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Australia's responded to Corona virus with panicked lockdowns and a reckless spending spree

By Brendan O'Reilly - posted Thursday, 16 April 2020

Governments can always be depended on to react to a good scare, whether real or imagined.  The usual response is to throw money at such scares to appease public fears.  Despite exaggeration by some, the Corona virus (COVID-19) is very real, and dwarfs previous scares (e.g. ozone layer depletion, Y2K, Great Barrier Reef, global warming) in terms of short-term cost and the immediate threat to lives and economies across the globe.

Not long ago, Australians were told that up to 150,000 could die in this country from the virus under a worst case scenario.  Deputy Chief Medical Officer, Paul Kelly, said that the number of infections would range between 20 per cent to 60 per cent of the population.  We were told that, under the best case scenario of a 20 per cent infection rate, about 50,000 people would die.  A moderate scenario of 10 million infections – 40 per cent of the population – would mean 100,000 dead.

Australia has (rightly) reacted with lockdown and other measures (predicted by officialdom to be of at least six months duration).  Australia has, however, gone down the track of many untargeted and ultra-expensive policies, that seem unjustified because they are being introduced when the worst appears to be over in this country.  These policies, broadly copy measures taken in (much more badly affected) parts of Europe, where the virus was let get away.  This is despite Deputy Chief Medical Officer, Nicholas Coatsworth, recently saying that (on a per capita basis) Australia has one of the lowest COVID-19 rates in the world, along with one of the lowest mortality rates.


The daily number of Australians newly testing positive for COVID-19 has now fallen to below 100 (from a peak of nearly 300), but the Government warns there is still a long way to go.  As at 3:00pm on 12 April 2020, there have been 6,313 confirmed cases of COVID-19 in Australia. There have been 21 new cases since 3:00pm 11 April.  Only 59 persons have died, and more than 353,000 tests have been conducted across Australia.  To date, the vast majority of confirmed cases were acquired overseas (about a third on cruise ships) and nearly all the deaths were among the elderly, many of whom had pre-existing chronic ailments.

Thus far, community transmission has been modest (34 per cent of cases) and falling, and it is possible that the total death toll will barely reach triple digits over coming months.  This compares with about 10,000 deaths to date in the UK and about 18,000 in Italy.  Testing, along with targeted quarantine and social distancing, seems to be working in Australia, and our relatively young population helps keep the death rate low.

To put corona virus in perspective, influenza on average causes far more deaths (1,500 to 3,000) per year in Australia, and close to 1163people died on Australian roadsin the twelve months to the end of February 2020.  The selective alarm (in relation to just 59 corona deaths so far) means that the massive proposed spending on corona virus is entirely disproportionate.  Alarmism seems largely reflective of severe effects in some overseas countries, that look unlikely to happen here.  Already several existing drugs have been identified that may killthe virus (e,g, hydroxychloroquine, chloroquine, and ivermectin), and many researchers around the world are trying to develop a vaccine.

Economic output has now fallen quiet across much of the world, with evidence mounting that the world is sliding into deep recession as countries lock down in unison.  (It has been forecast that the forced closure of businesses across the United States will force U.S. growth to contract by 30% in the second quarter and by 5% overall in 2020.]

Big spending policies may have been justified in places like China, Italy, Spain, the UK and the US, where the virus got away to a greater degree.  Australia has not reached their levels of spread, even though we were slow to close our borders, and NSW made a major mistake by failing to quarantine the Ruby Princess passengers.

Issuing edicts, that force the closure of many of our services industries, virtually guarantees a huge jump in unemployment.  A lot of the shutdowns are justified but, if this is kept up for long, many businesses will go broke and never reopen, especially firms with high fixed costs and little current revenue.  Current policies will leave a major increase in public debt, high unemployment, and much lower asset prices in their wake.  There is as yet no plan concerning repaying the increased debt, though somesuggest increasing the GST to 15 per cent.


To date the Commonwealth Government has announced support for the economy totalling $320 billion across the forward estimates, representing about 17 per cent of annual GDP.  (Our GDP being A$1.89 trillion in 2019.)  When you also bear in mind expected falls in revenues (e.g. income tax) you are talking about increased borrowing of perhaps $500 billion, with further deficits certain for a number of years.  As at 6 March 2020, the gross Commonwealth government debt was $573.1 billion so that this could be expected to quickly grow to about a trillion dollars (about 50 per cent of GDP and rising).

There are a number of attributes the government rescue package ought to have:

1.      It should be effective in maintaining economic activity or at least allowing enterprises to survive and subsequently re-open.

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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