Mike's Minute: Was the economic calamity worth it?

Author
Mike Hosking,
Publish Date
Fri, 18 Sep 2020, 9:20AM

Mike's Minute: Was the economic calamity worth it?

Author
Mike Hosking,
Publish Date
Fri, 18 Sep 2020, 9:20AM

It's almost quaint that we call it a recession.

A recession is we might have, in the good old days, have gone backwards for two quarters but Q1 would have been negative 0.1 and Q2 was negative 0.2. Not negative 1.6 and followed by negative 12.2.

If this isn't a depression, then we need a new word, because recession doesn’t seem to cover it.

The 12.2 percent drop is worth noting for several things actually. Yes, it's not as bad as they said it would be. But surely now we understand that is a dose of reverse psychology and the fact their original numbers, even their revised numbers, were pretty much guesswork, and a dartboard would have been just as useful at Treasury.

It further highlights yesterday's PREFU, which you would hope was published with an increased level of confidence, but still in reality has to carry an element of "I wouldn’t have a clue what happens next" about it.

Which is what makes the GDP so interesting. It's real. Yes, it's behind us, but it did actually happen. This wasn’t a forecast or a guess, this was the cold hard stark fact of it all.

A 12.2 percent drop is a disaster. And it's proof positive that when you take our two numbers and Australia's two numbers, they thrashed us.

They closed less of their economy, their approach was broadly the same but with a defter touch, and as a result, Victoria and its specific Daniel Andrews' inaptitude aside, they got out less damaged. In fact, significantly less damaged.

The government needs to own up to this. Grant Robertson and Jacinda Ardern I am sure will busy themselves not wanting to compare, but we must, for the simple reason they are our trading partners, our closest allies, and a repository for what will almost certainly become a brain drain.

12.2 is of European standards, Sweden aside who got a 9 percent drop. They, once again, can claim that, economically at least, theirs has been a better path. But Spain, France, and Italy, economies we looked askance at fared no worse than us, or we no better than them. Italy, long considered an economic basket case came in at negative 12.4 percent.

The big question is, was all this really worth it? Chaos, carnage, joblessness, lives torn asunder, debt for years, deficits for years, and borders shut this year and maybe next. Even the so-called bounce-back we are supposed to be in now, is in real jeopardy and doubt.

Go hard and go early? Or go backwards and go broke?  

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