On the one hand, especially since the state elections in Western Australia in March, the states have become less hair-raising when slamming national borders for one another. This may be due in part to the fact that state governments have increased confidence in their ability to track and prosecute outbreaks, and in part because the end of the federal JobKeeper wage subsidy has removed some of the moral risks of bans.
Australia cannot protect itself behind a closed border for too long.
On the flip side, after reading Virus Elimination Policy, Scott Morrison has stopped criticizing states and shows little urgency in opening the international border. COVID-19 leaks from quarantine hotels have retained sensitivity to the international border front and center.
And the already slow introduction of the vaccine was hit by sheer bad luck. A locally developed University of Queensland vaccine had to be put aside early. And AstraZeneca’s local production can now only be used by people over 60, which further restricts the offer.
The labor shortage comes with a shortage of everything for the Australian economy as global supply chains straighten out after the pandemic. This could help create the kind of inflation that Dr. Lowe is looking to force a 0.1 percent increase in the current cash rate from the forecast for 2024.
But the lack of recruiting of skilled workers from overseas and ongoing logistics bottlenecks for companies could just as easily throw growth off track again. The V-shaped recovery could then settle down to a rather slow pace. It means there is no time to lose in finally releasing the economy from the grip of pandemic restrictions.
The more urgent tasks include keeping the national borders open permanently, a better target for the reopening of the international border and the acceleration of vaccination. Australia cannot protect itself behind a closed border for long, regardless of the temporary political and economic attractions. Until it is open, the crisis is not over and job recovery has not stalled. Then comes the task of moving the language back from expansion to sustainable growth and prosperity.
Aside from the sharp V-shaped surge Australia is currently experiencing, the deficits that have been paid for stretch over the forecast horizon with no repayment plan. Productivity is falling, which is preventing the country from getting out of debt as the Morrison administration is hoping. The government needs to make the political investments in supply-side reforms that will boost growth and pay off the debt after the pandemic ends. Ironically, the lack of a burning platform has taken away the incentive to do so.