Terry McCrann: The ‘good times’ just can’t last

Nobody under 30 in Australia has lived through a real humdinger recession. That may soon change, says Terry McCrann — and you should brace for tough times anyway. This is why.

Nobody in Australia under the age of 30 has had to live through a real humdinger recession. Make that nobody under at least 40, maybe even 45, for anyone who’s tried to find a job or run a business through a recession. Or sell a property.

That’s to say, nobody who’s lived continuously in Australia through these years.

If you’ve come here from somewhere else, it might well have been — it almost certainly would have been — a very different story.

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Australia hasn’t had a real recession since the early 1990s. By 1993, we were on the way out of it and we haven’t been close to going back at any time since.

In contrast, almost every developed country — led by the US — got hit by very real recessions around 2009 and 2010 after the global financial crisis.

Back in the early 1990s, the jobless rate went above 11 per cent in Australia and stayed there for years.

Some countries, notably Greece, went into real actual depressions and a decade later are still mired in pain.

We didn’t hit the wall primarily because of China, which went on a spending binge like no other country in world history, and which poured money directly into Australia — first through resources, then students and then tourists and property.

Major contributions were also made by the Reserve Bank, which slashed interest rates.

The RBA also introduced the “go hard, go early, go to households” big-budget spending proposed by then Treasury secretary (and current, for the moment, NAB chairman) Ken Henry and done by the Rudd-Swan government.

A moment’s diversion at my indulgence.

My major criticism of Swan as treasurer was not the pump-priming, although it was a bit excessive and badly directed (home insulation and school halls).

My major criticism was the failure — after the crisis had eased and it was clear that China was delivering big time — to wind it back. We are still living with the consequences of that failure.

As indeed, the rest of the world (including us) is still living with the consequences of the GFC and the subsequent efforts to fight the global recession.

A worker removes anti-austerity graffiti from the wall of a university in Athens, Greece, which felt the global financial crisis a decade ago particularly painfully.

It is sobering to note that the world only finally “got out” of the Great Depression of the 1930s thanks to the Second World War. We are still not “out” of the GFC and the policies that followed.

There was also a big fourth factor that warded off a recession in Australia a decade ago, that was not widely understood, but was bubbling away.

That factor was our high levels of immigration and the way it poured people specifically into Melbourne and Sydney.

It has kept those local, and so also the national, economies humming.

Now sure, to say most Australians have never experienced a recession in general terms is not to claim they don’t know about or have not been hit by hard times.

Many hundreds of thousands of people have lost jobs or had their businesses wiped out along the way.

The difference is they’ve generally been able to come back and quickly.

Back in the early 1990s, the jobless rate went above 11 per cent and stayed there for years.

Compare that with the situation now: official figures release last Thursday put the jobless rate at 4.9 per cent.

Then federal treasurer Wayne Swan was too slow to unwind the stimulus pumped into the Australian economy during the global financial crisis, says Terry McCrann. Picture: Glenn Hunt.

Back in the early 1990s, businesses were bankrupted at way above normal rates and the banks were hit with loan defaults — on both business and home loans.

That hasn’t happened this time — at least, so far.

Now, this has not been a wind-up to predict that we are all going to get a chance to find out what a real recession is like.

It is more to point out that we may get a recession — not so much a “recession we had to have” as, perhaps, one we won’t be able to avoid, if the US and China both “go down” together.

That might or might not be in our future, although right now any such prediction would be premature.

What is clear is that we are going to be living in far less buoyant, more volatile and very uncertain times than most of us have got used to over those 26-28 years since we had to live in a real recession.

Population growth could become a negative rather than an economic plus if the economy is struggling. Picture: David Caird

The major characteristics of the near-30 years of continuous “good times” have been jobs, rising real incomes and — for the two-thirds of us who own our homes — continually rising property values that we could ultimately turn into spending.

Yes, we’ve all had to live through various waves of change — such as the destruction of manufacturing and the arrival of online and digital disruption — that have destroyed jobs and businesses.

But they’ve also delivered huge and pervasive benefits (like cheap TVs and travel), making our boosted house-value dollars go much, much further.

What we now have to be worried about is that we will continue to get all the negatives from rapid change but much fewer of the pluses.

At the same time, the basic economic realities could get bumpier and population growth could become a negative rather than an economic plus.

Crudely, you could learn to live with congestion in Melbourne and Sydney while it boosts the economy and generates jobs. If it stopped doing the latter, we’d just be cranky.

The one thing we do — or should — know is that our world is not going to get calmer or less complicated.

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