Economic possibilities, 19 April 2020
Updated: Apr 30
Latest data for Australia's corona virus looks promising. Numbers of those who have tested have 'flattened', better than expected, and deaths are few and far between. Our leaders have thanked Australians for (mostly) keeping to the tough rules imposed, but are sensing that good behaviour by people cannot be relied upon. The PM has said that, subject to results in the month ahead, Australia may be gradually easing on the 'lockdown' seen to such good effect. He has 'brought time' by suggesting easing may be on the cards if three things succeed.
Paul Kelly provides, as ever, a fine running review. 'No country has got to this stage. But Australia’s prospects look sound — subject to an assumption: that the medical projections of our progress to date are soundly based. Morrison said our medical progress had been “ahead of time”. He has now qualified his constant six-month timetable with a new four-week period — after which if health protections are strengthened, then base restrictions can start to ease. This is a critical policy change.'
'Morrison flags a revived economy based around three core principles — a recovery that prioritises business, not government; new policies, separate from last year’s election agenda, for a growth economy; and an economy that balances efficiency with greater security self-reliance.'
It is in my view impossible, except by luck, for anyone to predict the state of the economy this time next year. Options are:
* Sharp V-shaped correction - the ideal one assumes.
* A U-shaped recovery with a long, shallow U.
* A large fall followed by a long period of sluggish growth.
* The typical Aussie scenario is 'Pour the drinks, lads, let's enjoy life for a bit'.
I am inclined to expect the third scenario. My main reason is monetary. At the time of the Global Financial Crisis central banks threw vast quantities of money in an attempt to fend off inflation. The money helped create a sluggish recovery. Australia did better because China was doing well and kept buying Aussie iron ore and coal.
Compliments of Spooner, The Australian
Inflation may remain low this time because workers were not demanding big wage increases and because now the Corona virus is knocking lives to the floor everywhere. Perhaps in another ten years we shall be able to say that Australia again missed the worst of the economic downturn, this time because sensible 'suppression' policies minimised illnesses and allowed careful, rational recovery of our economy. Be aware however that international experts say Australia will have one of the largest downturns and because the major nations of the world's economic system are getting a much needed kick in the butt by some goods inflation to go with the continuing Asset inflation. This is the forth scenario.
There are three conditions being put as nicely as possible by the PM if Australia is to ease current 'suppression' policies. They are:
* much larger numbers of tests for the virus, aiming to get faster news of outbreaks
* better tracing capability is needed. This is likely to involve consent-based technology, now used in Singapore, with a voluntary app that allows mobile phone recognition if you are in contact with a person who has contracted the virus. Likely to be hard to convince Aussies to agree to as their activities will be far easier to track, but I hope a majority does so as it will greatly improve our ability to suppress the virus.
* swift local responses when outbreaks occur, such as in Northwestern Tasmania at present.
Here is the most difficult matter. There are two extreme approaches. 'Herd immunity' where the virus is allowed to run free until a large proportion of any population becomes immune. One assumes a higher level of deaths, and if a far greater proportion of elderly people make up the deaths, some (young) people may think it is no bad thing. A more certain result may be faster reintroduction of economic activity.
The other approach is called 'eradication - total killing the virus until there is no more in the population. This might work if every third person was a doctor or ICU nurse, but what happens when you open your borders?
In any case, these approaches are no longer possible in Australia. In any case, our approach is 'suppression' and this seems to be working well.
Paul Kelly finishes his analysis as follows:
'The recovery priorities will be getting some domestic planes in the air, speeding up infrastructure projects, ensuring construction is operating, factories are functioning and schools reopen, and getting some energy back in retail and cafe life. The core message from the week, only getting stronger, is that each nation meets the pandemic in its own way and that Australia’s strategy, so far, has been successful.
'Looking at fatality rates Morrison says Australia is just under 1 per cent at present (in terms of cases detected) compared with Britain at 13 per cent, France over 13 per cent, Spain over 10 per cent and The Netherlands at 11 per cent.
'Australia is not copying anyone. It believes it is on the right path. But Australia, unlike the northern hemisphere, now heads into winter.'
Read the full story if you subscribe to the Oz or can pick one up from a neighbour.
The sporting life
By accident I switched on the TV yesterday and went to Fox Sport. A wonderful footy game was underway. It was the preliminary final in 1990. Essendon were the red hot favourites, and Caaaarlton! were the hopeless underdogs. After a most stirring game, the underdogs won by 2 points.
Here is a great article about that era.
points. Sadly they were beaten in the grand final by North Melbourne. But the game reminded how much fun one can have when one's team plays well above its season performance to post a breath-taking finals win.