Chief economist update: The cheaper alternative

"Australia is following in the COVID-19 footsteps of the UK and experts are warning the floodgates are likely to open soon."

This statement -- printed by the Australian Financial Review - talked about the rising number of infections in the UK and how "Australia will also suffer as many severe cases and deaths as the UK".

As at March 24, the UK has 8077 cases of infection from the coronavirus, 422 deaths and 135 recoveries, according to worldometer.com.

According to the same website, Australia has 2144 cases, eight deaths and 118 recoveries.

Just like the UK, fiscal and monetary authorities here (and elsewhere) are trying to mitigate the fallout on the functioning of the general economic activity.

Just like the UK, Australian economic activity will slow as shown by the latest UK Markit/CIPS figures - composite PMI down to a reading of 37.1 in March from 53.0 in February; manufacturing down to 48.0 from 51.7; services down to 35.7 from 53.2.

But unlike the UK, the Australian government is heading into an utter lockdown earlier than the Motherland.

UK Prime Minister Boris Johnson announced "draconian" social isolation measures only yesterday (March 24) at the same time that ScoMo's implementing ever more stringent lockdowns on Australian society.

If, indeed, Australia is following in the UK's footsteps, that's well and good - even better because Australia isn't waiting until the number of infections gets out of control, when frontline responders are themselves infected and medical supplies (like ventilators) become scarce.

The Bank of England has cut interest rates by a total of 65 bps in March - 50bps on March 11 and 15 bps on the 19th and increased its bond purchases by £200 billion to £645 billion - while the UK Treasury reportedly plans to spend as much as 15% worth of the UK's national output.

To limited avail.

But Johnson's draconian - by western standards - shutdown regulations gave Britons hope. So much so that, according to the latest YouGov poll, Boris' net approval rating jumped to +20 in March from -7 in the previous month.

Fiscal and monetary authorities can only do so much to limit the economic fallout from the coronavirus.

The clue is in tackling the root of the problem - the continued spread of infections that's scaring the beejesus out of consumers and businesses from spending. We'll all be hesitant to spend and invest no matter how much money is thrown at us. With many shops and businesses shuttered, there'll be little to spend money on anyway.

Boris is showing Australia the way.

Three weeks of pain and isolation - which could probably be extended - may be a tall ask but it's a small sacrifice for us citizens of planet earth in exchange for a healthier and wealthier tomorrow.

Read more: Australian Financial ReviewBank of EnglandYouGov
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