Coronavirus: Economy not as bad as we thought, but it will be if we give in to stupidity

Earth Digger Driver at construction site

With one coronavirus patient across the nation in intensive care on Wednesday, Josh Frydenberg conceded the cost of our efforts to avoid the scale of deaths overseas: the first recession in almost 30 years, and by far the deepest.

Whether it was the necessary price of success or born of hysterical overreaction, history can judge. But so far we’re doing better than most, at least. The 0.3 per cent contraction in the March quarter outperformed every OECD nation­ except Sweden, which managed 0.1 per cent growth.

Indeed, real income per capita — a far better, if largely ignored, measure of living standards in the national accounts — increased by 0.1 per cent over the quarter to finish­ the year 1 per cent higher.

Whatever the details, though, the worst is yet to come, statistic­ally. A contraction almost 30 times as great is expected in the second quarter. The favoured economic sales pitch of the Coalition and the Labor Party in government has been another virus casualty: those decades of uninterrupted growth are gone for a generation at least.

Per-capita economic activity went backwards by 0.7 per cent in March, before immigration dried up. And without 250,000-odd extra people every year, the per-capita figures are about to look a lot more like the headline figures.

That said, Reserve Bank governor Philip Lowe is probably right, and the downturn won’t be as bad as first thought, given restrictions have been eased sooner than expect­ed. GDP figures are inevit­ably backward-looking.

Chinese demand for our exports­ remains strong. Job losses have stabilised, and troughs in business and consumer confid­ence are already behind us.

Even the bounce in the Australian dollar back to US70c shows foreigners haven’t written us off as an emerging Argentina. To reduce the chance of that fate, though, governments must stop trying to cauterise all the damage they have caused in the name of public health.

The government’s stimulus packages are already near the largest in the world. Augmenting them further will not avoid a recession, but will make the years after the pandemic passes more challenging and shred whatever respect for sensible policymaking remains.

That the Coalition is poised to borrow even more to give tens of thousands of dollars to people­ who can afford to buy a house, for instance, flies in the face of its criticism of the Rudd government for doing the same in 2009. Worse, forcing taxpayers to renovate other people’s homes to aid some tradie, who probably earns more than the average taxpayer, is economic and political stupidity.

Moreover, neither policy will alter the fact that population growth has slowed dramatically, probably permanently. The construction sector will have to shrink. In any case, restaurants and hotels have done much worse than builders. Where are the federal subsid­ies for a round of beers at your local, or a Queensland getaway?