COVID’s economic impact ‘worst since Depression’

Economics is often called “The Dismal Science”. In many ways it is also one of the most imperfect. General trends can be projected, but there are so many swings and roundabouts by which a country’s economy can be measured that its almost impossible to predict whether a recession curve will be “U” shaped, “V” shaped or “L” shaped.

Indeed, economics does not have the precision of mathematics because human sentiment plays a major role in the direction it takes. It stands to reason that Treasurer Josh Frydenberg would warn of a jobless blowout as this country heads towards recession for the first time in nearly three decades.

Standard and Poor’s has placed a “negative outlook” on our hard-won ‘Triple A’ credit rating and the economy is set to contract by almost 4 percent this calendar year.

As a result of the government’s massive stimulus package, Chris Richardson of Deloitte Access Economics estimates that the unemployment rate will peak at about 8 percent, saving half a million Australians from the dole queue. But his assumptions could be heroic given that during the last recession of 1990-1, unemployment increased by more than 80% going from 6.1 percent to 11.2 percent in just over a year.

That recession did not last long, however, unemployment has a long tail, and it took nearly a decade to get it back to 6.1 percent. The predicted recession has already been declared by the IMF to be the worst since the Great Depression of the 1930s.

Frank Carroll

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