GDP number looks like a win, provided you look at it only one way

Treasurer Josh Frydenberg in Canberra on Tuesday. Picture: Martin Ollman

The third-largest economic contraction on record looks, unbelievably, like a win.

Treasury envisaged a 3 per cent blow to GDP, rather than the 1.9 per cent tickle we have experienced.

Josh Frydenberg can use this expectation management to talk about the resilience of the Australian economy – which is true. Locking down half the population did only slightly more than a quarter of the damage during last year’s national lockdown.

The fact that household spending in Victoria dropped by far less than in fellow lockdown jurisdictions NSW and the ACT suggests the more you are forced to stay at home, the better you are able to handle it. (At least from an orthodox economic perspective; GDP does not stray into the world of intangibles such as mental wellbeing.)

Indeed, shopping and working from home has become familiar to most people who live on the east coast. Firms are prepared to look through disruptions to the rebound on the other side, and have the processes in place to keep operating through outbreaks and draconian health restrictions.

Governments, too, have become better at responding. For half the level of fiscal support, we got a contraction that was only a quarter of the size of last year’s recession.

Again, though, this is about perspective. You could give Treasury kudos for designing more fit-for-purpose support mechanisms, such as the Covid disaster payment. Alternatively, you could say this speaks to the massive overspend on policies such as JobKeeper.

If you were uncharitable, as Jim Chalmers was on Wednesday, you could even say that this was a downturn we didn’t have to have.

Around the time Delta had forced Sydney into lockdown, only 30 per cent of Australians over the age of 16 had received a first dose of Covid vaccine, and fewer than one in 10 were fully inoculated. So you can easily construct an alternative history in which Australia had put more effort into vaccines and been better protected from the new strain when it arrived, perhaps even negating the need for lockdowns.

Chalmers has a good case to make. But will that message resonate with voters? The government is determined to put the economy at the heart of its election campaigning. It will do so with the economy in rebound mode, probably accompanied by a sharp drop in the unemployment rate, and will be happy to claim credit.

As for the fact we are bouncing out of a hole that we probably shouldn’t have fallen into in the first place, it remains to be seen whether Australians are interested in alternative histories and “should-have-beens” if today and tomorrow look bright.