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Tom Hughes Oration – COVID-19 – Rising to the Challenge, Seizing the Opportunities

Speech

Date : 11 March 2021

Author: The Hon Josh Frydenberg MP

The Hon Josh Frydenberg MP
Treasurer

Tom Hughes Oration

“COVID-19 – Rising to the Challenge, Seizing the Opportunities”

11 March 2021

Sydney

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OPENING REMARKS

I acknowledge the Traditional Owners of the land and pay my respects to their elders past and present.

Thank you, Julian, for that kind introduction.

You’re a person with a deep commitment to faith, family and Liberal values and I very much appreciate your friendship.

Julian has the utmost respect of his colleagues.

He is a person of humility, integrity and talent.

As we’ve heard here in Berowra, you’ve had wonderful Members, among them Tom Hughes and Philip Ruddock.

I very much believe that Julian Leeser is a Member who will live up to that proud legacy.

It is a treat honour and pleasure to be delivering the Tom Hughes Oration tonight in the presence of Tom and his family.

Tom Hughes has provided this country with great service, and is known not just as the father of former Sydney Lord Mayor, Lucy Turnbull, a high achiever in her own right!

Tom is one of the most distinguished Australians of his generation and one of its finest legal advocates.

Thank you, Tom, for this honour.

Thank you for all you’ve done to serve our great country.

INTRODUCTION

In wartime, Tom Hughes served with the Royal Australian Air Force having been awarded the French Légion d’honneur for his courage while flying planes in the Invasion of Normandy.

In the legal profession he became a QC in 1962 and became the barrister of choice for difficult cases.

In the Parliament he served as Attorney General in the Gorton Government, with none other than John Howard, who as it’s been said, was his campaign manager, said of Tom Hughes, ‘it is hard to think of a more durable figure in the professional life of Australia than Tom Hughes.’

Tom Hughes once said, very modestly, that he had “a lucky war”.

It is hard for most of us to imagine the terrible ordeals that Tom, and those of his generation, faced at that time.

The events of the past year cannot be compared to the human tragedy of World War II.

But many of the same qualities that epitomised that generation of Australians have again come to the fore.

The Australian people have once again shown their remarkable spirit of resilience and innovation.

People from all walks of life have come together and risen to the challenge, led by our amazing frontline health workers and those working to secure our border.

Early in the crisis, our teachers and parents quickly adapted to remote learning, to ensure our children could continue to learn and not fall behind.

Our supermarket and transport workers partnered with government to secure our essential supply chains and keep vital goods on the shelves.

Our domestic manufacturers quickly pivoted to support our needs, best illustrated by our gin manufacturers shifting to the production of hand sanitiser.

And our banks worked in partnership with regulators and the Government to provide immediate relief for mortgage holders and small businesses.

These are just a few of the examples amongst many.

This spirit, together with an unprecedented response by the Morrison Government, has put Australia, as we begin this year, in an enviable position.

So far, we have come through this crisis in a stronger position than almost any other nation in the world — both on the health and the economic front.

Tragically, in the United Kingdom, there have been over 1800 deaths for every one million people as a result of COVID-19.

In Italy and the United States there have been around 1600 deaths per million people.

By comparison, in Australia, there have been around 35 deaths per million people.

We haven’t had more than two people in an ICU or on a ventilator due to COVID-19 at any time since November last year.

And our economy has recovered strongly, outperforming all major advanced economies in 2020.

And our success means that most Australians will avoid the long-term unemployment and scarring that can accompany deep recessions.

Aggregate employment levels for those over 35 years of age are now back at pre-crisis levels.

Around 94 per cent of the 1.3 million people who lost their jobs or were stood down on zero hours in April are already back in work.

And we can, as a nation of 25 million people, be proud of this collective achievement.

But we must now turn our minds to the future.

COVID-19 is driving changes to the global economy and the way we all live and work.

