An unavoidable recession
The pandemic got us in, the treasurer must get us out
Asked whether Australia was already in a recession, Treasurer Josh Frydenberg made no bones about it. “The answer to that is yes,” he confirmed. After today’s national accounts showed the economy shrank by 0.3 per cent in the March quarter, it is a foregone conclusion that Australia will meet the technical definition of a recession – two consecutive quarters of negative economic growth – for the first time in 29 years, because the heaviest contraction is undoubtedly going to occur this quarter. “The impact in the June quarter will be even more severe,” said the treasurer, adding, “we’ve climbed this mountain before, we’ll climb it again”. Though Frydenberg was clear that worse is to come, the treasurer talked up early signs that the economy may recover more quickly and strongly than initially feared – just like Reserve Bank of Australia governor Philip Lowe said in his evidence to the COVID-19 committee last week. Off the back of better-than-expected health outcomes, the sharemarket has recovered, the Australian dollar is back up against the greenback, and consumer confidence (but not business confidence) has recovered from historic lows.
Citing the earlier-than-expected reopening of the economy, the government announced this afternoon that its economic and fiscal update has been postponed until late July, so that it can incorporate Treasury’s review of the JobKeeper program, the centrepiece of the $260 billion pandemic response. As Guardian Australia has reported, the government is considering adjusting the JobKeeper scheme so that, for example, businesses whose profitability has recovered may be weaned off earlier, or workers who have received effective pay rises will have their $1500 per fortnight subsidy reduced. That’s good news, and the flipside is there is every reason to extend assistance right now to those people irrationally excluded from JobKeeper or JobSeeker, and to taper the assistance off more slowly for the most heavily impacted sectors. Universities are expecting a $16 billion hit to revenue, are shedding hundreds of jobs (signalling the beginning of an avalanche of unemployment), and are warning it is “ground zero” [$] for Australian research. A billion-dollar stimulus package [$] for the housing industry is expected on Friday (and there have been mixed signals this week about whether it will be for new homes or renovations, and whether or not it will be means tested). A package for the arts sector, which has been decimated by the pandemic, is expected next week.
There can hardly be much political mileage made out of Australia’s slump into recession, and there will be very little patience for arguments about the counterfactuals. Would we have hit recession without the pandemic? Would the budget surplus have been achieved? Who cares! Australia has so far dodged the worst of the pandemic, and we are lucky to have a working Federation and an excellent public health service, among many other blessings. As Guardian Australia’s Essential survey showed yesterday, Scott Morrison is riding a historic turnaround in his approval ratings, with pollster Peter Lewis describing him as a “unifying figure” that voters are falling in love with – even if there has been a $60 billion bungle and most of the goodwill has come from pinching policies from the other side.
You can almost smell the relief as restrictions start to ease. Announcing interest rates would remain on hold, Philip Lowe’s statement from yesterday flagged it was “possible that the depth of the downturn will be less than earlier expected … there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending.”
From here on in, it’s all about economic management through this unavoidable recession, and there is plenty of scope for the Morrison government to get that very badly wrong. Shadow treasurer Jim Chalmers has warned that the country is heading for an “economic cliff” when the stimulus is withdrawn along with benefits such as childcare. A few more policy blunders like JobKeeper or robodebt, a bit more rorting of government programs, a bit more upper-class welfare, and a bit more selective austerity for the disadvantaged, and we should see the political contest get competitive again.
“I understand that Channel 7 will make a formal police complaint asking to have the matter investigated. We are in discussion with the State Department, and they have offered assistance to identify where the complaint should be targeted.”
Australia’s ambassador to the United States, former senator Arthur Sinodinos, treads very carefully after Australian cameraman Tim Myers and reporter Amelia Brace were assaulted by police while covering a protest outside the White House on Monday.
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The number of days the National Archives of Australia will take to declassify letters between former governor-general Sir John Kerr and the Queen of England, a delay that historian Jenny Hocking describes as “extremely disappointing” and inconsistent with the verdict of the High Court.
“The strong interest coming from all parties has generated the competitive tension we have sought that is important in a process such as this, and we are in a strong place when it comes to delivering the best possible commercial outcome for all creditors, and to see a strong and sustainable Virgin Australia emerge from this process. It is still the intention to have a binding agreement in place by 30 June, which remains unchanged.”
Virgin Australia’s administrators outline next steps, after selecting two private investment firms as final-round bidders: Bain Capital, advised by former Jetstar chief Jayne Hrdlicka, and Cyrus Capital Partners, linked to Virgin founder Richard Branson.
“After six months of research, I find out the Victorian education department has ‘opt out’ forms for Google and Seesaw that can be submitted by parents to their children’s school. Parents have to ask for them specifically, but to do so you need to know they exist. None of the 60 plus parents I speak to is aware of these forms.”
“The cell footage shows us Day suffered five significant falls that the officers failed to notice, and although policy stipulates alcohol-affected prisoners must be roused and physically checked every half-hour, after the fall that likely caused Day’s brain haemorrhage she was left alone for two and a half hours. The Castlemaine police, it turned out, were having their Christmas party, and the station was understaffed.”
“It is our organisations and communities that are best placed to respond to this crisis, and to drive progress towards the longer-term priority of closing the gap in life outcomes between Aboriginal and Torres Strait Islander people and other Australians. Yet these same organisations and communities have borne the brunt of repeated funding cuts and a roller-coaster of policy and administration changes.”
Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is the author of Inside the Greens and the unauthorised biography of Malcolm Turnbull, Born To Rule?
Asked whether Australia was already in a recession, Treasurer Josh Frydenberg made no bones about it. “The answer to that is yes,” he confirmed. After today’s national accounts showed the economy shrank by 0.3 per cent in the March quarter, it is a foregone conclusion that Australia will meet the technical definition of a recession – two consecutive quarters of negative economic growth – for the first time in 29 years, because the heaviest contraction is undoubtedly going to occur this quarter. “The impact in the June quarter will be even more severe,” said the treasurer, adding, “we’ve climbed this mountain before, we’ll climb it again”. Though Frydenberg was clear that worse is to come, the treasurer talked up early signs that the economy may recover more quickly and strongly than initially feared – just like Reserve Bank of Australia governor Philip Lowe said in his evidence to...
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