How Victoria’s pain will be shared by the nation
Victoria’s rolling lockdown has not only thrown the state back into deep recession, but will be sufficient to keep the entire national economy in recession — just when it looked like we might climb out, writes Terry McCrann.
Terry McCrann
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The cost of the Victorian Government’s criminal negligence — devastatingly disastrous for Victorians, but also punishing for the entire nation — is becoming more and more obvious.
On the most immediate human level, it’s read out every day in the daily death toll — 12 announced on Saturday, 11 the day before, 193 now in total in Victoria or now some 69 per cent of the national toll.
Both — the Victorian total and the Victorian share of the national toll — will continue rising. For days? For weeks? For months? Ask Dan the man.
But somewhat belatedly, people and even “experts” are beginning to understand the broader devastation being wreaked by the Victorian Government’s negligence.
And again, it’s not just devastating for Victorians, but punishing for the other 19 million Australians who don’t live in Victoria but who have to — unnecessarily and undeservedly — share its pain.
Again, the economic and budget cost detailed by the Prime Minister during the week is just what will be evident on the surface.
Like an iceberg, the vast bulk of the pain — both economic and financial to individuals, both employers and business owners and employees, but also, critically to both mental and physical health — will be concealed below the surface.
That is, until it erupts into view at later dates, progressively over years like calving or splitting-off icebergs.
Victoria is one quarter of the national economy. The now (at least) nine-week rolling lockdown has not only thrown the state back into deep recession, but will be sufficient to keep the entire national economy in recession, just as it looked like starting to climb out.
During the week the Prime Minister revealed Victoria would cost the national economy somewhere between $10 billion and $12 billion in the September quarter alone.
That is real jobs lost — somewhere between 250,000 and 400,000 — and real businesses damaged or destroyed.
Treasury had estimated national economic growth was going to pick up by 1.5 per cent in the September quarter after plunging by an estimated 6 per cent in the June quarter (we will only get the official GDP numbers for the June quarter in early September).
Now Treasury estimates that growth will be marginally negative in the September quarter. More pointedly it expects the jobless rate to hit 10 per cent as against the 9.25 per cent it had previously estimated.
Now let me say that all these numbers are a combination of throwing darts at a dart board and computer-generated fake numbers.
The real jobless rate is already much higher — I’ve estimated it was closer to 20 per cent in May before coming back to around 18 per cent in June.
It was going to fall a bit in July until we “got Victoria”. It will go up in August as a result. And remember, I’m talking about the national number; the Victorian number will be worse, much worse.
The Reserve Bank put all this in context with its quarterly forecasts on Friday. Except, for the first time they weren’t forecasts but a “baseline scenario” and they were also, in forecasting terms, more broadly general.
Unlike Treasury in its Canberra Cocoon, the RBA lives more in the real world, albeit from a rather elevated position at the top of Martin Place in Sydney. In real estate terms: magnificent views of the Harbour.
In May the RBA had forecast the economy plunging a completely unprecedented 8 per cent in a single quarter, the June quarter.
But then, what we are living through is totally unprecedented: never before have we had a government order the economy into recession; order businesses be destroyed; order jobs be destroyed.
Now the RBA sees the economy as having dropped “only” 6 per cent in the June quarter — still the largest ever on record (back to 1948, and so not including the Great Depression).
But that was “before Victoria”.
Now, while the drop wasn’t as large as feared, the (national) recovery will be slower thanks to Victoria. And even that rests on the crucial assumptions that Victoria’s lockdown only lasts the scheduled six weeks and that nothing goes pear-shaped anywhere else in Australia.
That means you have to think of the RBA’s “baseline scenario” as now also the “optimistic scenario”. It rests, crucially, on the assumption that come mid-September, life can move progressively and smoothly back to a version of the pre-virus normal.
That assumes we can get sustainably on top of the virus — whatever that means — and/or that governments, whether state or federal, would not immediately move to lockdowns if we don’t.
Good luck with both of those.
All remains uncertain, except for one set of things: Victoria’s criminal negligence; the damage it’s done; and zero indication that the Victorian Government will stop being criminally negligent.