COVID-19: Managing the risks must be based on evidence

By Verona Burgess

Friday April 17, 2020

COVID-19 ROAD TO RECOVERY — WHAT GOVERNMENTS CAN LEARN FROM EACH OTHER: This pandemic has put federal and state governments between the devil and the deep blue sea when it comes to managing risk, writes Verona Burgess.

Nothing is more important for the Australian Public Service, in helping chart the “road out” of the COVID-19 crisis into to recovery mode, than evidence-based risk management. 

Two essential elements in managing the crisis are the government’s ability to maintain the cooperation and good will of the people; and its willingness to develop and adapt its policy responses, sometimes at warp speed, on both the health and economic fronts.

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This pandemic has put federal and state governments between the devil and the deep blue sea when it comes to managing risk.

The post-National Cabinet press conferences helmed by the Prime Minister, Scott Morrison, and Chief Medical Officer Brendan Murphy have been a tour de force in plain speaking – normally a rare commodity in politics. 

Murphy’s patient, clear lessons in public health as he lays out the developing epidemiology with such clarity have been the bedrock for the trust being placed in the government.

On Thursday April 17, Morrison, who has, no question, risen to the leadership task, was able to talk for the first time about “synchronising” the health and economic responses which, up until now, have been seen as warring elements.

On the economic front, a key to maintaining the trust of the people will be the government’s preparedness to identify, admit and rectify the problems in the responses even as they are being implemented. By necessity, it’s been not so much policy on the run as at a gallop.

There are gaping holes, for example, in eligibility criteria for the $130 billion JobKeeper program in relation to the cash-flow realities of the nation’s two million small businesses. If they are not rectified, the casualty count may be too high before the payments even start to flow. 

Morrison has earmarked initial economic priorities for the “road out” as including manufacturing, infrastructure, agriculture and construction, seen as lower risk industries.

The current Commonwealth risk-management policy bible was issued in 2014 to support the Public Governance, Performance and Accountability Act 2013. It has nine elements that government agencies must follow.

Down in the weeds of preparing Cabinet submissions, the Department of Finance has a risk-potential assessment tool that departments and agencies are obliged to use to gauge the risk factors in any policy proposal that they put forward.

“This template will give ministers confidence that their entities are considering risk and mitigation strategies at the earliest possible stage of policy development,” it explains.

One might imagine that the use of this template has been running white hot recently.

The template asks 21 questions over two sections. Section A is “Strategic Context”. Its seven risk categories are (with “very high” risk described in parentheses as follows): government priority; financial impact (“very high” risk means exposure of public funds greater than $1 billion); citizens (large impact on large number); market (significant negative or positive impact on private sector); stakeholders (complex stakeholder arrangements or significant stakeholder opposition expected); legal risk (including risk of litigation or significant risks to the Commonwealth); and “all other” (specific risks to be highlighted to Cabinet).

Section B is “Implementation Complexity”. The fourteen risk areas are: other jurisdictional/entities/business areas; financial benefits; organisational/cultural change; innovation; information and communications technology; procurement; construction; contractual or service delivery arrangements; governance; management or team experience; timing constraints; dependencies; clarity of policy; and entity capability.

Even to the amateur eye it is obvious that the “very high risk” factors are, inevitably, off the chart in the government’s massive COVID-19 health response and the bail-out package that totals, to date, around $320 billion over the forward estimates. 

Of course, the risk of not taking those measures has been the potential death of many thousands of citizens and a collapsed economy. 

Ironically, extreme caution will have to play a major part in the decisions to unwind the measures on both the health and economic fronts.

During last week’s [April 9] parliamentary sitting to pass the JobKeeper package, Opposition treasury spokesman Jim Chalmers said, among other things, “What we learned during the GFC is that the business of stabilisation and recovery of an economy is a very delicate undertaking. It’s not only a technical policy issue but also one of confidence. 

“The technical issue is that stimulus only supports growth as it climbs to a peak. The second you are past the peak stimulus or peak dollars out the door, every dollar after that, even if it’s much more than you’d normally spend, is actually detracting from growth. So the stimulus must come off more slowly than the growth in new private spending, because it offsets it dollar for dollar in terms of economic growth.”

He said this was why, in the GFC, Australia had had two major waves of stimulus. 

“The first was the immediate sugar hit of the cash payments in October 2008, essential to sustain activity but not in itself sustainable. It’s why we had the second wave in February 2009, and that was the protein, the main nation-building investment in schools, housing and infrastructure, to underpin current and also future economic growth. It was still temporary spending, but it spread stimulus over a slightly longer period so we got through the danger period of weak private growth and were only withdrawing our stimulus once we were largely out of the woods.”

That is probably not something the Morrison government wants to hear. By its nature, it would probably prefer a fast clawback, even though politicians can find spending taxpayer money quite addictive once they get used to it. But the government didn’t want to hear about wage subsidies, either – yet here we are with the $130 billion JobKeeper program.

There will never be a perfect time for changing the weighting of priorities between public health and a healthy economy, but a collapsed economy clearly cannot support public health.  That’s why it continues to be all about managing the risk.

This article is part of the Mandarin Premium’s special COVID-19 Road to Recovery series.

 

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