Terry McCrann: Economic fate hinges on Victoria
Thanks to Victoria’s Lockdown, one state is keeping both itself and the nation locked in the worst recession in nearly 100 years, writes Terry McCrann.
Terry McCrann
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We saw quite a bizarre event during the week which went unremarked across the media and maybe even actually unnoticed.
On the day, Thursday, that the Australian Bureau of Statistics told us that unemployment dropped from 7.1 to 6.8 per cent, Prime Minister Scott Morrison said the real jobless rate was still well into double digits.
The ABS said only 922,000 Australians were unemployed; the PM was saying that at least 1.37m — at least another 448,000 — were really jobless. And that’s calculating off a real jobless rate ‘just’ into double digits: 10.1 per cent.
If you take what he said ‘well into’ to mean, well, at least, say, 12 per cent; we had the ABS tell us that 922,000 Australians were officially jobless and the PM ‘correcting’ that to at least 1.63m.
Those extra 700,000 or so — minimum — are not just some sort of statistical argument; they are real people. They — all of them — are also the crux of just exactly where we are right now and where we are headed.
The answer to both is Victoria. It is the pivot for everything.
Thanks to Victoria’s Lockdown Version 3.0 (the stage four lockdown that is the most severe and the most extended in the entire world), one state is keeping both itself and the nation locked in the worst recession in nearly 100 years.
In the June quarter the national economy plunged by an unprecedented, crushing, 7 per cent. You would have to go back to the Great Depression of the 1930s – decades before we had official statistics — to see anything like that.
We did get some indirect ‘comfort’ during the week: New Zealand did worse; its economy plunged by an even more thumping 12 per cent, thanks to its Lockdown going the Full Monty that Premier Dan was arguably itching, itching, all year to do and finally got the excuse to do in early August.
Before ‘Dan struck’, in the September quarter the national economy was headed for a bounce off the floor. It WAS going to recover by about 4-5 per cent.
Now both Treasury and the Reserve Bank see it as flat, give or take a decimal point or two around zero growth. And then Victoria struck.
I think that’s a tad pessimistic; that it will have grown by perhaps 1-2 per cent. We will find out when the official numbers finally surface early December.
The big and when you think about it quite startling difference between the June quarter plunge and any prior economic downturn, is that it was directly ordered by the government.
The government ordered businesses to close; the government ordered hundreds of thousands of people lose their jobs — for the best of reasons, of course, to fight the virus and to stop people dying.
But it is important not to forget that it wasn’t the virus that caused the recession; it was deliberate government — and especially federal government — action.
It is important because, as I argued right at the start, the — federal — government did not just then have an economic imperative to provide something like JobKeeper, it also had a moral imperative.
If as a government you order people to lose their jobs, you order businesses be destroyed, you were then morally bound to provide direct financial support.
Further though, just as the government can and did order the economy into recession; it can also and indeed in a very real sense actually does have to order it out of recession.
But in the ‘ordering out’ case, it is as much about state governments doing it as the federal government.
Clearly, the ‘ordering out’ is most critical in Victoria, but it is not just Victoria. The border closures of the other states are significantly negative as well and only those states can undo the damage.
The main game though is Victoria.
Not just that state, but the entire country is pivoted on a race between Victoria cutting its virus case numbers to (all-but) zero — and JobKeeper and JobSeeker payments starting to be wound down from the end of the month towards termination points at the end of March.
Whether the number of (the nation’s) jobless is 922,000 or 1.63m — it’s actually at least 1.87m and quite probably over 2m — it would be much worse but for JobKeeper, and to a lesser extent the super-JobSeeker payment.
More than 3m are getting JobKeeper’s $750 a week, for another two weeks; well over another 1m more the doubled JobSeeker payment — also, for another two weeks.
JobKeeper didn’t only keep people off the jobless numbers — official and real — the spending it funded (as with JobSeeker) fed in to the economy.
Those payments and so the spending will fall sharply as we kick into October. If Victoria stays locked down through November, the combination will be a real kick in the guts to the economy — and real people.
Originally published as Terry McCrann: Economic fate hinges on Victoria