2021-06-24 Border Closures - Australia's New Protectionism

Join Saul Eslake for a discussion about how Australia’s prolonged border closures are indirectly providing a short-term boost to spending, and making it easier to reduce unemployment – although in the long run this form of ‘protectionism’ like all the other forms will make us worse off.

Australia has closed its borders – to the movement of people in both directions – more comprehensively than almost any other (and certainly any other democratically-governed) country on earth, in response to the threats posed by Covid-19. As a remote island nation, that’s been easier to accomplish than for most European or Asian nations, or for the United States. And unlike most other ‘liberal democracies’, neither Australia’s Constitution nor any of the treaties to which it is a signatory prevent the Australian Government from banning its citizens from leaving the country, or from threatening its citizens with jail should they attempt to return from a country from which the Australian Government has banned travel (even though they might be at much greater risk of catching Covid and dying than if they were able to return to Australia). With the exception of New South Wales, Australia’s state governments have also been more willing than governments elsewhere to order strict ‘lock-downs’ in response to numbers of infections that most other countries would ‘give their right arms’ to be able to point to.

This “lock ‘em out, lock ‘em in, lock ‘em up” approach has, from an epidemiological perspective, thus far served Australia well. Australia’s case numbers and, especially, Australia’s death toll, per head of population, have been amongst the lowest in the world. That has allowed those who do live in Australia to go live their lives in ways which – except when they are in a city or state which has been subject to a ‘lock-down’ – closer to what we used to regard as ‘normal’ than almost anywhere else in the world.

‘Fortress Australia’ has also delivered some under-recognized short-term benefits to Australia’s economy. The upwards of A$50 billion that Australians would have spent overseas during the past year – if they’d been allowed to – has instead been deflected into domestic spending, boosting retail sales, vehicle sales, home renovations, and hence employment, in ways that have more than offset the loss of the spending that foreign tourists and students would have done here if they’d been allowed to come. And the fact that Australians looking for work haven’t had to compete with recently arrived migrants has made it much easier to reduce unemployment. Indeed, as of May, unemployment is already back down to where it was before the pandemic started: and even if employment grows from here onwards at half the rate at which it has over the past five months, all else being equal the unemployment rate could be down to 3¼% – well below the level the RBA and the Treasury now think is consistent with ‘full employment’ – by June next year, the earliest date at which (it would seem) the Government is willing to contemplate re-opening Australia’s borders.

So what’s not to like about ‘Fortress Australia’?

Well, as Saul will argue in this webinar, it’s a new version of an old Australian habit – ‘protectionism’. ‘Protectionism’ is about forcing people to spend at home money they’d prefer to spend, if they were allowed, on things (goods or services) produced outside Australia. And it’s about reducing the competition Australians face from foreigners. Its advocates say it’s a ‘Good Thing’ – that’s why they call it ‘protection’ – because what true patriot could be against ‘protecting’ ‘Aussie businesses and jobs’. But our own history shows that while ‘protectionism’ can deliver a short term ‘sugar hit’ to an economy – in terms of increased local sales and jobs – it comes at a much greater long-run cost, in terms of efficiency and productivity, and ultimately, in terms of standards of living.

Meanwhile, Australia’s less-than-stellar progress in terms of vaccinating our population – especially by comparison with countries which bungled the first year of the pandemic, most obviously the US and the UK – threatens to bring Australia’s so-far better-than-average economic recovery back to the pack, as alternatives to maintaining a fortress as a way of managing the virus become more widely available.

This webinar is being offered free of charge in the interests of prompting wider awareness of some of the implications of the Government’s health and economic strategies.