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Image: Maria Sbytova, shutterstock.com

Image: Maria Sbytova, shutterstock.com

Hibernating the economy through COVID-19

7 April 2020

CBE academics are behind the Australian Government’s approach to hibernate the economy.

COVID-19 is a crisis unlike any the world has seen in the last 70 years. Its effects are being felt across all levels of society and at all scales of the economy; with unemployment rising, an increasingly volatile stock market and anxiety gripping individuals who feel cut off from their community.

In the face of such a crisis, the ANU College of Business and Economics’ (CBE) Professors Rabee Tourky and Rohan Pitchford are leading the discourse on how the Australian Government should steer the economy, so that it emerges in as strong a position as possible.

The basis of their work is the idea of putting the economy into hibernation, by getting banks to provide insurance for businesses and allowing small businesses some exemptions from payments and interest. The intention is then that individuals and businesses would be able to resume trade as soon as the protective measures are lifted.

“Our suggestion is that the Government facilitates the transmission of low rates by doing whatever it can to encourage renegotiation of loans, credit lines and debt forgiveness by private banks,” says Rabee.

Rabee and Rohan’s substantial contributions to this area have captured the attention of the Australian Government, who are now adopting this economic hibernation approach.

As the situation unfolds, Rabee and Rohan continue to monitor the Government’s path forward. Following recent announcements from Government about the development of a wage subsidy, the two professors have mapped out the potential pitfalls of such a policy.

“Our proposal is to keep things simple and not to attempt to introduce complicated policies that are counter to the wellbeing of workers, which introduce corporate welfare into the policy mix, and which will very likely hinder recovery. Far better to increase unemployment benefits: use the existing tools of our (already elaborate) safety net,” they say.

The College supports its academics to share their expertise. Visit our new COVID-19 page to stay up-to-date with how our research is informing the policy and direction of Australia’s response to this crisis.

Updated:   8 April 2020 / Responsible Officer:  CBE Communications and Outreach / Page Contact:  College Web Team