Mike Hosking: 2020 is the year of the recession

Author
Mike Hosking,
Publish Date
Tue, 10 Mar 2020, 4:36PM
Two quarters of negative growth is your technical definition of a recession. To suggest that is not happening is to try and defy gravity. (Photo / AP)

Mike Hosking: 2020 is the year of the recession

Author
Mike Hosking,
Publish Date
Tue, 10 Mar 2020, 4:36PM

You don’t need to be a bank to call this, do you? Surely as sure as night follows day, we are headed for recession.

There is still variance in what sort of numbers we will get in quarter one and quarter two and we won’t get the quarter two number until about election time.

But at least one major bank has pulled the trigger on the r-word. If you accept our economy was slowing badly anyway.

What’s unfolded these past six to eight weeks certainly hasn’t helped.

A tiny country at the bottom of the world with its biggest trading partner closed and at least partially crippled.

A tiny country at the bottom of the world who’s major income outside dairy is tourism seeing a global fear of flying, routes being slashed, and guidance being suspended by the national airline.

A tiny country at the bottom of the world reliant on foreign students to boost bottom lines at high school and universities once again largely from the aforementioned one country that is crippled  if not closed.

Just what part of that scenario doesn’t lead directly to us going backwards economically?

Then you get to the broad based fear and this now is the real story. This isn’t as much of a health story as it is an economic one.

With five - count them five cases - the reaction has been disproportionate in the extreme. There is no need not to go out for lunch or dinner; there is no need to adjust your life in any real way.

And yet we have, rightly or wrongly, and that adds to the economic trouble coming our way.

So two quarters of negative growth is your technical definition of a recession. To suggest that is not happening is to try and defy gravity.

Is it the end of the world? No.

The GFC was a mile worse. If you translate the latest virus numbers out of China, and extrapolate them out to the rest of the world, we may well be through this by the end of April. But the damage will be done.

And the next question is how big the bounce back is. That will depend a lot on us the same way; it is up to us to this point.

Other things to think about, how does this play for the government; does it ruin their election year or enhance it?

How much cut through can the opposition get on policy if we are obsessed with hand sanitiser and bog roll?

Are job losses linked to government inaction or a virus we can’t contain and didn’t invite?

Going forward, do we really adjust our view long term of China and our reliance on them?

One of the best pieces I have read so far on the lessons learned from SARS and MERS and bird flu is we didn’t learn any lessons at all.

Do the Trumps and Putins of this world gain a permanent foothold in their isolationist thinking? Are we suddenly, as free open global traders and dealers, on the wrong side of the zeitgeist?

We are witnessing a piece of history, much of which is still unknown, but what surely is almost certain is 2020 will be a year of recession.