The economic crisis is still to come

I have an op-ed in The Age this morning (ungated version here):

The economy is already broken. Devastated. The economic crisis is still to come. Realise this: in 2008-09 the government spent tens of billions of dollars keeping the economy going. In 2020 the government has already spent hundreds of billions of dollars to stall the economy. We haven’t begun restarting the economy.

It gets worse. Both state and federal government are in denial. They seem to think that this is a “business-as-usual” crisis. That somehow when they give the all-clear that we’ll emerge – as if from hibernation – from our homes, squeeze into our work clothes, give up our day-drinking, and go back to work. This is the snap-back view. Similarly many economic commentators seem to think that a good dose of government spending and tax increases will restore our prosperity.

Economies are not about businesses, and unions, and shops, and goods and services. The economy is about people; their plans, their expectations, their relationships. For all the talk about competition, the economy is about co-operation. The economy is not a machine that can be switched off and on at will. The interrelated web of co-operative relationships that was the February 2020 economy is gone forever. The economy that now exists is a lot smaller than what it was just six months ago. The problem now being that we can’t be sure which part of it will revive and which part of it won’t.

The Age basically published it as submitted (minor adjustments to reduce word number) but did edit part of my affiliation – alas.

 He is co-author (with Darcy Allen, Chris Berg, Aaron Lane and Jason Potts) of Unfreeze: How to Create a High Growth Economy After the Pandemic published by the American Institute for Economic Research.

Anyway – now available at all good book stores (okay – Amazon).

This entry was posted in COVID-19, Economics and economy, Gratuitous Advertising. Bookmark the permalink.

41 Responses to The economic crisis is still to come

  1. C.L.

    Great column. So true. I believed snap-back was possible, say, two months ago. But not now. These people have no idea what they’re doing.
    ——–
    What part of your by-line did they edit?

  2. a happy little debunker

    No exit strategy – beyond some vague hope of a vaccine.
    Both buggered and stuffed!

  3. Sinclair Davidson

    The bit that I quoted – they kept that I’m at RMIT.

  4. Professor Fred Lenin

    Has China reached its goal of being thr worlds largest economy yet? The very convenient Chinese Virus should have brought them close to the top . What a coincidence the virus has crippled the Wests economies ,
    As good detectives always say ,”I dont believe in coincidences “ . I wonder if the West will punish them for this strangely new virus ,? Bit suspicious dont you think .

  5. Fang

    I have a hard time understanding getting jobs back is the first requirement???
    Wouldn’t it be better to say getting small to medium business back on track? Doesn’t a private business create jobs, not the other way round?
    Take the shackles of small to medium business! Give them ten years of very little taxing, so entrepreneurs and humans! Can at least, take a risk with getting into business?
    I’m positive if state government closed its doors this afternoon (oh god please!)
    The private small business would explode and flourish? And just the GST revenue (On Everything) would help substantially with getting us out of this hole???

    One can dream?

  6. C.L.

    Oh OK, no free plugs for you.

  7. cuckoo

    Sorry, for a minute there it looked like you said you had an op-ed in the Age. Gotta cut down on this daytime drinking.

  8. Michael Lewis

    No need to leave a comment here. It is all perfectly summarised by the commenters at the Age/SMH. /sarc

  9. John Smith101

    Modern Monetary Theory is to economics what hydroxychloroquine is to COVID treatment.
    What is this supposed to mean?

  10. Mater

    This was a firepower demo for the uninitiated which displayed what the government can do to you and/or your business.
    Anyone starting/reviving/growing their business, needs to include this new factor in their SWOT matrix. The sovereign risk factor has enlarged significantly.
    Personally, now the bureaucrats have had a taste of the power, I wouldn’t bother.
    Climate change will be the next existential threat to the collective public health.

  11. Megan

    The utter failure of modern education systems to produce citizens with an understanding of basic economics or the ability to understand what they are being told by the mendacious ruling class, let alone question it in any competent way, has been totally exposed during this shit show.

    Not surprisingly the citizenry is not learning to read, write coherently or add up either.

  12. Colin Suttie

    “No need to leave a comment here. It is all perfectly summarised by the commenters at the Age/SMH. /sarc“

    My favourite SMH comment so far:
    “ Where is Ross Gittens when you need him, I am used to the clarity he brings to things.”

