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Australia's COVID-19 about-face is a warning for everyone

Scott Morrison should channel the Hawke-Keating era to get creative about reform

| Australia
Scott Morrison's problem is the lack of a Plan B.   © AP

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

You do not need to be a political genius to know that no national leader wants their name tied to a recession.

Welcome to Scott Morrison's hell year in Australia, where the prime minister cannot seem to avoid #MorrisonRecession chatter as the delta variant trolls his "zero COVID" strategy.

This is a hell partly of Morrison's making. Like Taiwan and other early COVID-19 success stories, Morrison's government believed its own press, slow-walking the procurement and rolling out of vaccines, the only real solution to the pandemic.

The fresh lockdowns now hitting the economy are but one of the self-generated headwinds complicating Canberra's recession troubles. The other is a fraught China relationship that has fewer tankers carrying resources and other goods -- including wine -- to Australia's biggest customer.

In the past, I wrote the column "China's bullying of Australia is bound to backfire," published in Nikkei Asia on Nov. 5, 2020, which lauded Morrison's demands for investigations into President Xi Jinping's failure to warn the world China was about to export a once-in-century pandemic. There is nothing xenophobic about asking what happened in Wuhan. Morrison's trade minister, Dan Tehan, stressed that Canberra is ready to take the economic hit from China's retaliation.

The problem, though, is the lack of a Plan B.

Morrison's government, after all, is warning vintners to seek alternative markets as China's love affair with Australian wine ends badly over tariffs. Mainland taxes on bottled wine from Down Under could cost the industry something approaching $2 billion over the next few years.

Yet where are Morrison's alternative strategies -- both on COVID and China?

As "zero COVID" gets exposed as more of a political slogan than a clear strategy, there does not appear to be a contingency. The same with pivoting away from Australia's addiction to Chinese purchases of iron ore, copper, coal, petroleum gases, gold, aluminum, beef, wine and other products.

Quiet city center in Sydney, pictured on July 28: the fresh lockdowns are one of the self-inflicted headwinds complicating Canberra's recession troubles.   © Reuters

Do you know who does have a Plan B? The Reserve Bank of Australia, which just four weeks ago was plotting a reduction in asset purchases. Yet prolonged lockdowns, and export headwinds, are sending the national economy back into reverse and the RBA back to the drawing board. Tapering is now on hold.

There is something else trending on Australian social media that should worry Morrison: Gough Whitlam, the nation's prime minister from 1972 to 1975. As many are pointing out, Morrison just matched his 1,071 days in office. Today, he matches Malcolm Turnbull's 1,075 days from 2015 to 2018, and a month from now, Julia Gillard's 1,099 days from 2010 to 2013.

After that, Morrison starts stumbling toward a time-in-office comparison no one wants: Paul Keating. Granted, given Morrison's slumping approval rating, it is hard to see him lasting Keating's 1,500-plus days in power. Still, Morrison's public relations team must dread political scientists comparing today with the fabled Hawke-Keating era from 1983 to 1996.

As political tag teams go, the reformist energy of Bob Hawke, prime minister from 1983 to 1991, and Keating, prime minister from 1991 to 1996, looks even more remarkable decades on. Their combined governments opened trade channels, internationalized the financial industry, floated the Australian dollar, privatized several industries and devised a compulsory national pension system.

John Howard (1996-2007) served longer than either Hawke or Keating. He even put reform wins on the board, including a national goods-and-services tax and wise gun-control policies. Yet the boldness of the Hawke-Keating partnership casts a huge shadow over any Australian leader. And Morrison would be wise to tap into some of their audacity right now.

Over the last 25 years, China's boom blinded a succession of Australian governments from the urgent need to increase competitiveness, innovation and productivity at home. Why bother, many figured, when we can just ship more and more commodities to China? This China-only strategy worked wonders -- until it suddenly did not.

The pandemic is clearly a mitigating circumstance. Morrison's experimenting with poking the dragon a bit, so to speak, deserves some credit, too. But complacency has played a big role in why Australia's economy is expected to shrink as much as 2.7% this quarter. Downward pressure on the Australian dollar suggests a negative turn in market sentiment.

Complacency also plagued Morrison's readiness for a more transmissible COVID-19 variant, and got in the way of bold efforts to diversify growth engines, even more than its trading partners. Xi may be Beijing's strongest leader in generations, but his hyper-thin-skinned government is proving to be an unreliable partner -- or economic engine.

Australia ranks a dismal 21st in research-and-development spending among Organization for Economic Cooperation and Development members, and 86th on the Harvard Growth Lab's Atlas of Economic Complexity, which assesses the current state of a country's productive knowledge -- several places behind Albania, Guatemala and Kenya.

The roughly 1.78% of gross domestic product Australia spends on R&D helps explain why it punches so far below its weight in creating tech unicorns. R&D booms worked for Germany, Israel, Japan, South Korea and the U.S., and one can work for Australia.

Canberra should also start thinking about tax incentives not just to keep more innovators at home, but to lure overseas entrepreneurs to build their startups Down Under.

First things first, of course. Morrison's government must get a handle on COVID, and fast. It must get creative about braking the fall in GDP. More importantly, it must channel the audacity of reformers past and remember one thing: How much time you spend in power matters far less than what you do with it.

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