It has dramatically accelerated some existing trends and other new trends are emerging.

Critically for Australia, our success in managing this crisis gives us an advantage — a strong launch-pad — to take advantage of these changes.

While other countries will grapple with the need to dig deeper, more damaging effects of this crisis on their economies and their societies. We here in Australia have a unique opportunity to capitalise on our relatively strong position.

In this spirit, tonight, I would like to delve into three particular areas:

RISING TO THE CHALLENGE

Ladies and gentlemen, a year ago today, we were staring into a health and economic abyss.

The outbreak that started in January was engulfing the world and, with it, Australia.

Early modelling estimates presented to the Government suggested that at least one in five Australians could contract the virus, overwhelming our hospitals and our intensive care units.

The Treasury was seriously contemplating GDP falls of as much as 20 per cent.

This is roughly equivalent to shutting down our entire mining, manufacturing and construction sectors or, alternatively, the entire Victorian economy.

The Morrison Government, working in partnership with the states and the territories, regulators, businesses and the community took decisive action.

By 11 March, we had imposed international travel bans, initiated a health sector emergency response plan, set up a taskforce to ensure our frontline health workers had access to Personal Protective Equipment (PPE) and expanded support for telehealth consultations.

Since then, telehealth has been introduced, more than 13 million patients have accessed over 51 million services.

On 12 March, nearly a year ago today, we announced our first Economic Response Package, $17.6 billion in temporary support for businesses, apprenticeships and trainees.

Well that was pretty big at the time. Ten days later, we announced a second Economic Response Package.

This included an unprecedented $66 billion in further temporary support for businesses; the introduction of the Coronavirus Supplement for those on income support, and we opened the way for the early drawdowns of superannuation for those in need.

Despite this support, we saw those unforgettable images of thousands of our fellow Australians lining up outside Centrelink offices around country.

It was a heartbreaking moment, with some invoking memories of the Great Depression.

The strict health restrictions put in place to stop the virus were necessary.

But the cost threatened to be enormous.

This was a critical phase of the crisis.

We risked losing thousands of productive businesses and millions of Australian jobs.

Many may never have ever returned.

In response, the Government developed a third Economic Response Package, with JobKeeper at the centre, providing a genuine lifeline to business.

The impact of JobKeeper was immediate.

Consumer confidence recorded its largest jump on record in the week following the announcement of JobKeeper, up around 10 per cent, and continued to increase for nine consecutive weeks.

JobKeeper helped to preserve our high value businesses and capital.

JobKeeper maintained the connection with our best and most productive workers.

JobKeeper allowed the economy to bounce back more quickly, as the health situation improved.

With the economy having stabilised and an early stage recovery underway, the October Budget provided further support to help lock in a private sector led-recovery. Our intention all along, was to provide the emergency support and then for the private sector to take over. Our total budget plan included the $74 billion JobMaker plan, comprising:

The December Mid-Year Economic and Fiscal Outlook added a further $4 billion in economic response measures, including the extension of the Coronavirus Supplement and the successful HomeBuilder program.

Since the onset of the pandemic, the Morrison Government has committed an unprecedented $251 billion in direct economic support, three times more than during the GFC.

And more than double what the states and the territories have collectively committed to during this crisis.

Our measures all long have been temporary, targeted, scaled, proportionate and using existing systems in response to the most severe economic shock since the Great Depression.

The results are clear.

We are now better placed than we could have ever hoped for at this time last year.   In fact, the economic performance of Australia is far better than even our most optimistic forecasts last year.

The virus remains largely contained across Australia and our vaccine rollout is underway, prioritising our essential frontline workers and the most vulnerable in our community.

Our schools are open – and despite periods of home schooling in 2020 they remained open. This is not the experience of the rest of the world. The United Nations estimating that the closure of schools impacted over 90 per cent of all students last year, over a billion young people.

Our economic recovery is now well advanced, GDP has grown by over three per cent for the last two quarters, the first time in history.

