Griffith Business School (GBS) academics have proposed a range of measures to solve Australia’s financial crisis in the wake of the COVID-19 pandemic.

GBS Dean (Academic) Professor Fabrizio Carmignani stressed policies were needed now in order to flatten the recession curve.

“We are facing a deep recession with very large social and economic costs,” Professor Carmignani said.

Professor Carmignani said evidence showed that with countries like Sweden, who did not adopt containment measures like those in Australia, were still headed for a recession as deep as those that had.

“The containment measures are necessary,” he said.

“What we need to do now is to absorb as much of the social and economic costs we are observing.”

He said four key priorities need to be addressed: strengthening the capacity of the healthcare system; ensuring workers stay employed and collect wages as much as possible; ensuring businesses that are solvent but illiquid do not go bankrupt; and ensuring and maintaining the liquidity of the banking system.

Professor Carmignani suggested reform by rethinking the role of fiscal policy and more investment in the labour market.

“It’s important we finally realise fiscal policy is a tool to achieve the greater good… not just to balance the budget no matter what,” he said.

“There is also an opportunity for investment in the labour market through active and forward-thinking policies that support the structural transformation of the Australian economy — like policies that support the mobility of workers across sectors.”

Finally, he said there is a need to develop a vision for sustainable and long-term inclusive growth in Australia, but not by choosing a sector that will drive economic growth in Australia in the future.

“These types of choices usually fade,” he said.

“What we need to do instead is to develop a vision to support and encourage innovation and entrepreneurship.

“There will inevitably be failures, but failures are not a problem.”

“It’s part of an evolutionary process, at the end of which successful innovation will emerge, new innovative sectors will emerge and will be driving the type of sustainable and inclusive growth we need long term.”

Griffith Business School’s Professor Tony Makin said the COVID-19 pandemic would likely change the way many things were done in the future.

“I think we can safely say Australia will never be quite the same as a result of this crisis.”

The economics professor said there were many reforms that could be considered, including raising the GST.

“Australia’s GST rate is relatively low compared to other advanced economies, as Australia is more heavily dependent on direct taxes — income taxes — than indirect taxes such as the GST,” Professor Makin said.

“I think there is a strong case for raising the GST perhaps to 20% across all items.”

Professor Tony Makin.

He also suggested other income taxes could be targeted at the higher end of the income scale, including inheritance taxes and wealth taxes.

“But we wouldn’t want to be targeting anyone that was badly affected by the crisis,” he said.

Professor Makin said company tax should not be an option, given Australia’s current rate for large companies is part of a problem when it comes to relatively low investment.

“There’s now net equity investment abroad, which means that we’re just not attracting investment here,” he said.

“One of those reasons is that our company taxes are way out of kilter compared to other economies.”

Professor Makin said also said there needed to be expenditure scrutiny for areas where there is overlap between the Federal and State governments.

More than 100 people tuned in to listen to Griffith University experts Professor Fabrizio Carmignani and Professor Tony Makin, and University of Queensland’s Associate Professor Renuka Mahadevan speak in an online forum organised by GBS, named COVID-19: The Australian Government’s Macroeconomic Response.