From Australia’s Pandemic Exceptionalism (Steven Hamilton & Richard Holden, 2024) pp47-9
Health crisis begets economic crisis
Looking back on early 2020, as the economic responses to the pandemic were being devised, two features stand out. The first is just how late the conversation started. It took people a long time to figure out that this would be a public health crisis, let alone an economic crisis. And the second is just how rapidly things snowballed once the latter became clear – eventually into the largest fiscal response to any crisis in history. Just like its public health response, addressed elsewhere in this book, Australia’s economic policy response was (literally and, in this case, figuratively) exceptional. And, just like its public health response, Australia’s economic policy response was much better adapted to the circumstances than virtually any other government’s response around the world.
In late February and early March, the first clear sense of the full public health impact of COVID-19 emerged from northern Italy, prompting questions about the scale of the economic shock were the virus to spread across the world. Reports of overwhelmed Italian hospitals where makeshift morgues were being set up raised the spectre of a full-scale economic shutdown to contain the spread. Naturally, this prompted questions about the economic policy responses that would be required to address the economic fallout that such a shutdown would precipitate. As would be characteristic of policy responses throughout the pandemic, early underestimates of the full scale of the crisis would be followed by a series of upward revisions as we went along.
David Gruen, who by then had been appointed the Australian Statistician (head of Australia’s statistical agency, the Australian Bureau of Statistics, had earlier been the executive director of the Macroeconomic Group at the Australian Treasury during the global financial crisis in 2008. When speaking to us, he recalled an eerie familiarity in those early days as COVID-19 spread across the world:
In 2008, you did get this feeling that things were gradually going off a cliff. Every time you woke up, some other large financial entity, either in the US or in Europe, had fallen over. There was a three-week period after Lehman Brothers collapsed of complete chaos in financial markets. There was a very strong feeling that things were spinning out of control. And I had the same feeling in February of 2020.
Hamilton was (and still is) an economics professor at The George Washington University in the Washington, DC suburb of Foggy Bottom, where the White House, Federal Reserve Board, International Monetary Fund, World Bank, and various other key public institutions are located. Through March 2020, he engaged on the ground with US experts and policymakers on the design of the US economic policy response. Meanwhile, a sophisticated discussion was taking place on the social media platform then known as Twitter, mostly dominated by US-based experts but drawing in the views of policy thinkers from across the world. #EconTwitter, as it is known on the site, would have a tangible impact on the economic policy response. The forum brought together the world’s top academics, policy experts at think tanks (including many former officials), public servants, political staffers and journalists.
The earliest spread of the virus in Australia tightly tracked that in the United States. The first US case was confirmed on 21 January, while the first Australian case was confirmed just four days later. The United States then reached 100 confirmed cases on 4 March, while Australia got there six days later. This delay might seem trivial but, given just how quickly the virus spread, policy responses had to be formulated, decided upon, and implemented within mere days. In such a breakneck environment, a head start of even a few days would provide an advantage.
From this point, the countries diverged sharply, in two major ways. First, it took the United States just one week to get from 100 to 1000 cases, while it took Australia twice as long to reach the same milestone. That was before any lockdowns or comprehensive border closures in either country. There was clearly something inherent to the United States, such as population density, that was driving faster spread there. No doubt slower spread gave the Australian policymaking apparatus some additional time. Second, the Australian policymaking apparatus, without anything like the sharpness of the United States separation of powers (whether between the executive and legislature, within the bicameral federal legislature, or between the federal and state governments), was clearly more responsive. In hindsight, it’s clear these institutional details rendered an Australian-type policy response effectively impossible in the United States.
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