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Letter from Melbourne

By SEC Newgate team
02 February 2021

By David Reeves

Writing this February 2021 update for our friends and colleagues in the UK from Melbourne, Australia is a thin line to walk.

On the one hand, Australia continues to be held up as a global case study for tackling the COVID-19 pandemic. Despite an early hotel quarantine bungle, Victoria has been lauded for managing to achieve what no other jurisdiction globally has been able to and not only got on-top of a true outbreak (albeit with one of toughest lockdowns seen anywhere) but achieve weeks and months of no community transmission. And even New South Wales’ recent outbreak has been well contained so that as of today there is zero community transmission across the country.

This means a ‘COVID normal’ life as Australians enjoy a peaceful and sociable summer, enjoying the beach and a few glasses of wine along the way. Despite some in the Northern Beaches area of Sydney being forced into lockdown, the vast majority of Australians celebrated Christmas with family and friends in this new normal. Prawns and turkey were consumed, presents opened and religious services went ahead. Come New Year, the champagne corks popped as we celebrated in a more subdued manner, but still with a freedom and safety that few globally have.

While I won’t speak too much about the cricket results (Michael Vaughn seems to enjoy speaking for the choir enough for everyone), with international and domestic cricket going ahead as planned, the Australian Open fast approaching, and the Australia Day public holiday, most across the country are thankful. It is also hard not to acknowledge the great benefit of clear policy direction, hard work and sacrifice by many Australians, as well as the luck of being a big island a long way from anywhere. With our vaccination program to begin in February, Australia has a real shot of leveraging this period to avoid the pandemic waves currently battering the UK, Europe, North America and beyond.

COVID normal also means Australians are increasingly returning to their offices, including in Melbourne, as businesses and employees now determine a balance between office and remote working environments. Nationally, forecasts of economic growth are positive with a predicted 4.4 per cent rise in GDP and household spending to bounce back by 6 per cent, as business investment also rises by 3.1 per cent. In Victoria, the predicted bounce is even higher at 5.3 per cent, a welcome figure for the state most impacted by the pandemic and recession (and of course back to leading the nation, like we are used to).

However, despite such positive forecasts, storm clouds continue to threaten the Australian economy and inform a likely long and hard recovery.

With wage subsidies via the JobKeeper policy to soon end, as well rolling back increased unemployment support rates, there are fears of a wave of business bankruptcies as zombie firms lose their final support mechanism. For the tourism and hospitality sectors, the threats are even more stark. Continued internal border closures and the unpredictability of similar future measures, as well as the pronouncement that our national border is likely to remain closed until 2022, has significant negative implications for such industries and the vast number employed therein.

None of which is helped by current diplomatic disputes and trade tensions with China, our largest economic partner, either.

Tariffs on wine, beef, barley, and threats to coal and iron ore, has rightly led to cries of quelle horreur, and questions regarding how the Federal Government approach this critical relationship. Such debate is increasingly seen through one of two incompatible prisms; political leaders who advocate a tougher line on China based on democratic, human rights and economic values (“The Wolverines”), and those in the more moderate camp pointing out that Australia has perhaps never been more economically reliant on this single relationship and that must be considered regardless of values judgments. For business stuck in the middle, there are a growing number of uncertainties with few answers and little meaningful comfort or assistance. 

But as said at the opening, this update is a fine line to walk. Because while we are enjoying this normality that has been worked very hard for (particularly by Melburnians), Australians are acutely aware of the plight of our friends in the UK and Europe. For those of us with family and close friends there, or simply keeping track via the nightly news, we can only hope that the vaccinations do the hard work and the right policy settings start to deliver results. Stay safe!