The Australian economy has recovered 85 per cent of its COVID-induced fall, six months earlier and twice as fast as we expected in last year’s Budget.

Employment has risen for seven of the last eight months, driving the unemployment rate down to 6.4 per cent and participation rates are now back to near record highs.

In 2020, the United Kingdom contracted by 9.9 per cent, Italy by 8.9 per cent, France by 8.2 per cent, Canada by 5 per cent, and the United States by 3.3 per cent.

In contrast, Australia’s economy contracted by only 2.5 percent.

Net debt in Australia is expected to peak at around 43 per cent of GDP and then reduce over the medium term.

Even at its peak, it was around half the levels in countries such as the US, UK and France.

And Australia is one of only nine countries in the world to maintain a AAA credit rating from all three major credit ratings agencies.

This strong fiscal position places us well to support the recovery and to respond to future challenges.

In the Budget the Morrison Government adopted a new fiscal and economic strategy.

This strategy puts greater focus on job creation as we move out of this crisis and a medium-term focus on stabilising and then reducing debt as a share of the economy once the unemployment rate is comfortably below six per cent.

It is a strategy that recognises the economic stabilisation role of fiscal policy and is important because of the size of the shock we faced, and because of the macroeconomic environment with which we live.

I was pleased that the importance of Australia’s approach was recognised by The Economist magazine last year, when they wrote: ‘More countries should follow the example of Australia and pledge not to tighten fiscal policy actively until the economy has crossed a defined threshold’.

We recognize that fiscal policy has had to do more of the heavy lifting in this crisis compared to previous global shocks as monetary policy had less room to move and as recent announcements demonstrate, we will continue to provide targeted support where it is necessary and appropriate to do so.

While Australia has outperformed almost every other country in the world on the health and the economic front, now is not the time to declare victory or become complacent.

There are still many challenges ahead of us.

COVID-19 has not been defeated.

Managing the health situation remains our key priority.

But there is nowhere else I would rather be right now than in Australia.

And this gives us a unique opportunity to look ahead with confidence and hope.

To consider the new opportunities that COVID-19 will create.

THE POST COVID WORLD

So, ladies and gentlemen, what will the post-COVID world look like?

We know that this pandemic is driving changes to the structure of our economy and the way we live and work.

It is still too early to know with certainty whether these changes will prove structural or temporary, but there are some clear trends emerging.

Today I would like to highlight three of these:

Digitalisation

The most visible of these trends for most of us is the rapid acceleration in digitalisation.

COVID-19 has forced consumers and retailers to make shifts in their behaviour.

According to the Australian Bureau of Statistics, total online sales jumped by over 60 per cent over the year to January 2021, as consumers shifted to e-commerce.

Online sales in Australia were already rising strongly, from around $750 million in 2015 to around $1.9 billion in early 2020.

But COVID-19 saw this figure almost double again between March last year and January this year to over $3 billion.

According to Australia Post, in April of last year, at the peak of the crisis, over 5.2 million Australian households shopped online, 31 per cent higher than the average over the year prior.

Another change accelerated by COVID and digitalisation has been the shift to more flexible work.

Over the last year, we have all become familiar with platforms like Zoom and WebEx.

Businesses have had to adapt to new ways of working, with more of their employees working from home or attending meetings virtually.

This has required firms to make major internal changes to the way they engage with their employees and clients.

According to McKinsey, 20 to 25 per cent of workers in advanced economies could work from home three to five days a week in the future, mostly in office based occupations.

This is four to five times the level before the pandemic.

Never has the expression “necessity is the mother of invention” been more apt.

COVID-19 has provided a unique impetus for companies to shift to online and remote working on a scale and speed they could never have imagined.

These changes have the potential to drive longer term productivity improvements and reduce costs for businesses, helping drive stronger economic growth.

