New research by the Australia Institute’s Centre for Future Work analyses the economic effects of COVID-19 on Tasmania, and suggests how Tasmania can ‘build back better’ out of the COVID-19 crisis, making key recommendations to help Tasmania avoid the mistakes made at the Federal level. Ahead of Tasmania’s State Budget, set to be delivered on 12 November 2020, in this new report the Centre for Future Work has explored what the shape of Tasmania’s economy could look like, and how it can recover and reconstruct after this pandemic.
Businesses and households will not simply ‘regain confidence’ and drive a full recovery themselves. Indeed, Tasmania’s proactive and protective fiscal response indicates that the state government already understands that major support from government is necessary. As a proportion of the state’s gross state product, Tasmania has committed the largest amount of funding of any state. Meanwhile, extremely low borrowing costs mean that there is no reason for the state government not to undertake a more proactive role in the economy than it has done historically, even if that means higher deficits.
However, a short-term, counter-cyclic approach does not adequately respond to the full scope of the challenge. The underlying working machinery of the economy is not in good order. COVID-19 has highlighted existing vulnerabilities and created new ones, and it has also limited the scope of the private sector to respond.
The state government in Tasmania will clearly be required to play a hands-on, leading role in job creation, investment and income generation for years to come, and it will need to borrow to do so. This fact should not be feared, but celebrated: large deficits are the flipside of the public investment that will be required to undertake Tasmania’s reconstruction. It will be necessary to mobilise economic resources, to meet human needs and to get Tasmanians working again—especially if the intention is to build a more resilient and diverse economy than the one that existed before COVID-19.
The Tasmanian economy will not have the same shape as it did before the pandemic. Tasmania can and must think differently about what is possible. Our purpose in this research paper is to add momentum to Tasmania’s conversation about its economic, and social, future. As a result of COVID-19, Tasmania could push itself forward into the next stage of its economic development, or it could, alternatively, spiral into a depression, scarring lives and communities. It cannot afford that. Tasmanians, moreover, deserve far better.
The report recommends:
- the Tasmanian Government make a larger investment in public housing
- the State Government also expand public sector investment into the health, aged and disability care sectors
- outsourced public sector functions should be returned to direct provision by Government wherever possible, to improve cost, accountability and quality
- doing so will also provide the State Government with a lever to improve wages and conditions across the economy, especially in sectors dominated by women
- the Tasmanian Government should also support and co-invest in several strategic industries, including manufacturing and renewable manufacturing, tourism and hospitality, arts and entertainment, food production, and higher education.
Read The Choices We Make, by Economist Dan Nahum, at this location.