    Aren’t we overdue for a meteor strike?

  13. feelthebern

    Has China reached its goal of being thr worlds largest economy yet?

    No.

  14. gary

    The problem is that both sides of politics think that money can be printed and debt doesn’t matter. We are about to find out if that is true in Australia. My guess is no, Australia cannot print money or borrow without end, even Dan Andrews said the Victorian lockdown can’t go on for six months.

    What happens in six weeks when the current lockdown ends and there are still 100 new cases a day (in people who may have no symptoms) do they extend the lockdown or risk another flare up? You can bet they don’t know?

  15. feelthebern

    The problem is that both sides of politics think that money can be printed and debt doesn’t matter.

    I know.
    How good is it !

  16. jupes

    The West Australian has to be the worst newspaper in the country at the minute.

    Every day the headline is all about McGowan’s hard border. They just love it at the West. The border is saving our lives. Clive Palmer will open the border and kill Western Australians etc etc.

    At least The Age is prepared to put an alternate view to the government’s. Big Clive had to pay to put his view in an ad in the West. Mind you, The West accepted his money then ran editorials against it.

    Just disgraceful.

  17. Sinclair Davidson

    I have a hard time understanding getting jobs back is the first requirement???

    Getting jobs back is something everybody understands. Here is the full quote:

    Job creation is going to have to be the number-one policy objective for the next generation. Not make-work job creation that government excels at, but rather private sector jobs. Not more road building projects, but rather private sector entrepreneurship and innovation. That means trade and open borders. There is going to be a lot more technology use, too.

  18. egg_

    No exit strategy – beyond some vague hope of a vaccine.

    What else would you expect from Scotty-from-Marketing and a bunch of CMOs?

    “Go out the other side” – of what, a disaster of their own making, viz Dan Andrews?

    “Snap back”/”Zigzag” out – which is correct?

    /”I’m from the Government and I’m here to help!”

  19. The Beer Whisperer

    My favourite SMH comment so far:
    “ Where is Ross Gittens when you need him, I am used to the clarity he brings to things.”

    “Clarity” lol. For every complex problem there is a simple, and wrong, answer.

    Oh, hi, Ross.

  20. egg_

    Anyone starting/reviving/growing their business, needs to include this new factor in their SWOT matrix. The sovereign risk factor has enlarged significantly.

    It’s the equivalent of the Govt giving chemotherapy to the host (Nation) to save a frostbitten/gangrenous finger.
    It’s a sad state of affairs when the peak Union body has better ideas (JobKeeper) than the third rate pollies in charge.

  21. H B Bear

    Couldn’t let readers know you dare at the IPA. They would choke on their tofu.

  22. Speedbox

    Well said, Sinc.

    Many Cats (and some others) have been near distraught at the economic destruction. We watch in horror as others have literally ‘cheered on’ Andrews and Morrison. Your comment that “in 2008-09 the government spent tens of billions of dollars keeping the economy going. In 2020 the government has already spent hundreds of billions of dollars to stall the economy. We haven’t begun restarting the economy” is devastatingly true.

    Yet, few seem to grasp the enormity. For weeks, myself and others have asked “what is the exit strategy” and not once have I seen any kind of proposal. We have been marched into the abyss and our leaders have no f*cking idea how we will get out. Are we just waiting for a vaccine? If so, we are truly screwed.

    I agree with CL that there was a glimmer of hope for a moderate ‘snap-back’ if this destruction wasn’t pushed past May. But now, that hope has been utterly extinguished.

    I have told my children (the oldest of whom is still at Uni, the others still in school) that a portion of their taxes for their entire working lives will need to be used to pay the debts being accumulated this year. And I am probably being optimistic – some of the debt will linger onto their children.

  23. H B Bear

    Jobkeeper, mortgages and leases frozen, zombie companies everywhere. We are sleepwalking towards disaster.

  24. duncanm

    Read it – amazed at the comments.

    I think fiarfax comments are flooded by the twitter sewerites and blue drips… either that, or their letters/comments editor is partisan.

    I would suggest the latter, as I’ve never had a comment pass through the keeper.

