The Costs of Covid: Australia’s Economic Prospects in a Wounded World

Abstract

After infecting more than 23 000 Australians and killing over 420, the coronavirus pandemic in Australia is fading sooner and with less economic damage than expected. While the secondary wave of infection in Victoria is a big setback and there may yet be other regional or local outbreaks, the economic recovery already evident is set to continue. Reckoning total COVID-19 fatalities compared to population at less than one thirtieth of the US or the UK rate, the handling of the crisis by Australian governments, hospitals, health care workers, and public officials has been more successful than in some comparable countries. So too, the economic response has been swift, well targeted, and substantial. Australia must now continue to recover in a global economy markedly less congenial than it was before the pandemic. Australia’s economic policy choices are constrained by the economic policy choices of larger powers, its economic growth trajectory constrained by their degraded growth trajectory, and its international engagement constrained by the increasingly combative relationship between the two biggest national economies — the United States and China. Like many other open economies, Australia has benefited from decades of increasingly liberal global trade and investment. The emerging post-COVID world will likely be less open and less liberal, permitting Australia fewer options and requiring choices that are more difficult.