They also have the potential to improve the experience of individual employees; providing more flexibility to help better balance their work and personal lives.

This shift to remote working has also contributed to many of our regional centres growing strongly.

The increased use of telehealth services and, to a lesser extent, online learning, also has the potential to remove common barriers to rural and regional living.

As a result, almost all states are likely to see a short-term shift of internal migration patterns toward regional areas due to COVID-19.

Data released by the Australian Bureau of Statistics shows capital cities had a net loss of 11,200 people to regional areas in the quarter to September 2020.

This was the largest net quarterly move to the regions on record and more than double the average that they had observed over the last 10 years.

People have a strong desire to work, meet and socialise in person and common workplaces are a key enabler and vitally important in supporting collaboration and the benefits of agglomeration.

But we must also recognise that COVID-19 has materially changed the landscape and technology has reached a tipping point where it is now able to overcome many of the traditional barriers to more flexible work.

Indeed, ask yourself – had this crisis struck a mere ten years ago whether we would have been able to adapt in the way we have? I have no doubt that the level of disruption would have been much greater and the loss of economic output far more significant.

Governments and businesses must capture the lessons from this national-scale experiment.  Just as Governments will, businesses are assessing the actual costs and benefits that remote working arrangements, among other shifts, have generated over the last year.  It is these insights that will ultimately guide how they do business on the other side of this crisis.

Sovereign Capability and Resilient Supply Chains

Another trend stemming from COVID-19 is the increased focus on sovereign capability and more resilient supply chains for critical inputs and goods.

The onset of the pandemic was a major stress-test for our existing global supply chains.

I’m pleased to say Australia passed the test.

Our supply chains proved resilient and our economy responded flexibly.

In addition to those gin distilleries making hand sanitisers, we had businesses in Sydney making sleep apnoea devices which suddenly turned to making ventilators, and we had a mask manufacturing business in Shepparton, Victoria, that was operating on one shift five days a week with two machines producing about two million masks a year.

So we brought the Defence Force and it ran around the clock.

Nevertheless, the experience with COVID-19 highlighted potential vulnerabilities, here and in other countries.

Not only to pandemics, but to other shocks such as cyber-attacks and natural disasters.

In Australia, we saw the risk of shortages of critical healthcare products such as personal protective equipment as major exporting countries redirected products for their own domestic use.

Coinciding with increased demand due to widespread rain last year, our agriculture industries faced shortages of some essential farm inputs such as herbicides, pesticides and fungicides.

This has triggered a global shift towards greater self-sufficiency and more diversified sources of supply for critical health and other essential inputs.

In the United States, President Biden recently signed an Executive Order for a 100 day review of potential weaknesses in the US supply chain for semiconductors, pharmaceuticals, batteries for electric vehicles and critical minerals.

He also called for closer cooperation with allies and partners to foster collective security and strengthen our capacity to respond to international disasters and emergencies.

Similar exercises are taking place now in many countries around the world.

And this is appropriate.

And these new shifts will unlock new opportunities for Australian industries to form new partnerships and play a greater role in global supply chains.

Around the world, countries are focusing on securing reliable access to critical minerals and resources technology; advanced medical products and pharmaceuticals; food and agriculture; defence and space technology and energy.

These are all areas where Australia has existing capability and a comparative advantage.

But we cannot allow this push for self-sufficiency and resilience to morph into old-fashioned protectionism by another name.

Australia has benefitted more than most countries from a strong, open, rules based global trading system.

Taking advantage of these emerging opportunities, whilst maintaining the best of the global trading system, has significant potential to boost our economic recovery and create many more jobs for Australians over time.

Competition for Global Skills and Talent

Finally, COVID-19 has seen the movement of people dramatically fall around the world.

The strong population growth that Australia has seen over recent years, including through our skilled migration program, has gone into reverse.

Following swift action to restrict international travel in March last year, the number of people entering Australia between April and December last year fell sharply to be just 1 per cent of the levels experienced over the same period in 2019.

