Flat White

Yes, there’s a by-election on, but this baseless optimism about the economy needs to stop

3 July 2020

11:45 AM

3 July 2020

11:45 AM

Since the coronavirus economic crisis began, there has been a great deal of rhetoric from the Morrison government that the economy would “snap back” to the way it was pre-COVID19, that their policies would “bridge” the crisis allowing for a rapid economic recovery.

This view has been supported by rosy forecasts from the RBA and Treasury, promising a recovery that can only be described as fantastical compared with those of the past decades.

After the release of the May unemployment figures, analysts concluded that the ‘real unemployment rate’ was approximately 11.3%, after accounting for workers who left the labour force after becoming unemployed in the past 3 months. This is already higher than peak unemployment during the 1990’s recession when it topped out at 11.2%.

Despite over $4 billion a week in government-induced stimulus measures flowing into the economy, which is a Kevin Rudd sized cash handout approximately every 3 weeks, jobs are still being lost at an alarming rate.

Meanwhile, the RBA’s optimistic scenario for the labour market has unemployment returning to just 5% by June 2022.

To put that into perspective, in the wake of the 1990’s recession unemployment peaked at 11.2% in December 1992. Despite the best efforts and economic management of the Keating and Howard governments, it took until September 2000 to reach 6% and June 2005 to hit 5%.

Among Coalition voters John Howard is often viewed as arguably the best economic manager the Liberal Party has ever produced. Yet even with his efforts, combined with those of the Keating government it still took 8 years to get within the ballpark of 5% unemployment and over 12 years to actually hit 5%.

The IMF has said that this crisis is the worst the global economy has experienced since the Great Depression, yet somehow there is the expectation that the Morrison government can do in 2 years what took the Howard and Keating governments well over a decade, during the greatest economic boom Australia has ever experienced.

The current economic crisis the world faces quite literally makes the global financial crisis look like a tiny blip by comparison. 

There is nothing wrong with an optimistic viewpoint being put forward by a government, Winston Churchill managed that even when the skies above London were filled with German bombers. But that optimism needs to be based on a solid foundation of facts, lest the hopeful outlook provided to the public eventually evaporate upon contact with reality. 

You can make up your own mind about the forces driving the rosy forecasts despite the dire circumstances we find ourselves in. But I will leave you with a quote from the former President of the European Commission Jean-Claude Juncker, which he uttered during the Eurozone debt crisis: “When it becomes serious, you have to lie,”

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