The Economics and Governance Committee of the Queensland Parliament called for submissions on the Queensland Government’s economic response to COVID-19.
You can download our response by clicking here.
We made a number of points, and hope that these will be incorporated into future government responses to pandemic outbreaks. As we see in Victoria this pandemic is not disappearing, and it is likely that governments will be urged to maintain, or reintroduce, current emergency economic measures, or to adopt new ones.
In the first place governments have to understand that health and economics are intimately entwined. If the measures we take to combat a pandemic reduce economic well-being too much in an effort to protect some citizens from the disease, it will damage the health of other citizens by destroying their livelihoods or prospects.
This means that a proper appraisal needs to be made of the direct health costs of the pandemic versus the direct costs of economic measures taken to deal with it. We see no evidence that this cost benefit analysis actually happened, or that there was any parliamentary scrutiny of the measures that were taken.
This part of our submission was partly based on our letter to Australian heads of government which outlines governance reforms that need to be undertaken. These measures would improve the analysis of the problem, communication to the public and a framework for better executive and legislative decision-making.
In the second place we looked at the measures that the government implemented.
Our philosophical position is that governments are there to maintain the common physical, fiscal, legal and social infrastructure that only governments can provide, and support for those individuals who can no longer support themelves. Governments are not there to support businesses or people who can look after themselves.
The government’s economic responses were largely piecemeal, and not subject to any cost-benefit analysis. We took particular issue with the change to the laws with respect to residential rentals where the government arbitrarily put the onus for supporting vulnerable citizens onto people who owned residential rental properties. This drew on our criticism of the legislation contained in a letter to all MLAs, but there were also problems with their business support measures, particularly the loan scheme.
A further issue is that most of these measures will involve increasing state government debt, which was already heading for $90.7 billion by 22/23. While some economists are urging governments to borrow as much as they want because interest rates are so low, that is reckless advice. At some stage interest rates will rise, and the cost of these borrowings will increase significantly. At the same time the value of the assets that underpin them will most likely decrease.
In our view the measures that the government should have taken are to reduce regulations, particularly around housing, mining and agriculture, invest wisely in infrastructure where there is a good cost benefit, change the tax structure to attract business here, and fix up the Commonwealth Grants Commission so the state is not penalised for implementing good policy.
Most of the areas where the state implemented policy were already adequately covered by the federal government.