Ok, the recession isn’t really over yet. I’m just getting in early because the Deputy Governor of the Reserve Bank said something about growth that gave rise to a headline or two about the recession being over.
Of course, I know that some of you are thinking that the country is in such a mess that it’ll take years to get over the recession, but you’re very possibly wrong. I only write very possibly because, while the Liberals have the reputation of being good economic managers, the reality is somewhat different. The Liberals are good economic managers in the same way that the company using child workers in a third world country can argue how much they’re doing for the local economy in that country and how they’ve helped so many avoid homelessness by letting them sleep on the factory floor after they’ve finished their 18-hour shift. In the same way, even though we should be able to get out of this recession more easily than people think, I don’t rule out the possibility that the Coalition may do something that undermines the recovery.
Anyway, the best way to explain is to take a household and use it as a metaphor to explain a recession. A recession occurs when you have two-quarters of negative growth. This is sometimes called “a technical recession” when the person speaking doesn’t want the government to be blamed for the bad economic conditions. For the purposes of this, let’s imagine that a man – who we’ll refer to as Ozzie – has a steady job which enables him to meet all his bills and to pay his rent every week. One night he goes to the Casino and starts playing Blackjack. He loses more in that night and when you add that to his other living expenses he comes out behind, but this isn’t a recession because it’s only one week (or we could say one quarter but that would take too long to get to the point). Convinced he’s learned something he goes to the Casino the next week and loses even more money. This is two weeks of negative growth and we can call it a recession.
Ok, here’s where the metaphor breaks down because in Ozzie’s case it would be easy to end the recession. He merely has to stop going to the Casino… Or get luckier. A real recession relies on convincing people that it’s ok to invest and to start spending, but you get the picture.
Now let’s imagine that Ozzie doesn’t do the sensible thing and decides to keep going to the Casino until he loses so much that he’s evicted and homeless. The good news is that this makes his expenses less and for that week he’ll be earning more than he loses because he’s also lost his wallet and can’t access any money to get to the Casino. So this homeless man with no access to cash is now out of recession… At least for this week. And this is pretty much where Australia is at right now. We’re at such a low point that growth is almost inevitable in the coming months, but that won’t stop the media from talking about what a great achievement it is that we’ve beaten the recession and not only that – against all odds – the Liberals have delivered a surplus ahead of schedule in two years time… just after the election.
Scott and Josh will be given great credit because they’ve done such a great job and we’ll all be encouraged to put them back in because we’re back in black and those mugs weren’t a waste of money because they can be recycled. In Parliament, Scott will reprise his lump of coal effort and announce, “This is gas, don’t be afraid, don’t be scared,” only to have someone from the Opposition try to heckle him with: “Gas? I think it was wind!” Josh will repeat his attempt to blame Dan Andrews for the suicide of the friend of a friend because said friend’s friend committed suicide after losing his job which must have been because of the lockdown and not the recession that we had to have because of Covid-19. This time, however, Josh will point to welfare recipients hit by Robodebt and suggest that it was because of the Victorian lockdown that they couldn’t afford to pay their debts.
Speaking of Dan Andrews, I’d like to offer the following as a description of the way the whole thing has panned out:
“Captain Dan is batting with the other opener when a mix-up occurs and they both end up at the same end. The other batsman is run out and this leads to mini-collapse. Dan continues to bat, while the twelfth man, Michael O’Brien, brings out the drinks and tells him that he should resign because it’s his fault that we’ve lost so many wickets. Andrews replies that he’s still batting and we can look at who’s to blame for the run out after we’ve scored the required runs. O’Brien suggests that we’ll never be able to score the runs and that Andrews should resign. Some of the spectators form a squad which boos every time Andrews or one of the other batsmen scores a run. When it’s suggested that we should all get behind him and try and win, they suggest that it’s his fault we’re in this position. Josh Frydenberg suggests that Andrews insistence to bat on is wrong, and he should declare because everyone should be at the pub. When Andrews hits a century and puts the team in sight of victory, O’Brien suggests that if he was batting he would have got the runs a lot faster…”
Ok, it’s not cricket season yet, and before that, we have to have the Queensland election, the Melbourne Cup and the US election. I predict Labor in Queensland, King of Leongrass or Admire Robson in the Cup and Joe Biden in the US election by a significant margin. If you’re reading this next week, you’ll wonder why I don’t work as a tipster for a living. I don’t mean I’ll be right; I just mean that I’ll be like all the other tipsters and explain that I would have been right if only something else had happened…
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