Recent data confirms Australia’s economy is currently being managed more ineptly than at any time in the last sixty years, reports Alan Austin.
OF THE SEVEN recessions since the Australian Bureau of Statistics started tracking economic growth in the 1950s, the Morrison-Frydenberg recession of 2020 has been by far the worst. Gross domestic product (GDP) contracted in the 2020 March quarter by 0.3%. Then the June quarter saw a devastating 7.9% decline in GDP.
Australia’s second-worst slump was in December 1982 when the two negative quarters were minus 0.7% and minus 1.6%. All others were shallower than that.
A survey of these recessions is illuminating.
Economic management matters
Government responses largely determine the success or failure of an economy through a downturn. In all five recent major crises, some countries averted the job losses, bankruptcies and loss of life which bedevilled the majority.
The early 1980s recession triggered by the 1979 energy crisis was the most severe setback since World War II to that time. But not all nations were devastated. Italy, Israel, Sweden and Japan escaped almost unscathed.
Finland and France experienced just two or three negative growth quarters. Belgium and Germany copped four or five negative quarters. Australia, under the inept mismanagement of the Fraser-Howard Government, suffered six negative quarters, as did Canada and Switzerland.
The early nineties recession
One decade later another global downturn whacked most of the developed world. But not all. Italy, Israel and Japan were spared again, as were France, the Netherlands, Norway and Denmark.
Australia copped two quarters of negative GDP growth, as did the USA, New Zealand and Germany. Countries to fare worse were Canada, the UK and Finland.
To this point, Australia had clearly been highly susceptible to the downturns which many countries had avoided. Australia had also gone into recession in 1961, 1972, 1975 and 1977. So the count was six between 1961 and 1991.
This was one motivation for the Hawke-Keating Government’s radical restructuring of the economy in the late 1980s and 1990s.
It worked. Inflation was halted, the jobs market stabilised and economic outcomes steadily climbed the world tables. Australia was recession-free for a world record-breaking 29 years – despite several international crises – until Scott Morrison came along.
The early 2000s recession
The first test of Australia’s resilience came with the global collapse of 2000 and 2001. Countries badly hit, with four or five quarters of negative growth, included Israel, Iceland, Mexico and Turkey. Countries to escape with just one negative quarter or none included Canada, Ireland, the Netherlands and Australia.
The Global Financial Crisis (GFC)
The next test, and by far the greatest, was the catastrophic downturn which in 2008 dragged all developed economies into deep and prolonged hardship. All but one. Only Australia avoided a year-on-year recession, widespread job losses and the associated poverty and suicides.
Australia’s extraordinary success through the GFC was, of course, hailed by economists worldwide, although, not within Australia. It largely set the template for effective responses to the next emergency.
The COVID downturn of 2020
This has been a crisis like no other in that the impact on jobs, productivity and growth was severe but fleeting. To use technical econometric terms, this recession was "short, sharp and shitty".
Of the 37 OECD member countries, 35 went into a deep recession. Turkey and Chile were spared. Yet 33 have recovered already, with only Austria and France still in shallow technical recessions.
Job losses soared in most countries. But jobless rates are now back below pre-COVID levels in Australia, Austria, the Netherlands, Slovenia, Turkey and South Korea.
In contrast, jobless rates have never returned to pre-GFC levels in New Zealand, Norway, Austria, Italy, Greece, Spain and elsewhere.
The Morrison recession was not inevitable
Turkey and Chile show that a recession was not inevitable through the COVID pandemic. Both experienced greater infection rates and loss of life than Australia did. So did Bulgaria and Romania, which, while not OECD members, are very highly developed countries that also averted recession. This is true of other countries lower on the development table as well.
It may therefore be argued that Australia’s recession was not wholly caused by the pandemic, but by Coalition incompetence in failing to apply the right fixes in a timely manner.
The pandemic just made it worse.
Australia was heading for a recession anyway. Through the full financial year 2018-19, annual economic growth was a puny 1.68%. Inflation was 1.6% and population growth 1.65%. This was what economists call a per capita recession.
Australia’s ranking on economic growth that year tumbled to a miserable 25th in the 37-member OECD.
Clearly, the rot had set in long before the pandemic.
What comes next?
The next challenge is to discover what specific policy decisions fended off devastation in some countries through the latest crisis and those which, conversely, exacerbated the harm elsewhere.
Yet, one finding is crystal clear. The record of Labor, the Greens and independents in government making the right calls is vastly superior to the Coalition’s.
Alan Austin’s defamation matter is nearly over. You can read the latest update here and contribute to the crowd-funding HERE. Alan Austin is an Independent Australia columnist and freelance journalist. You can follow him on Twitter @alanaustin001.
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