Terry McCrann: It will be harder to order the recovery
Australia is in recession, and not just a ‘technical recession’ but real recession where businesses go broke in significant numbers and unemployment soars, writes Terry McCrann.
Terry McCrann
Don't miss out on the headlines from Terry McCrann. Followed categories will be added to My News.
Australia is in recession.
Forget about that always stupid term ‘technical recession’ – the ‘two consecutive quarters of negative growth in GDP’.
Recessions, real recessions, the only form of recession, are when businesses go broke in significant numbers and unemployment soars.
That’s what happened in the last recession we had, in the early 1990s. The jobless rate went over 11 per cent; indeed it stayed in people-crunching double digits for nearly three years, and then took another four years to get below even 8 per cent.
That is exactly what is happening right now, even though the Australian Bureau of Statistics home page is still ludicrously telling us that the jobless rate is just 6.2 per cent.
The real jobless rate, shown by Roy Morgan Research polling and analysis, is over 25 per cent. Even the Government’s own JobSeeker – the dole – numbers show it is over 12 per cent, before of course accounting the hidden jobless on JobKeeper payments.
Yes, when this sort of thing happens the economy – recorded in the GDP numbers – shrinks.
But as I’ve explained before it’s ludicrous to describe these quarterly GDP growth numbers as a (technical) recession: plus 0.4, then minus 0.3, minus 0.1, plus 0.4, because of those two successive negatives.
But that these numbers would not signify a recession because there were no consecutive negative quarters: plus 0.5, then minus 1.6, plus 0.1, minus 0.8, plus 0.2.
In reality, the second would be a recession, a real recession, the first would not be.
Now, in any event, what is happening in this current June quarter will blow all that sort of prissy silliness out of the water. According to the Treasurer Josh Frydenberg, Treasury was initially forecasting the GDP drop could be as much as 20 per cent in this quarter.
No, that’s not missing a decimal point; Treasury really predicted the economy could have been slashed by fully one-fifth, in a single quarter.
Hence, its prediction that 6.5 million would be on JobKeeper – nearly one-in-every two workers, and over 55 per cent of all workers in the private sector. Plus the 1.7 million on the actual dole.
As we now know, those numbers were way over the top. ‘Only’ 3.5 million are on JobKeeper; the economy isn’t going to shrink by 20 per cent this quarter.
The Reserve Bank, which unlike Treasury is anchored in the real world in Sydney not an ivory tower in Canberra, had thought the drop could be around 10 per cent; it now thinks it’ll be more like 6-8 per cent.
These numbers are still crushingly bad: tens of thousands of business have been destroyed, hundreds of thousands of people have lost their jobs; many more are holding onto theirs only thanks to JobKeeper.
This is clearly not just the first recession since that of the early 1990s – smashing finally that claim trotted out by every treasurer of our world-record performance of unbroken GDP growth – but the worst recession since the Great Depression of the early 1930s.
It’s also the weirdest recession we’ve ever had. It’s the first recession directly ordered by the government – first with the flight bans that hit, as the figures show, tourism and hospitality in February and March; and then even more crushingly the mandatory lockdowns.
Unfortunately, it’s not going to work so easily in reverse.
Governments can and will order the end of the lockdowns; they can’t so easily order the economy out of recession, far less for it to return even to the already rocky state it was in through the March quarter.
The best thing though is that the plunge will be so great in this quarter, that there will only be one direction to go, and that’s up even if unsteadily and uncertainly.
For a complex of reasons, we should not have to repeat the long drawn out semi-recession that went almost up to 2000. But, we’ll see: there are a lot of dark clouds out there that will linger.
This numbers could, by the bye, lead to a really ludicrous outcome for the idiots to get their terminology around, if the March quarter number was subsequently revised, as they so often are, from the minus 0.3 to, say, plus 0.2.
Yes, the June quarter would be negative (big-time) but that all-but guarantees a positive September quarter, unless we got a massive ‘second-wave’ and the economy was ordered back into lockdown.
Then suddenly there wouldn’t be even a ‘technical recession’ as there would not be two successive quarters of negative growth.
Just the big fat June negative – and all the lost jobs and destroyed businesses that lived the real recession.
OH DEAR, FATE CAN BE SO CRUEL
Even people who should know better use that silly ‘technical recession’ term – like former RBA and now HSBC chief economist Paul Bloxham, who opined that Australia was “almost certainly in its first technical recession in 28.5 years”.
No Paul, we are in a recession, full stop. The March quarter data was just the prelude.
We didn’t get there in the rocky days around the introduction of the GST at the turn of the century; and we didn’t during the GFC when every other major country did – and indeed suffered their worst recessions since the 1930s.
That was thanks, first, to the Rudd-Swan-Henry massive stimulus spending – albeit, piddling compared to the Morrison-Frydenberg-Stevens stuff – and then secondly to China.
As he presides over the first recession in nearly 30 years and our biggest-ever budget deficit, that should give young Josh some pause for reflection: how fate can be cruel.