Indeed, net overseas migration will be negative this year, for the first time in 75 years with 72,000 more people emigrating from Australia than immigrating.

Overall population growth is expected to fall to just 0.2 per cent in 2020-21 and 0.4 per cent in 2021-22, down from 1.3 per cent in 2019-20.

The reduced flow of international students has hit our education sector hard.

According to ABS data, in 2020 the total value of in-person education exports fell from a record high of just over $40 billion to around $31 billion.

The fall in international migration has made it harder for our agriculture sector to meet its seasonal workforce needs, and for many other companies to recruit and attract other high quality international professionals.

As vaccines are rolled out, and international travel reopens, there will be increased competition to attract the best and brightest global talent.

And because countries will open up at different speeds, and experience different domestic health and economic outcomes, migration flows will continue to be disrupted.

This will present new opportunities for countries to open up new markets, or expand existing markets, for high value services exports like education and tourism.

It will present opportunities for successful and fast-moving countries to attract more of the best and brightest.

The countries that seize this opportunity will be better placed to grow strongly into the future.

For me, human capital has always been more important than financial capital.

Migrants assist to fill skill and labour shortages – they allow us to take advantage of business and investment opportunities that we might otherwise be unable to take up.

We now have an opportunity to attract some of the most skilled and highly qualified individuals from across the world to build on our competitive position across a wide range of sectors, professional fields and scientific areas.

The benefits of this targeted migration is not just limited to these sectors.  In 2016, the International Monetary Fund found that increasing the share of migrants in the adult population of an advanced economy by 1 percentage point can raise its GDP per capita by up to 2 per cent in the long run.

Migrants contribute to our productivity which in turn increases our living standards.

SEIZING THE OPPORTUNITY

Ladies and gentleman, Australia is uniquely placed to seize the opportunities flowing from COVID-19.

Our success on the health and economic front mean we are at the front of the pack.

We have a strong economy that is growing and has momentum.

Australia’s onshore COVID-19 vaccine production is supporting our health response at a time when many countries in the world are entirely dependent on international supplies.

We are a safe and attractive destination from a health and lifestyle perspective for international talent, students and workers.

We are a trusted, reliable, open, trading partner, with comparative advantages in many of the critical goods that countries are seeking to build resilience in.

We have a strong and sustainable budget position, allowing us to prudently invest to take advantage of these opportunities.

The Morrison Government has already made a strong start to seize these opportunities.

The 2020-21 Budget included a Digital Business Plan.

The Plan includes investments of almost $800m and removes outdated regulation to boost the capability of small businesses and drive the uptake of technology across the economy.

We have also introduced a new ground-breaking Consumer Data Right.

It gives consumers greater control over their own data and allows them to share their personal data in a secure and trusted environment.

The Morrison Government is leading the world in setting the ‘rules of the game’ for this new digital environment, ensuring Australian businesses share in the benefits.

Australia’s new media Bargaining Code for media and digital platforms is a significant economic reform for the new digital age.

It is an example of our leadership on a global scale on these issues.

These initiatives are designed to help Australia stay at the forefront.

I have also outlined tonight how COVID-19 is reshaping global supply chains, with a greater focus on sovereign capability and trusted partnerships.

And this is where we are moving to ensure we protect our own supply chains and seize the opportunities for Australian industry.

CONCLUSION

In conclusion, Australia has always been an attractive destination to travel, work and live.

But our strong position coming out of COVID-19 provides an opportunity to bring even more global business and talent to our shores and help create more Australian jobs.

We are not out of this crisis yet. But there is no other country I would rather be in at this time.

And through capitalising on our opportunities provided by our success in managing COVID-19 we can ensure that this is a crisis that is not wasted.

And most importantly of all, we can ensure that Australia, a country which Tom Hughes has made such a significant contribution to continue to be the best country to live in the world.

Ends.

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