The COVID-19 pandemic may prove to be the gravest public policy challenge of our lifetimes. It was simultaneously an unprecedented health crisis, an economic crisis and eventually a social crisis, the repercussions of which are still being felt today. Politically, the impact has yet to play out in full, but we may well have moved into a red flag zone.
It need not have worked out this way. Early in the pandemic our governments received high marks from Australians for their decisiveness in managing the crisis. In 2021, levels of trust in government hit a staggering 85 per cent — around 30 percentage points higher than before the pandemic. As the pandemic wore on that trust eroded. By 2023 it was back to the near all-time pre-pandemic lows.[1]
To understand why things have gone so wrong, we need to revisit the recent history of public policy before returning to our current troubles.
Over the last 50 years, Australian public policy has been driven by a single simple idea: the self-regulating market, (variously referred to as neoliberalism or economic rationalism). The idea is that government should shrink, allowing the private sector to do more while government focuses on supporting those most in need. As part of all this, government budgets were to be in surplus and government debt kept low, to free up cash for private sector spending.
How a pandemic changed the budgetary tune
With the arrival of the pandemic in February 2020, the self-regulating market policy regime was soon upended. Within 6 weeks, Australia had begun to rapidly intervene in the economy, eventually tipping in more than $314 billion as part of a rapid-fire set of stimulus measures, funded by debt.[2]
The single most important initiative was the decision to pay a portion of the payroll of businesses affected by the pandemic, costing an estimated $89 billion. The self-regulating market appeared to be no more — for the first time ever, the state was now paying a hefty chunk of the private sector’s wages bill.
'The pandemic was a moment of extraordinary crisis that the government could have used to bulk up public services and put an end to those malfunctioning, artificial and expensive markets in energy, airports, ports and care. Instead, it effectively turbo-charged the funnelling of public money into private markets that to this day are hardly models of efficiency, economy or sagacity.'
On top of this, the federal government substantially increased payments going to