The UK is growing at the fastest pace in 80 years. The United States, fuelled by President Biden’s stimulus programme, is expanding at a breath-taking pace, while Sweden is growing at a rapid rate. Most of the global economy is bouncing back from the Covid recession at remarkable speed. There is, however, one exception. Australia. What has long been one of the most successful economies in the world is heading back not just into lockdown but into recession as well — and giving the world a sharp lesson in the cost of ‘zero Covid’.
Over the last year, Australia, along with New Zealand, has been heaped with praise for the way it has managed to keep Covid-19 under control. There is, of course, plenty of justification for that. Infection and death rates are dramatically lower than they are in most other countries. And yet, there is a price attached. Many local economists are now forecasting that a recession is almost certain in the latest quarter.
There is no great surprise about that. With rising local infections, and New South Wales and Victoria under lockdown, two states that account for more than half the country’s GDP output is being hammered. No one can produce very much when they can’t go out.
That, of course, is happening in one of the richest and most successful economies of recent times. Only a couple of years ago Australia was being celebrated for completing almost three decades without a recession, the longest run of uninterrupted growth since accurate GDP records started to be collected in the 1930s. Now it is slumping just as the rest of the world is recovering. In fact, it is about to show the economic cost of a zero Covid strategy. The country has imposed the tightest lockdowns and border closures in the world. Sure, that has worked in the sense that it has a far lower death rate than any other major counrtry. The trouble is, it also has a chaotic vaccination programme, and keeps going back into lockdown.
In truth, the big problem with zero Covid is that there is no exit strategy. The virus isn’t eliminated, it just keeps on circulating at low levels. While that is true, the borders have to remain closed and there are repeated lockdowns to stop infections running out of control.
Lots of ‘experts’ have been lecturing us for the last 16 months that there was no trade-off between health and the economy, and that zero Covid would be better for output in the medium term. Australia is about to show that isn’t really the case. Zero Covid will take a huge economic toll and may last for years. It is perfectly respectable to argue for it if that's what you want — but there is no point in pretending that there won’t be a heavy price in lost output and jobs. And over time that will take a toll on society as well.