By Alan Austin
First the Covid crisis was “worse than the global financial crisis”, then it was “thirty times worse”, then it became “the most significant crisis Australia has seen since the Second World War.” That’s according to Scott Morrison and Josh Frydenberg. Now, as their messaging appears to be flailing, “the country has been under the most stress since federation itself”.
The implication of these ridiculous claims is that the Coalition faced a much greater challenge – thirty times greater to be precise – than Labor did in fending off a recession.
Recessions since federation
Since 1901 there have been six major global downturns. The most severe was the Great Recession in the 1930s. Second worst was the global financial crisis (GFC) from 2008 to 2013. Others, in order of severity, were the early 1980s global recession, the 1970s energy crisis, the early nineties oil price shock and the Covid downturn of 2020.
Of these, the last was clearly the mildest. It was much shorter, impacted fewer countries, cost far fewer permanent job losses, and caused much less damage as measured by property loss, bankruptcies and suicides.
Quarterly GDP growth
Through the GFC, only two of the 36 developed members of the Organisation for Economic Cooperation and Development (OECD) avoided a recession – defined as two quarters of negative growth in gross domestic product (GDP). They were Australia and Poland. (Australia also avoided widespread job losses. Poland didn’t.)
Through the Covid downturn, however, more than twelve major economies averted recession. These include OECD members Ireland, Japan, Poland, Chile, Lithuania and Turkey. So did Romania, China, India, Croatia and others which are not OECD members.
Annual GDP growth
Through the GFC, only one OECD member country averted a negative quarter of annual GDP growth. That was Australia. Israel experienced one negative quarter and Poland just two. Chile and South Korea copped three. A majority of 27 nations suffered between four and 14, while four economies endured more than 14. See GFC chart, below:
The longest recession was Greece’s which lasted six years. The average was more than two years. In contrast, the Covid recession was over within a few months for all OECD members except Austria. Austria’s recession lasted nine months. See Covid chart, below:
Yes, the negative quarters in the Covid downturn were deep. But the snap-back was rapid. France, for example, suffered a 13.5 per cent quarterly decline in the 2020 second quarter, the worst in recorded history. But it recovered fully next quarter with a thumping 18.6 per cent gain, wiping out the losses instantly. Even Austria which went backwards in three quarters in 2020 and two in 2021 restored all lost income with a strong positive result in the 2021 third quarter.
Job losses then and now
Norway’s jobless rate is now 3.3 per cent, which is much healthier than the 3.8 per cent recorded in December 2019, before the pandemic. It has now restored all jobs lost in 2020 and added an extra seventy thousand. Gratulerer!
But here’s the thing. Norway has not yet restored jobs lost through the GFC. Nordmenns still have a lang vei to go to get back to rates below 2.7 per cent they enjoyed from 2006 to 2008.
This is true of another 15 developed economies, mostly in Europe, including France, Sweden, Denmark, Italy, Greece, Spain and Austria. All these have easily regained the jobs lost during Covid but have not yet fully recovered from the GFC.
Suicides the critical indicator
Suicides escalated dramatically as the GFC intensified worldwide. A British Medical Journal (BMJ) analysis of 54 European and American countries found an estimated 4,884 more suicides in 2009 than expected based on previous trends. Suicides rose 4.2 per cent in Europe and 6.4 per cent in the Americas, mostly among men. The study found the increases were “associated with the magnitude of increases in unemployment, particularly in countries with low levels of unemployment before the crisis.”
In contrast, Australia experienced a decline in suicides in 2009, down from 2,281 to just 2,130.
A more recent BMJ publication confirms that during the Covid-19 pandemic suicides in developed countries “remained largely unchanged or were lower than expected”. Australia again experienced a drop in the suicide numbers in 2020, down from 3,317 to 3,136.
Mismanagement thirty times worse?
Clearly, the Covid recession was a puny adversary compared with the GFC. It is arguable, however, that Australia’s management of the 2020 crisis was much less effective than in 2008.
Evidence for this includes budget deficits relative to GDP, government debt added, the decline in national net worth, jobs lost at the lowest point, productivity declines, real wage declines, business failures and rates of GDP growth. All these were much healthier in Australia during the GFC than during the Covid downturn – both in raw numbers and global rankings.
On annual GDP growth, for example, Australia had the OECD’s highest growth rate in 2009 and was in the top eight for most of Labor’s term. In contrast, Australia ranks 27th today.
The ultimate difference, of course, is that Australia averted recession through the GFC. It didn’t through the pandemic.
The list of independent economists, global leaders and other authorities who have credited Australia with the world’s best response to the GFC now exceeds 160. The list of accolades for Australia through the Covid downturn is much smaller, with just two entries – from Scott Morrison and Josh Frydenberg.
As the election approaches, perhaps Australia’s Covid crisis will escalate further in ministerial rhetoric to the worst disaster since Noah’s flood. Or maybe the greatest catastrophe since that meteor wiped out the dinosaurs. We shall see.
The mainstream economics writers know full well all this is nonsense. Their failure to factcheck this furphy whenever it appears reflects poorly on their competence and integrity.
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