  25. Nob

    The unemployment hasn’t even started yet.

  26. wal1957

    Everybody who has a hand in making decisions are too far removed from the economic impacts.
    ie. they aren’t suffering any income loss and the accompanying stress associated with same.

    Plenty of money trees around…just ask any politician.
    That includes the Libs, but especially Liebor and the Greens.

    This economic bastardry will be felt for decades, not years.

  27. feelthebern

    Couldn’t let readers know you dare at the IPA.

    I smell Fairfax/Nine doing that on purpose.
    So the punters accuse that connection being hidden.

  28. egg_

    Jobkeeper, mortgages and leases frozen, zombie companies everywhere. We are sleepwalking towards disaster.

    With a Zombie gummint, what do you expect?

  29. Watch Your Back

    Yes, market economies are the human condition in economic form. I’d offer the suggestion that this involves both cooperation and competition. Without the latter we’re less likely to see falling prices and new goods and services.

    The UK government is muttering about ending the ‘furlough’ in October, and the Governor of the Bank of England opines that dying industries shouldn’t be supported any longer. This is unconscionable as the hospitality and personal services and tourism industries weren’t dying until the government killed them.

  30. egg_

    Put the virus Genie back in the bottle?

    Chinese restaurants were complaining of lack of patronage – from Chinese – prior to social distancing laws.
    Self interest to the fore.
    Virus hysteria pumped up by the Govt and compliant media.

    Ruled by a virus “reported cases” curve.

    Pearl clutching “top Doctors” calling for a “shutdown” as they’re “terrified” due to THEIR Ruby Princess debacle.
    That’s yer problem, right there.

  31. egg_

    Job creation is going to have to be the number-one policy objective for the next generation. Not make-work job creation that government excels at, but rather private sector jobs. Not more road building projects, but rather private sector entrepreneurship and innovation. That means trade and open borders. There is going to be a lot more technology use, too.

    Including trade with China.
    Trumble was right, Trump was wrong.
    Never discount domestic politics in the US.

  32. NoFixedAddress

    Sinclair

    A great commentary that speaks to the heart of darkness.

  33. NoFixedAddress

    eggsie

    You’ve been watching too many Kingsman movies.

    Job creation is going to have to be the number-one policy objective for the next generation. Not make-work job creation that government excels at, but rather private sector jobs. Not more road building projects, but rather private sector entrepreneurship and innovation. That means trade and open borders. There is going to be a lot more technology use, too.

    Burn all Acts of all Parliaments in Australia.

    Trade with Open markets and have nothing to do with so called “free” markets.

    Stop all taxation and tax gathering structures.

    Open borders to refugee Christians from anywhere and South Africans in particular.

  34. Vicki

    Agree with every word, Sinclair.

    It is amazing that, in the midst of this economic carnage, so many can’t see what’s coming. Maybe everyone is in either a zombie state of disorientation or they are just in denial, or they having given the repercussions much thought.

    Or maybe – all three. Or maybe this is precisely why there is a high degree of anxiety & heavy drinking.

    I can’t believe that I have joined the ranks of “preppers” – but I have. It is just so surreal.

  35. marc

    No exit strategy – beyond some vague hope of a vaccine.

    Dan Andrews is on it. Belt and Road…

  36. H B Bear

    The Worst Australian and Channel 7 are Kerry Stokes in-house publications. Anybody complaining about Rupe hasn’t seen anything yet.

  37. egg_

    You’ve been watching too many Kingsman movies.

    That was quoting Sinc.

  38. a reader

    One immediate change must be made ASAO: CMOs must be elected by the people. If they’re going to control our lives, we should be allowed to choose the bastards

  39. Even the lovies can’t deny your arguments, even if they deny you some book sales.

  40. The job layoffs are going to massive. Or we can keep 1 mn workers on 750 pw plus 1 mn unemployed on 750 pw.

    The ensuing debt crisis would have permanently crippling unemployment that could destabilise Australia as a political entity.

  41. Squirrel

    Yes – we’re still in the early days of the phoney war on the economic front, and the Dunkirk(s) have yet to come.

    Not sure who’s going to lead us to the broad, sunlit uplands.

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