COVID-19: Comparing jurisdictions - opportunities for policy borrowing?
Black Swans? Leveraging Western Australia’s public and private sector capacity in a post-COVID-19 world
Jessica Shaw MLA
It seems almost trite to observe that the COVID-19 pandemic is the most profound and enduring disruption to our society and economy since the Second World War. Many describe the emergence of COVID-19 as a ‘Black Swan’ event – something unexpected and of enormous magnitude and consequence, likely to completely reshape our society. While challenges undeniably lie ahead, Jessica Shaw MLA, argues that Western Australia, the Black Swan state, is well positioned for recovery, relative to other Australian states.
The effects of the COVID-19 ‘Black Swan’ event on our personal lives, businesses and model of government are significant and the scale of response unprecedented. Many commentators now project a deep and prolonged global recession. However, the significant disruption to our everyday lives does present a rare opportunity for Western Australia’s business, community and government sectors to plan comprehensively for the post-COVID-19 world.
The commonwealth and state governments have acted swiftly to address both the population health and immediate economic impacts of the virus, deploying record levels of resources to expand the capacity of the health system, support household and business incomes, preserve the economic structure, and to maintain and grow confidence. The forms and extent of government intervention are without precedent, challenging long-held conceptions about the role, capacity and inherent value of the public sector.
The pandemic has highlighted that our population’s health is our most valuable resource. By instituting the nation’s strictest border protections, restricting movement both to and within WA, early signs suggest that the State Government’s efforts to ‘flatten the curve’ have been effective in protecting our workforce and minimising the pandemic’s impact on our most vulnerable. Assuming we see a sustained decrease in cases, we will inevitably consider how to gradually relax restraints and resume economic activity.
The Prime Minister has ventured that some states may be positioned to lift restrictions earlier than others. Commentators have suggested that successful first-mover states may gain competitive advantage. Equally, jurisdictions can observe and learn from successful (and unsuccessful) relaxation measures and recovery policy initiatives instituted by other governments.
As minds turn from response to recovery, it is critical to consider how subnational governments might address the longer-term economic challenges: their potential roles in supporting growth and rebuilding value. Relative to other states, Western Australia has cause to be cautiously optimistic about our capacity to recover. The road will be long and difficult, but we start along it with a number of solid structural foundations.
In terms of stocktaking and planning for the ‘other side’, there are a number of structural advantages our state possesses in terms of government capacity and our existing economic base that position us well to develop a robust and innovative recovery strategy.
For instance, WA Treasury Corporation has observed that the state’s economy appeared to have picked up momentum in 2019. It noted that the Q4 2019 national accounts showed trend real state final demand (the total value of goods and services that are sold to buyers who wish to either consume them or retain them in the form of capital assets) grew at its fastest year-end rate since 2012 and the trend unemployment rate was the lowest since 2014 at 5.4 per cent. WATC considers that while WA will not escape the crisis, it “appears the best placed of the states to benefit from a recovery when in eventuates.”1
In terms of government capacity, the McGowan Government’s financial discipline in the early years of its administration, tackling state debt and returning the budget to surplus, has provided it with the ability to roll out immediate support for businesses and households. Although revenue into the state’s coffers will undoubtedly reduce following dampened economic activity, the Premier has signalled the Government’s intent to provide further stimulus and assist with economic ‘restart’ once the emergency passes.
In terms of strengths inherent in our existing economic base, WA has a commodity-driven economy. Compared to Eastern states’ economies, a lower proportion of our income is derived from service-based industries, such as tourism and tertiary education, and a greater proportion from minerals, energy and primary industries – industries that continue to operate throughout this crisis and will continue to function as we rebuild. Additionally, the strong and immediate response to the COVID-19 crisis will ensure WA’s reputation for stability and as a location for low-risk investment will be enhanced from a global trade perspective.
Western Australia is also replete with a range of critical minerals and materials required for telecommunications, electric vehicles and battery technologies. The Economics and Industry Standing Committee recently considered the State Government’s Future Battery Industry Strategy, the value chain opportunities associated with lithium mining and processing, and battery component manufacturing and assembly. Western Australia has a distinct global competitive advantage in lithium production, owing to its hard rock reserves, mature mining industry and stable political environment. Although there will undoubtedly be a downturn in global demand for commodities linked to renewable and battery technologies in the immediate future, over the medium to longer term, opportunity exists for WA.