The coronavirus pandemic is creating real problems for business and the economy.
While the progression of the pandemic is not predictable, business owners need to take this crisis seriously. This virus is very dangerous for the following key reasons: It is highly infectious; it has a relatively long incubation period; people can be contagious without symptoms and it has a high mortality rate for older people. In addition, we know little about this virus and there is low immunity in the community to this virus.
Current experience in combatting the virus, in China, South Korea and Singapore has demonstrated that rigorous public health measures such as quarantine, isolation and lock down are effective in stopping the increase in infections. Mass testing combined with forced lockdowns are required to combat the virus. If this is to be achieved the government needs to mobilise resources such as testing facilities and specialist diagnostic personnel to carry out the rapid assessment of the hot spots and risks. Experience overseas indicates that these resources take some years to develop and few countries have been planning for such a requirement. This is really a significant failure of governance.
But there is a bigger problem in addition to the medical risks associated with this virus. The big problem is the thinking of governments around the world in relation to the economic measures required to deal with the crisis.
It is clear, that massive government stimulus is required to stop economies and businesses spiraling down to a depression. Unlike the 2008 financial crisis, the current crisis is a financial crisis, a health crisis, a bushfire crisis and a climate crisis. The Morrison Government seem to be more concerned with not creating a long-term deficit and avoiding the “mistakes” of the previous Labor Government than dealing with the problem we have. It has spun the myth that deficits are bad, and surpluses are good. A surplus provides the capacity to tackle problems when things go bad- right! This is a simplistic myth and is of no use in the current situation. The federal government is quite capable of spending/funding significant deficits and providing the financial capacity to mobilise resources to combat this economic crisis.
The Reserve Bank has indicated that it will purchase government securities to assist the smooth function of the secondary bond market. In fact, further action by government through deficits spending could mobilise the resources necessary to stop mass unemployment. Australia has significant real capacity in terms of labour and resources to produce food, grocery and medical items and manufactured goods to take care of its population. If the private sector cannot make the investment, direct government financing, for some time, will achieve adequate supply. The main requirement is to keep people in jobs and to ensure that demand does not collapse if mass unemployment emerges. Inflation is unlikely to be a problem if adequate capacity and unused labour can be mobilised.
The way to stop panic and deal with the crisis is for the government to announce that the government will not limit spending and that jobs and incomes will be guaranteed for some time to allow the community to recover from the economic shocks. However, I won’t be putting my money on the triumph of sensible real responses. But if we don’t change our policies, we will pay the price in terms of wasted resources and wasted lives.
We can expect more calls for reform of the economy less red tape and other such neoclassical proposals which have led us to the disastrous economy we currently have. Where casual employment, the gig economy and massive underemployment is considered the acceptable norm and the cost of a house is completely unaffordable to a large portion of society. If you are interested in an alternative view, Professor Wray, Bill Mitchell, Stephanie Kelton and Warren Mosler provide better descriptions of the way markets and the financial system actual work and what needs to be done to change our situation.
PRACTICAL BUSINESS RESPONSES TO CORONAVIRUS
Many businesses have now adopted and begun implementing their risk management and business continuity plans. ASR Partners is now in Stage One of its Coronavirus Plan.
In addition to the standard hand washing procedures we are regularly disinfecting the office and provide virus filters in the office as well as optional masks and social distancing. For examples interviews, if required, can be conducted in our clean room with the accountant in a separate room using zoom and other technology. We have been preparing for this for some time.
We are encouraging our clients to provide documents and information electronically rather than face to face. We can also use Zoom or Slack to keep in face to face contact or in regular chat mode.
In addition, we have put our resources towards investigating the various government announcements and programs and are preparing a lengthy guide for our clients on what is available and how to access these resources. We will be available to assist all our client access whatever is on offer. I will keep you informed.
For a few years, we have been preparing our systems for remote access while maintaining advanced security controls on our systems. We can therefore easily work remotely if an immediate lock down is required. Over the next week, we will be carrying out tests of our system to ensure that we can securely navigate our resources via remote access. This is a lot more complicated for a small organization that it appears at first sight and we have been working with our IT people to make this transition.