Virus lockdown pushes already weak economy into recession

If you needed the news that the economy contracted in the March quarter or Treasurer Josh Frydenberg’s official admission that, because Treasury expects the present quarter to be much worse, we are now in recession, go to the bottom of the class. Sorry, but you just don’t get it. To anyone who can tell which side is up, what characterises a recession is not what happens to gross domestic product in two successive quarters or...

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Many illusions performed in the name of creating jobs

How on earth can someone get to be Treasurer of our oldest state and yet say something as uncomprehending as that he has to freeze NSW public servants’ wages so he can use the money to create jobs? Fortunately, Victoria’s Treasurer is better educated. So, for the benefit of Dominic Perrottet, Economics 101, lesson 1: every dollar that’s spent by governments, businesses, consumers or the most despised welfare recipient helps...

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Reserve Bank has just one thing to say to Scott Morrison

It’s possible Reserve Bank governor Dr Philip Lowe has been reading a book about speechmaking – the one that says: keep the message simple and keep saying it until it sinks in. See if you can detect his one big message last week in his evidence to the Senate inquiry into the response to the coronavirus. Lowe said that when the JobKeeper wage subsidy scheme was due to end in late September was "a critical point for the economy"....

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Treasury: no depression, but no big bounce-back either

Although the virus has delayed the budget until October, Treasurer Josh Frydenberg will deliver an update on the budget and – more importantly – the economy, within the next fortnight. But last week the secretary to the Treasury dropped some big hints on what to expect. In evidence to the Senate committee inquiring into the response to the virus, Dr Steven Kennedy started with the outlook for the labour market. The latest figures...

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Right now, we need all the government spending we can get

Lying awake in bed last night thinking about our predicament, a frightening insight came to me: the only way out of a recession is to spend your way out. It sounds wrong-headed, but it’s not. It’s just, as economists say, “counter-intuitive”. Who must do all this spending? In the first instance, the government. And let me tell you, if Scott Morrison lacks the courage to spend as much as is needed – as it seems he may – he’s...

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Treasury: the budget won't ruin us, but will help save us

Something we should be thankful for is that Scott Morrison saw fit to return the leadership of Treasury to another highly respected macro-economist in the months before the arrival of a virus obliged Morrison to hit the economy for six. The key to our success in suppressing the virus was his willingness to follow his medicrats’ Treasury-like advice to “go early, go hard”. Unfortunately, going hard meant governments closing our...

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Women, part-timers and the young hardest hit by jobs crisis

At a time like this, measuring the rise in joblessness is very important. But it’s a trickier job than many realise. You have to draw boundaries somewhere, and where they should go can always be debated. But some who don’t like comparing shades of grey think the problem can be reduced to good guys and bad guys. Why do the figures look strange? Because some prime minister a few years back changed the definition of unemployment...

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Joblessness hasn't been worse in our lifetimes - nor as hidden

Voters have highly stereotyped views about which side of politics is better at handling which of our problems. So it’s no surprise that the party of the bosses is seen as better at managing the economy, the budget and interest rates, whereas the party of the workers is regarded as better at industrial relations and anything that involves the government spending money. These stereotypes aren’t necessarily right, but they’re deeply...

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Obsession with jobless is Morrison's best chance of survival

As Scott Morrison contemplates returning to politics as usual, there’s something he should keep front-of-mind: governments that preside over severe recessions usually get tossed out. Voters’ gratitude for being saved from the virus will fade, leaving them staring at that triumph’s horrendous price tag – its opportunity cost: the huge number of people still waiting to get a job back as we approach the federal election in early...

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There's a lot of economic worry about, but here's what matters

If you’re wondering what shape the economy will be in when we come out of lockdown, how the recovery will go – what to worry about and what not to – there are three key issues: the economy and its growth, the budget and its deficit, and unemployment and its consequences. These three are different but related. The trick is to understand how they’re related. What causes what. The media bombards us with information about them —...

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Let's not go back to politics as usual. It doesn't work.

With life cautiously returning to normal after the great lockdown, it’s time for Scott Morrison – who’s “had a good virus” – to think about where he goes from here. Does he want to be remembered as a single-minded warrior for his Liberal tribe, soon replaced by another scrapper, or as one of our great prime ministers, up there with Curtin and Menzies? Does he want to cling to office by exploiting our divisions, or by uniting...

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How Morrison can give us a bright economic future

A big part of getting economic life back to normal involves restoring people’s faith that the future will be full of opportunity for progress. But that ain’t easy because the gloom of recession kills our belief that things could ever get better. And the longer we think like that, the truer it becomes. So Scott Morrison needs to accept the paradox that returning the economy to normal demands that we don’t return to squabbling...

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Economic managers bank on us being smart as the average bear

It’s a lovely, comforting way to think about our economic problem. To beat the virus, we’ve had to put the economy into hibernation, but now it’s time for the bear to come out of its cave and get back to normal living. And it seems that’s just what Reserve Bank governor Dr Philip Lowe expects to happen. The "baseline scenario" he outlined this week sees real gross domestic product falling by about 10 per cent over the first...

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Hard lessons on how recessions work and why we hate them

Forgive me for boasting about how old I am, but this coronacession – aka the Great Lockdown – will be the fourth severe recession of my career as an economic journalist. That makes recessions my special subject, though I’ve not had much call to talk about them for almost 30 years. I was too young to remember much of Bob Menzies’ Credit Squeeze, which came within a whisker of tossing him out of office in 1961. But I was established...

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First the economy needs CPR. We'll worry about reform later

I can’t take seriously all those people saying we mustn’t waste a crisis, but seize this great opportunity to introduce sweeping economic reform. It’s like telling a baby who hasn’t yet learnt to walk it should start training for the Olympics. It’s true, of course, that we won’t get back to economic life as we used to know it – that is, knew it before the global financial crisis, more than a decade ago – until we get back to...

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After the anti-social lockdown comes the anti-jobs recession

Until now, old farts like me have thought it a terrible thing that next to no one under 50 has any experience of how terrible recessions are. Even ABC guru Dr Norman Swan sees the costs of the lockdown as mainly social: the boredom, loneliness, anxiety, depression, suicide and domestic violence. Really? That’s as bad as it gets, eh? But at least our lack of herd immunity from unrealistic expectations means only us old-timers...

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Morrison and the medicos must also avoid complacency

They say Australians always respond well to a crisis, and it seems it's true. Even in these days of disposable leaders, Kevin Rudd deftly stopped the global financial crisis from sucking us into the Great Recession, and now Scott Morrison has got on top of the corona crisis in a way few would have expected. His approval rating has soared. But I still wouldn't want to be in his shoes. Why not? Because, as an old econocrat explained...

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How would Jesus treat people on the dole?

Since it’s Easter, let me tell you about something that’s long puzzled me: how can an out-and-proud Pentecostalist such as Prime Minister Scott Morrison be leading the most un-Christian government I can remember? Fortunately, however, the virus crisis seems to be bringing out his more caring side. Many people think being a Christian means being obsessed with sexual matters - abortion, homosexuality and same-sex marriage – plus,...

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Some major contagions have nothing to do with you-know-what

It’s a long weekend so, though we’re barred from enjoying it in the usual way, let’s at least forget the V-word. How about a quiz? Let’s say the government is preparing for the outbreak of an unusual disease (no, not that kind of disease) that, should we take no action, is expected to kill 600 people. The government could act to combat the disease in either of two ways. If program A is adopted, 200 people will be saved. If...

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