About a week ago, as we Melburnians began Lockdown 2, I realised that many other cities and areas are in the same position. I realised that ‘this’  may well be our medium-term future – permanent physical distancing, local cluster lockdowns, no international (and minimum domestic) travel, no large scale events (sports, entertainment, pubs, clubs, restaurants).  And I realised that no one seems to be planning for this as our ‘future’.  Everyone is assuming we will return to old normal.  With no vaccine on the near-term horizon, the number of global cases continuing to hit daily records, this no longer seems likely.  I wondered:  What might our medium-term future really look like?The Problem:  High Unemployment

Australia’s official unemployment is currently 7%, but even the optimist Treasurer admitted it is really 13%, while others suggest 20% is more accurate.  Like many countries, we have softened reported unemployment with generous job subsidies.  Having a job, a purpose, is critical for personal wellbeing.  So continual government funding of private employees is neither sensible nor sustainable.  The quicker we can reduce unemployment to ‘normal’ levels, the better for the government budget and for taxpayers.  Fine.  But how?

Possible Solutions:  Socially, Environmentally and Economically Good Strategies

Despite high unemployment, Australia has many problems and opportunities going unaddressed.  Rather than spending on unemployment or subsidising jobs that will disappear (eg airlines, tourism, coal mining, restaurants), we should encourage private industry to invest in industries of the future, strategically important industries, employment-heavy industries and environmentally and socially ‘good’ industries.

Since governments will be the key signallers of confidence in the future, they should spend in areas wherever private industry can’t or won’t.  Some possibilities include:

1. Electric vehicle manufacture and related infrastructure.  Incentivise the remnant automotive industry to change focus from petrol/diesel cars to electric cars, trucks, buses and supporting electric charging stations.  As well as providing new jobs and building national capabilities for the future, this significantly reduces carbon emissions.
2. Energy transmission infrastructure. Renewable energy generators are having trouble linking to the coal supply-focussed national grid.  Incentivise existing transmission providers and energy generators to improve grid access and hence encourage renewable energy supply.  Improving the grid improves energy reliability, decreases carbon emissions and lowers energy costs.
3. Refit existing buildings. Incentivise commercial and residential property owners to refit buildings to meet global environmental standards.  This will employ hundreds of thousands of building tradies, improve the quality of our buildings, decrease carbon emissions and decrease energy costs. (Naturally all new buildings should also meet these standards, which are much higher than are currently required.)
4. Invest in improved environment. The pandemic has shown the true value of green (and blue – sea/river/lake) space for mental and physical health.  Better personal health means less societal health costs.  Coronavirus levels are now linked directly to air pollution levels.  More and better green spaces (national parks, walking trails, city parks, lakes, rivers, beaches etc) can be achieved through incentivising community NFPs, Landcare and local governments, supported by stronger enforcement of environmental regulations.
5. Invest in scientific research. The current pandemic crisis has shown the value of science.  But scientific evidence applies across all areas eg climate change, health, education, social welfare, taxation.  Invest in research and implement their findings, rather than have people unemployed.
6. Invest in online education at all levels. The innovative ability of schools to design and deliver online learning so rapidly during the pandemic demonstrates the innovative opportunity of online education, not previously recognised.  Invest in education at all levels, in IT use, in process application, in content and in research on outcomes to build country capability.
7. Increase Arts/entertainment funding. Arts is a crucial part of a society’s culture and overall social wellbeing.  Australia has an internationally-renowned arts sector (eg films/TV, theatre, singing, writing, directing, staging).  Arts employs a lot of people, many of whom don’t fit into traditional economy roles.  Arts is also generally a cheap investment.  Investing in Arts/entertainment will employ many people, challenge, support and sustain Australia’s specific culture and improve our sense of wellbeing.

The alternative?  Pay money to many people to do nothing or subsidise ‘zombie’ jobs that have no future.  Let’s spend on activities that produce something, not nothing.

Where Will the Money Come From?

Current government spending (on anything) is critical to supporting the existing economy without even addressing ‘growth’.  But where will the money come from?  Some main conceptual ideas are:

1. From reduced unemployment payments.
2. From taxes paid by newly-employed people and businesses making profits from new activity.
3. Borrowing in the short term. Borrowing costs are virtually zero for governments at the moment, so the interest cost is very low, while the social value is very high.
4. In the longer term, government can increase taxes on rich people (many rich people are already calling for this), tax international businesses not paying taxes in Australia (eg Google, Facebook, Amazon, Apple) and reduce its own costs by reducing defence expenditure (around 30% of its total costs), since much defence expenditure goes on places we don’t need to be involved with and military hardware we don’t need.

‘New Normal’?  This is It…

A new normal with permanent distancing regulations and frequent cluster outbreaks means many existing businesses, certain industries and many types of employment will contract significantly or disappear.  Lifestyles will change.  Governments have to signal new directions, new growth industries, new jobs, funded sustainably.  These ideas should help.