than half of all workers in the hospitality industry could be left without jobs due to the virus. Other industries identified at risk are retail trade, education and training, and the arts.
The report found lower-income workers are twice as likely to lose their jobs and younger Australians and women are more likely to suffer because they commonly work in the industries affected by the virus.
Last month the government celebrated unexpectedly good employment figures, which showed the number of Australians in work had exceeded 13 million people.
The figures showed Australia’s unemployment rate fell to 5.1 per cent for the month of February and the participation rate is at the highest point in almost 20 years.
While announcing the data last month, Employment Minister Michaelia Cash conceded the strong figures don’t reflect the challenges currently being faced by many, particularly small businesses as a result of coronavirus.
“But what the figures do show – and the fact that we do have a record number of Australians in employment – is that we are facing this crisis and we come from a very good base,” she said.