With the virus on the back foot, it's tempting to declare victory. Provided we stay vigilant on the public health front, we do have a good chance of keeping the pandemic at bay. But there's another enemy still to defeat.
The public health measures have worked so much better and faster than expected that calls to reign in the economic measures have already begun. The prime minister has said he wants to get the patient out of the intensive care unit as quickly as possible.
But these calls take for granted an economic snap-back that is far from assured.
Last month's stunning revelation that the JobKeeper wage subsidy will cost A$60 billion less than expected has been taken by many as good news.
But this might not be because there is no need for further aid but rather because there are too many barriers to accessing it, or business owners have decided it is futile.
Even with this underspend, JobKeeper is propping up the wages of a quarter of the workforce. An extra half a million Australians have lost their jobs. While JobKeeper has saved many businesses, still thousands have failed.
It'll be a three-step recovery
Reserve Bank Governor Philip Lowe said last week it would be a mistake to withdraw the fiscal stimulus too quickly.
We see the battle plan for a full recovery progressing through three phases: (i) shutting down the economy until the pandemic is under control, (ii) bringing the economy out of the ensuing deep recession, and (iii) putting the economy back on a strong growth path.
If we're lucky, we're nearing the end of phase one.
We're ready for step two
This crisis is unusual. We deliberately engineered an enormous decline in activity in order to achieve the social distancing required to bring the pandemic under control.
During this first phase, conventional stimulus would have been of limited help and could have been counterproductive. We needed tools such as JobKeeper to freeze much of the economy with the hope it would thaw once the pandemic was under control.
The second phase is the more conventional vicious cycle of workers who lose income spending less causing other workers to lose income.
It is best dealt with by fiscal stimulus.
Broad-based cash transfers to households, like those implemented in the United States, would be a powerful complement to existing measures. They could paper over cracks in JobSeeker and JobKeeper over the coming months, and help prevent any relapse as those schemes expire.
Economists widely acknowledge the role of the cash stimulus component of the Rudd government's response to the 2008 global financial crisis in helping Australia avoid recession. The Morrison government could pick the best part of that response while avoiding the less effective parts.
Some worry about heightened levels of government debt.
These concerns are unwarranted. Australia went into the crisis with low debt by international standards, and can borrow at historically low fixed interest rates.
It can borrow for ten years at a rate close to 1%, less than the rate of inflation.
More debt, sooner, can cut debt
The more successful we are at getting the economy out of recession, the less we'll spend on programs like JobKeeper and JobSeeker.
Provided we keep the pandemic at bay, the quicker the economy recovers the sooner earnings and taxes will pick up and the sooner the budget will be back in black.
A turn to austerity triggered by debt and deficit of the kind seen in Europe after the global financial crisis could deliver us a slower rather than a faster recovery in our debt to GDP ratio.
Phase three in our recovery is the search for programs to increase the productive capacity of the economy. They can help make up for lost time, getting the economy back to where it would have been without the crisis. And they can help deflate away the debt.
How best to set our economy up for the decades ahead is an important debate. We look forward to it.
But let's not get ahead of ourselves. Now is the time to use the best recession-fighting tools we have to get the economy back on the path to recovery.
Authors: Steven Hamilton - Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University | Bruce Preston - Professor of Economics, University of Melbourne | Chris Edmond - Professor of Economics, University of Melbourne