To keep Queenslanders safe, our state government has decided to lock down the over
2 million residents of Greater Brisbane for the next three days, but its sudden, unexpected announcement at 8am sparked immediate panic buying in our supermarkets, and an exodus of people from the capital to the regions and other states, possibly spreading the mutant UK COVID strain there. Great job, Queensland Government.
The National Cabinet is supportive of the lockdown so I will withhold judgment for now, other than noting it would have been good for our Premier or Chief Health Officer to have signalled earlier this week they would even contemplate doing this. It came as a bit of a surprise, given we only have one reported case (so far) of the mutant UK strain, the cleaner from the Grand Chancellor, and thankfully she doesn’t appear to have travelled many places.
It’s too early to predict what the economic implications of this will be, as so much depends on whether the mutant COVID bug has been spreading in the community. That said, we fear this Brisbane lockdown will extend well beyond three days, as the Health Minister has suggested it could (e.g. check out this Brisbane Times report). When I dropped into my office at the Johnson Hotel this afternoon, I saw one of my neighbours, an engineer, and his partner carrying out two widescreen monitors from his office. He needs them to work on his spreadsheets and CAD diagrams, and he’s obviously thinking this is going to last much longer than three days.
We may need to rush that vaccine out after all if the mutant COVID strain is spreading. Otherwise, we will see further lockdowns and loss of economic activity, possibly requiring an extension of JobKeeper, meaning larger deficits and more debt.
On financing the COVID-19 government debt, I spoke with UQ Associate Professor Begoña Dominguez earlier this week, and our conversation is now available as Episode 69 of my Economics Explored podcast. I interviewed Begoña about a thought provoking video she recorded for the UQ Economics School at the end of last year on Financing the COVID-19 Government Debt. One idea of Begoña’s that I really like is that we should think of support provided during COVID in the context of a social contract, whereby in an emergency like a pandemic we readily assist people but if it turns out we have over-compensated people (as we may have in Australia as I noted in my 9 December 2020 post) we have some mechanism to claw back some of that assistance. Conversely, if it turns out we’ve under-compensated some people, we increase assistance to them or give them a tax rebate in the future. Possibly, assistance could be generous in a pandemic, given the radical uncertainty about the future, but the assistance could be given as an income-contingent loan.
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