Morrison Government’s 3 Step Reopening Plan for Economic Recovery

As per official stats, Coronavirus has infected 6,913 people and has taken away 97 lives in the country, while 6,035 have recovered from the deadly virus.

With a strong control over number of new cases and community transmission in the country, Prime Minister Scott Morrison announced to restart the economy stating that the Australians have earned an early mark. He added that the next steps to reopen the economy would not be uniform across states and territories, and would rather depend on the region specific success story.

However, he cautioned Australians to ready themselves for a rise in COVID-19 infections as the economic activity resumes. Notes have been formulated to guide employers for providing COVID safe workplaces as soon as people begin travelling to work again.

The National cabinet has formulated a 3-step strategy for restarting Australia and the discussed plans are set to be applied from May 11.

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Morrison’s 3-Step Plan

As the National cabinet met on 8 May, it has carved out a 3-step plan and a national framework to achieve a COVID-safe economy by July 2020. The states and territories are allowed to pick up the steps at their own pace with an expectation of national economy to become operational by July.

STEP 1: Under the first step, PM Scott Morrison declared that Australians would be allowed to have 5 visitors at home and 10 in businesses and workplaces. Restaurants and cafes will open while non-essential travel will be allowed within states and territories. Community centres, playgrounds, libraries and exercise boot camps will also be permitted to operate.

STEP 2: Under this stage, gatherings up to 20 people will be allowed, including gyms, beauty salons, galleries, cinema and amusement parks. Some interstate travel will also be permitted.

STEP 3: Gatherings up to 100 people will be allowed at this stage along with the opening of food courts, night clubs and all interstate travel. Travel to New Zealand may also be permitted at this stage, but international travel may still not be opened up.

The Federal government asserted that progressing from one step to another will be contingent on medical advice that relaxing restrictions will not result in any risk, with extensive testing capabilities and the ability of authorities to trace new cases and local outbreaks.

The Prime Minister warned that the process would be gradual and people must be prepared for more virus outbreaks in their path. National Cabinet will review the progress on coronavirus cases and restrictions every 3 weeks to decide the state and territory’s readiness to move to stage 2 and 3.

Brendan Murphy, Chief Medical Officer, stated that the 3-step plan relies on every Australian to take responsibility to follow social distancing rules and maintain personal hygiene. There can be a high risk of losing the battle if there is any leniency in following the rules.

He also urged people to download COVIDSafe application which will help the authorities in tracing the virus as restrictions ease.

RBA Envisions Recession As Restrictions Ease

In its latest monetary policy update, RBA has kept its cash rate unchanged at 0.25%. The measures taken to contain the virus have limited its spread but has posed a huge economic cost to the country. Travel bans, social distancing rules, business shutdowns resulting in layoffs have significantly reduced the domestic economic activity since the mid of March.

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As per RBA’s latest policy statement, RBA has projected that the country is confronting the worst economic contraction and has pledged to sustain jobs and incomes as government plans on relaxing restrictions.

RBA predicts that the $2 trillion economy would shrink by 10% in the first half of 2020 marking the first recession in 30 years. The central bank also estimated that shutdowns had costed $4 billion to the economy.

RBA had reduced the cash rate to a historic low of 0.25% in an emergency meeting on 18 March along with a target of 3-year Australian government bond yield of around 0.25% and a term lending facility for the banking system. The bank has also provided extensive liquidity into the financial system via its daily market operations. To achieve the target and to support market activity, RBA has bought $50 billion of Australian government securities.

Philip Lowe, RBA Governor, stated that there is a possibility of an upside scenario where domestic restrictions are eased sooner with the economy recovering faster than in the baseline scenario.

Outlook Ahead

RBA anticipates annual GDP to shrink by 6% in 2020 whereas unemployment rate to touch 10% by June and stay at 7.5% through 2021. While, CPI is expected to fall into negative territory in June quarter before moderating at the end of 2020.

The initial phase of recovery is expected to be driven by the easing of restrictions and uplifting of employment due to the opening of businesses. At the same time, the latter part will be shaped by business investment decisions.

A significant part of recovery depends on how other countries recover from the virus with the nation’s dependency on exports and imports. However, uncertainty remains on the duration and intensity of the outbreak in future.