This blog is part of a series relating to the economic impacts of the COVID-19, novel coronavirus outbreak of 2020.
Australians begin to navigate the complexities of the economy ‘opening up’ again as the National Cabinet announced yesterday a three-step plan to ease coronavirus restrictions and reopen the economy, with the goal of restoring one million jobs and achieving a fully safe and stable economy by July. A brief summary of the three steps are as follows:
Step one: businesses such as cafes, restaurants, libraries, retail stores, community centres, pools and playgrounds may reopen for up to 10 customers at a time but must follow social distancing and hygiene measures. Households are allowed up to 5 visitors at a time and groups of up to 10 may congregate outdoors. Weddings and religious gatherings may have up to 10 attendees. Funerals may have 20 mourners if inside and 30 mourners if outside.
Step two: businesses such as gyms, cinemas, concert venues, galleries, massage therapists and tattoo parlours may reopen; all open businesses may have up to 20 customers at a time. Interstate travel may be allowed depending on the circumstances of each state. Weddings and religious gatherings may have up to 20 attendees. Funerals may have up to 50 mourners.
Step three: pubs, casinos, nightclubs and RSLs may reopen; all open businesses may have up to 100 customers at a time. Workplaces may open and resume activities as normal. Recreational gatherings of up to 100 people are allowed.
While the general parameters of reopening have been outlined by the Federal Government, the power lies in the hands of state and territory governments to decide when the changes come into effect. As such, there is no exact timeline for a nationwide reopening. Furthermore, the progression to steps two and three is contingent on the successes and failures of step one and will be reviewed every three weeks by the National Cabinet.
While these conversations about ‘reopening’ the economy are being had through the media, over coffee and in the cabinet room, the truth is that no one knows what is going to happen or on what timeline. The economy is not one industry, not one homogenous thing, so we need to look to the data to gain insight into the impact of this new normal across different sectors and businesses. The Australian Bureau of Statistics (ABS) has released a series of COVID-19 related data products to this end. The new releases provide statistical information about survey data collected regarding the impacts of COVID-19 on businesses, the labour force, retail trade and households, among other categories. The ‘Business Impacts of COVID-19’ release details the response to the JobKeeper scheme and highlights the expected adverse impacts of the virus, including 72% of businesses citing reduced cash flow and 69% expecting to be impacted by a reduction in demand for goods and services. In terms of the JobKeeper scheme, 61% of businesses had registered or intend to register for the payment scheme. This is made up of 61% of small businesses (0-19 persons employed) and 60% of medium businesses (20-199 persons employed) compared to 45% of large businesses (200+ employees).
However, the two industries hit hardest by coronavirus restrictions are 1) accommodation and food services, and 2) arts and recreation services, which saw decreases in jobs by 33.4% and 27.0%, respectively, since 14 March 2020. These reductions are disproportionate to other industries surveyed, which reported a median job decrease of 5.6% over the same period of time. For accommodation and food services businesses, 84% reported expecting Government restrictions to have an adverse impact on their business over the next two months. Furthermore, 76% of businesses in the accommodation and services industry and 63% of businesses in the arts and recreation services industry have registered or intend to register for the JobKeeper Payment scheme, and the accommodation and food services industry had the highest proportion of businesses that reported their decisions to continue paying employees were influenced by the JobKeeper scheme. In April, the Grattan Institute released a working paper on the impacts of COVID-19 on employment, calculating that 1.9-3.4 million people could be out of work as a result. Those lower income workers are twice as likely to be out of work as high income earners, and younger people and women are likely to be hit the hardest due to their higher representation in the most impacted industries.
Even as the Government begins enacting plans to re-open the economy through easing restrictions for restaurants and cafes by allowing them to seat up to 10 patrons during the first stage of the new plan, it is not yet clear the impact this will have. Many businesses will not see major changes as a result of the eased restrictions because they are not in a position to benefit or adjust their service delivery in a financially meaningful way. The financial data collected by Alphabeta and illion on consumer spending shows that cafe patronage was down 46% compared to normal while food delivery was up 213% in the week of 20-26 April. These figures reflect the changes to patterns of behaviour during the pandemic and are situated within the broader context of an already decreased spending rate, which is currently 20% below ordinary levels. It will be interesting to track these spending patterns against the phases of re-opening. At least at this first phase, while the Commonwealth, state and territory governments can technically ease restrictions, it is not yet clear what the nature of the impact will be on how people actually respond, as businesses, workers and consumers. What will the long-term impacts be on our behaviours? Are certain industries better prepared to adjust? In what industries and services are the costs too high, for the company or the customer? Where will we be open to changing our expectations and practices about the ways goods and services are delivered? We have a lot to learn about what to expect in this new normal.
Although business failure rates are not yet being impacted, they are expected to rise over time. Some do not expect the easing of the shutdown to make significant impacts on the economy at this stage, but concede, “when you’re on life support, any improvement in your condition is welcome”. Any impacts of the new measures are contingent on whether businesses are ready to open their doors and whether members of the public are ready to re-enter the economy as consumers. Just last week in the United States, the governor of Missouri lifted restrictions around social gatherings and allowed businesses to re-open. Despite the green light, many businesses opted to remain shut due to hesitation and uncertainty around the governor’s decisions, some of whom faced fierce opposition from customers wishing to resume pre-pandemic life as quickly as possible. A recent poll conducted by Pew Research Center found that 68% of Americans were concerned that state governments will ease coronavirus restrictions too quickly. The public opinion in Australia seems to be equally mixed, with responses ranging from expressions of gratitude to warnings of a second wave. Twitter user @cpltalk remarked, “I fear a sufficient number of people think shops reopening means the pandemic is over (or, perhaps worse, there never was one in the first place)”, while @Menace_Bunny declared that little would change in her household, saying, “my family will continue to stay at home and not have any visitors… until there is sufficient evidence that we’ve got this this [sic] beat.” Linda Kelly, a community nurse from Melbourne, raised the concern that re-opening businesses while members of the public still appear to be inept at basic hygiene practices will be detrimental to the country’s progress in the long run. She explained, “I see people in the community every day being totally unaware of how to avoid spreading the virus. I would rather wait until there are no cases in the community—if we have to revert to isolation again it will be extremely problematic.”
The process of reopening the Australian economy will undoubtedly be a long and gradual one and Prime Minister Morrison said more outbreaks should be expected. That comes as no surprise, with the easing of restrictions going ahead despite the Reff currently sitting at 1.06, although this number is mostly the product of the Cedar Meats and Newmarch House nursing home clusters. Chief Medical Officer Brendan Murphy emphasised the importance of individual responsibility in containing the virus, declaring that “every Australian has to do their bit” and that failing to do so could cause the country to “lose the battle that we have won so well, so far”.
Before the eased restrictions have even been implemented, let alone shown their impacts, Prime Minister Scott Morrison has discouraged the states and territories from moving back to tougher restrictions saying that “I think it’s important we all hold our nerve…You can’t stay under the doona forever.” While an infectious disease specialist from Australian National University, Sanjaya Senanayake has warned of the risks of the “hammer and dance” effect, with the dance being what happens as restrictions are eased and the hammer is the need to reinstate the restrictions to manage the associated outbreaks. Despite the uncertainty, there is value in continuing to highlight data-informed decision making as this crisis and its impacts continue to unfold. In a press conference delivered on May 9, the Deputy Chief Medical Officer, Professor Paul Kelly has said that at present, anything beyond stage three is “too far in the future for us to consider”.
A full breakdown of the three-stage plan can be found below.