On a flight path to a boom Christmas

We are quite literally flying to a very big finish to the year, writes Terry McCrann.

WE are quite literally flying to a very big finish to the year. The planes are back in the sky big-time and so are both business and holiday travellers.

Add this to a super-wave of pent-up consumer spending that started in November and is going to sweep through to and beyond Christmas, and the economy will have made up all the ground lost in the devastating June quarter by New Year’s Day.

The strength of consumer spending and the way consumers have reacted so quickly when freed either from literal imprisonment – locked in their homes – or prohibitions on certain spending like hospitality and travel has clearly taken both Reserve Bank and Treasury by surprise.

The real surprise is why they should be surprised as it’s essentially their doing: Treasury (advising) pouring money into consumer hands with JobKeeper and the RBA super-charging that by slashing home loan interest rates and thus home loan repayments.

All it really needed was for government – all nine governments to be precise – to ‘order’ people to start spending just as they had ordered them to stop, when they locked the joint down.

When Victoria finally did so order and the other states and most especially Queensland opened their borders, ‘away’ went both people and their spending.

Yes, it might be quite – indeed, extraordinarily and uniquely – bizarre; and totally unfair: a majority if not most Australians right now have never had it better, at a time of still near-record levels of (real) unemployment and small business trauma.

People prepare to travel to Sydney from Melbourne’s Tullamarine. Picture: Jake Nowakowski

But the truth of it is playing out in what we will in time discover will have been record levels of retail spending through both November and December, a spectacular surge in house-building activity, and now also the alacrity with which people have re-taken to the (domestic) skies.

As the Australian reported, now that state border walls have finally been torn down, flights have exploded.

Melbourne-Sydney has gone from 16 to 162 weekly return flights in barely three weeks; Sydney-Brisbane is almost as many at 120; while Jetstar’s Melbourne-Gold Coast has leapt to 40.

There are even planes flying to Perth – not that many yet, but a big increase in flights is scheduled around Christmas week.

That’s assuming of course that WA’s risk-averse premier Mark McGowan doesn’t extend his ban on face-to-face contact with eastern state pollies to eastern state people in general, by throwing up his border wall again.

Now the number of Melb-Syd flights – easily the busiest route we have; indeed, in ‘normal’ times it’s the second-busiest in the entire world – is still less than 50 per cent of that normal.

But Syd-Bris and Melb-GC are not far short of normal. That suggests the pick-up so far is heavily weighted to tourism-family-private trips rather than the mostly business flights of Melb-Syd – which confirms the breadth and even more the depth of this consumer spending binge.

Our economy shrank by 7 per cent in the June quarter. It snapped back 3.3 per cent in the September quarter as most of the country opened up, at least within states.

It would have been more like 5-6 per cent if Victoria had joined in. That would have recaptured almost all the drop and without the border walls coming down.

Now Victoria is acting as a national super-charger and the walls have come down and housing has taken off and consumer spending has been unplugged.

Growth this quarter will top September 3.3 per cent; the economy will be back to at least where it was in the December quarter last year.

Happy Days are here again?

Well, maybe. We are now in a countdown race to March between the ‘Godot’ vaccine and the end of JobKeeper.

Originally published as On a flight path to a boom Christmas