Coronavirus: Coalition blueprint for recession makes sense

As odd as it sounds in the midst of mass unemployment and recession, Australia has again proven itself the lucky country.

Wednesday’s economic growth numbers for the March quarter could have been worse. Much worse. And compared with where most of the rest of the world is, they could even be considered good. This is the broader narrative to which Scott Morrison and Josh Frydenberg have hitched the economic recovery. Australia has made the best of a very bad situation.

Yesterday’s national accounts reflect the world we lived in three months ago. The first negative impacts of the coronavirus were starting to come through on top of the bushfires. It was also pre-stimulus. The contraction of 0.3 per cent was better than Treasury forecast, owing as much to the prediction model as it was expectation management. As they say in the financial markets, “beat it by a penny”.

Taken in isolation, the figures are on the GFC scale. Bad but not so bad. Taken in the context of the beginning of a pandemic, then they aren’t that bad at all.

The slowdown was far less pronounced than all G7 nations, most of Asia, and a hell of a lot better than China. Over the same period, the US went backwards 1.3 per cent, Germany 2.2 per cent, France 5.3 per cent, Italy 5.3 per cent, Britain 2 per cent, the Eurozone 3.9 per cent and China 9.8 per cent.

Having prepared for the worst and delivered something slightly better, the Treasurer has taken a forward-leaning position to declare the country in recession while laying the groundwork for the next round of numbers, which won’t be released until September.

They are likely to be catastrophic.

Yet like yesterday’s numbers, in themselves they are just a historic confirmation of what people are feeling right now.

Frydenberg can have every confidence that the next set of numbers, while probably the worst since the Great Depression, will be released at a time when the economy is already in recovery.

In other words, we are now at the worst of it.

Labor’s take on the news was hardly surprising, if somewhat hysterical. And it runs the risk of heaping pessimism on a people looking for optimism.

The economic numbers reflect one thing. The government has performed a remarkable feat in beating back the virus.

This has allowed Australia to begin an accelerated reopening of the economy.

The Prime Minister and Frydenberg have taken a two-pronged approach since the beginning — “go hard and go smart” — by spending to protect the economy and jobs while seeking to get reforms in place that will grow the economy faster on the other side.

The numbers give them no reason to change the strategy. If anything, it confirms it is right.

The challenge ahead is how to take the nation with them on the next phase. This will require them to explain to families where they are headed when the government begins to wean them off JobKeeper and JobSeeker. That will be a much harder story to manage than the raw numbers of the economy.