Premiers send economy into reverse

The premiers of Victoria and NSW are doing their damnedest, in oddly idiosyncratic ways, to ensure the nation stays in recession through to Christmas at least.

At the crossroads. ‘The premiers of NSW and Victoria have put the entire country into recession. It is entirely in their hands how long and how bad it lasts.’

Let us be very clear. Australia is in recession right now.

The important question is not whether we were already in recession in the June quarter – we were not.

The important question is how long we stay in recession – the premiers of Victoria and NSW are doing their damnedest, in oddly idiosyncratic ways, to ensure the nation stays in recession through to Christmas at least; and their own states to stay in serious recession.

The subsequent question is what happens in 2022; when – (I’d say it’s still “if”) – we get to that target shimmering out there like an oasis in the summer desert heat of 80 per cent full adult vaccination.

This has been given an added degree of difficulty now that “adult” has seemingly been redefined as everyone over the age of 12.

It doesn’t seem to have occurred to many that getting to 80 per cent full vaccination of everyone over the age of 12 is much more difficult in both simple mathematical and functional terms than for over the age of 18.

Indeed short of actually holding people down, compulsion it’s probably impossible.

It doesn’t seem to have really sunk in among the political class that whether or not we actually call it Freedom Day, if the target is to have any serious meaning and effect, we do have to actually have to cross a line at which not just the actuality of lockdowns and border closures – right across Australia – are no more, but even the threat of them.

Does anyone seriously believe that’s going to be the case with Chairman Dan? That he will abdicate his power to call a “short, sharp lockdown” when Delta can leap across the Tasman in a single bound, as he noted the other day?

That he will abjure his belief that: “You only get one chance to go hard and go fast. If you wait, if you hesitate, if you doubt, then you will always be looking back wishing you had done more earlier”?

That he really will grit his teeth, say nothing and more potently do nothing if – when – the virus starts spreading through Melbourne, not just at the 80 cases or so a day of last week, but in the thousands?

If we got the numbers that the opened-up UK is now getting, in the middle of its summer, the equivalent would be 3000-3500 cases a day in Victoria. And, around 10 deaths a day.

Does anybody really believe that Premier McGowan would cede his power to close the WA border to a virus-ridden east, just because we had reached an 80 per cent vaccination rate?

Heck, I doubt he would give up the power even if we got to a 120 per cent vaccination rate, He’d sooner move to literally cede the state than the power.

So, it remains – or should be – a “known unknown” what happens into and through 2022, even if we do get to that 80 per cent vaccination rate, however defined.

What is much clearer – a “known” – is that we are in recession right now.

Thanks to the Victorian and NSW lockdowns, the national economy will have shrunk by at least 3 per cent in the September quarter, compared to the 7 per cent slump in the June quarter 2020 when the entire country was in lockdown.

We don’t measure state GDPs, but the plunges in NSW and Victoria would be more like 6-7 per cent, or roughly equivalent to that June quarter.

The other states would be at various points around zero growth, reflecting their specific characteristics.

Queensland was probably negative because of the hit to domestic tourism; WA probably positive thanks to iron ore, which is good for the state budget but not all that directly significantly in the lives of West Australians.

Those economists rushing to claim that next Wednesday’s June quarter GDP numbers will show us back in so-called “technical recession” are punting on the quarter coming in negative. Pre-add that to the certain negative September quarter, and “voila” there’s your technical recession: two successive negative quarters.

They’re in effect punting on a replay of what happened last year when the record June quarter plunge had followed a marginal pre-Covid 0.3 per cent March quarter GDP drop thanks to the bushfires.

The absurdity of the idiots that persist with this “technical recession” is that if that March quarter had been instead marginally positive – easy enough given the margin of error in this calculation – we wouldn’t have had a recession. One quarter’s 7 per cent plunge wasn’t enough.

Try telling that to the hundreds of thousands of people who lost their jobs and the even more than went on to JobKeeper and lower income; and to the tens of thousands of business owners who saw their businesses shuttered and shattered.

Sorry, your misconception; technically no recession.

Let’s say this June quarter comes in with positive growth. It should, in terms of what was generally happening with the economy; and with only Victoria’s Lockdown 4.0 of any major negative significance.

Chairman Dan was – figuratively and literally – resting between his earlier Lockdown 3.0 in February, when we got positive 1.8 per cent March quarter GDP growth, and Version 5.0 unleashed when he sprang back refreshed in July.

If by some miracle, the NSW and Victorian lockdowns ended in October or even, the heavens forfend, in September, and we got positive GDP growth in the December quarter, this would not erase the reality of the recession all 26 million of us are experiencing right now.

But even with lockdowns dribbling on through the December quarter – maybe with some more Premier Berejiklian-style easings in the premier state – it is entirely possible that we could get a small positive growth number in that quarter.

In sum, the premiers of NSW and Victoria have put the entire country into recession. It is entirely in their hands how long and how bad it lasts.