Radical rethink

While we weathered COVID-19 as well as any country, a contracting economy and rising joblessness will be painful for millions of Australians.

We have entered our first recession for nearly 30 years. While we weathered COVID-19 as well as any country, a contracting economy and rising joblessness will be painful for millions of Australians.

Recessions have scarring effects. Some who lose their jobs will never work again at their current level or in their current industry, and young people who enter the job market during recessions have lower wages over their lifetimes. The challenge for policymakers is to minimise what economists call hysteresis, the long-lasting effects of economic downturns.

The JobKeeper program has mitigated those impacts. By maintaining the connection between employees and employers, the program has prevented that critical break that can easily leave workers out of jobs for long periods in a subdued economy.

In our recent membership COVID-19 survey, more than 40 per cent said JobKeeper had been the crisis policy measure that most assisted their organisation; 81 per cent said the withdrawal of such support policies must be cautious to support a gradual transition to recovery, even at the cost of increased government deficits and debt. The message is clear. Leaving support packages in place — adapted to address lessons learned in implementation and to target greater employment — is essential to economic recovery. The Reserve Bank’s forward guidance is that its unconventional measures will be in place for an extended period.

But Prime Minister Scott Morrison was right to point out at the National Press Club in May that “[a]t some point you’ve got to get your economy out of ICU”. To enable that we need a policy framework that creates bandwidth for recovery and a platform for economic growth. Challenges had already appeared before COVID-19. Real wage and per capita growth had been negligible, while high household debt and falling productivity increasingly constrained our policy options. With immigration likely to slow for the foreseeable future, finding sources of growth in a post-COVID world will require bold thinking and calculated risk-taking by all leaders — government, business and NFPs.

In our COVID-19 survey, almost 70 per cent of members said the government should radically rethink its agenda, developing new policy priorities and objectives for the Australian economy. We must revive our passion for bold economic reform. Tax and industrial relations, infrastructure investment and climate policy should all be on the table. Members have asked policymakers to think big, to consider the policies that will drive our economy in an era of technological and social change — not to revert to the prescriptions of the past.

The PM has already outlined key areas of focus for the JobMaker program and expressed the desire to work with business and unions to build consensus. The AICD will contribute to this debate, consulting with members on this new agenda and ensuring all our director community is heard — from listed and small business to the NFP sector.

We should anticipate governments will spend less, however, in a post-COVID environment. Some industries will diminish, some companies will fail. To get Australia back on track, other industries must grow and new companies must take their place. This process of renewal will require a regulatory environment that supports new business and encourages employment.

Australian performance on innovation has been weak, as borne out by AICD’s 2019 study with the University of Sydney Business School. We cannot afford for this to continue. AICD members have affirmed once again that the introduction of pro-growth, pro-innovation policy settings must be a priority. Directors also need to take the lead. Boards must encourage and reward entrepreneurial thinking and ensure innovation is a regular item on the board agenda.

We need to ensure workers have the skills to prosper as new businesses are created and evolve. Targeted policies to assist retraining will be essential to respond to the acceleration of digitisation and automation in our economy, to avoid persistent long-term unemployment and reshape the workforce for a post-COVID economy.

Bold measures have been taken by government, business and NFPs. Reversion to incremental reform will not meet the challenges of the global economy, nor ensure the prosperity of future generations. Across the economy, individuals and organisations are reinventing their work in radical ways, stepping over the barriers of the past. Our policy settings should be just as bold.