Strong government support will have to continue in the next four years. In the short-term it will succeed during the virus, but it is not for a bridge over a chasm to viral recovery. It is a recession or possibly a depression sized gulf to renewed growth. New thinking is necessary.
People who previously argued for much lower immigration would feel the real economic effects from lack of it, if immigration were not returned to pre-virus levels and if government ceased its offsetting spending. When the virus pandemic is truly over, immigration should be gradually increased despite claims for it to stay low. It would help stimulate the economy together with continued strong government spending.
Pre-virus underlying assumptions and policies have not changed: growth is “slower for longer”; populations of Melbourne and Sydney are both to grow to 8-10m in the next few decades; no interstate High Speed Rail (HSR) to compete with air; West Sydney Airport protected from competition by the ban on interstate HSR; densification of Melbourne and Sydney by settling 5m more people in each city in the same area already occupied by 5m; continued high cost east coast interstate road freight; high emissions from interstate air and road transport to grow with population and increasingly degraded air quality; and city traffic congestion given priority.
In order to restrain congestion in Melbourne and Sydney the Federal Government has encouraged and agreed to partly fund fast rail construction and development between small regional towns and Melbourne and Sydney CBDs. This is worthwhile spending, but the extra few hundred thousand people settled in regional towns will hardly cut congestion in cities growing to 8-10m.
Government is also considering regional HSR that might form part of interstate HSR much later. Each State is contemplating separate HSR suppliers. This is a recipe for recreating the troubles of the “different rail gauges” constructed by the Australian States in the nineteenth century. Three or more separate state suppliers would provide diverse rolling stock; trainset driving systems; power intake requirements; signalling; safety; and computer systems. They could not be integrated and unified into one interstate HSR system. Under such a policy Australia would probably be the only country in the world with multiple HSR suppliers. The best, most experienced, innovative, safest, single supplier must be selected on a 50-year agreement to supply the original system and install updates and innovations over the whole period.
The Federal Government previously budgeted to spend $100b on infrastructure over 10 years or $10b pa on various projects including fast rail. This is not enough to replace the annual business investment shortfall of around $20b pa in recent years. It is not enough to overcome a recession in the next few years. Much more will be needed. The $100b might have been enough to continue slow real growth of maybe about the 2% pa on average post-GFC, but not in a coming recession or depression. It is certainly not enough to lift growth back to the average 3.5% pa achieved long-term pre-GFC.