Economy

If anybody needed reminding, the Australian economy is in deep trouble, much deeper than either the treasurer or the prime minister realised at the beginning of last month. Then, the talk was of a ‘snapback’ from the damage of the coronavirus pandemic; now it is of a ‘sobering’ economic impact in ‘very difficult’ and ‘uncertain times’. Making these times even more uncertain is our biggest trading partner, China, none too subtly firing the first shots in a trade war.

This weekend, Australians are emerging from the lockdown that placed the country into quasi-hibernation for almost two months. The emergence of coronavirus has ignited an economic conflagration on a scale only comparable with the disruption caused by the Great Depression and World War II. How these health and economic crises now interact with one another as they play out will deeply change and affect the lives, health and prosperity of us all.

It’s been a long six weeks since Australia’s governments first imposed economy-crushing lockdowns to flatten the coronavirus curve. Scott Morrison has no doubt the pain has been worth it, saying ‘thousands of Australian lives have been saved’. Now he’s leading the charge to get back to business as soon as possible. He adds the qualification ‘safely possible’ but he is taking a huge gamble, risking a relapse that could only lead to a deeper recession.

Australia’s relationship with its biggest trading partner, China, has plunged to depths not seen since formal recognition of the Communist-governed state 48 years ago. The stakes for Canberra could not be higher, with business leaders and exporters privately furious at the government’s bumbling diplomatic performance over China and coronavirus.

The ‘Great Lockdown’ – as the International Monetary Fund dubbed the coronavirus crisis this week – is plunging Australia and the world economy into the worst recession since the Great Depression of the 1930s. Just as that cataclysmic economic event seared itself into the psyches of those who lived through it, this episode is sure to do the same.

Earlier this year, I wrote that I feared the situation in China would become the reality across the rest of the world in March and April. That, unfortunately, is now what is unfolding before our very eyes. But if there is to be a third wave of this crisis, it will now be what happens in much of the developing world – including on Australia’s own doorstep.

The earth moved on Monday, when the coronavirus pandemic opened up a wide chasm between Australia’s governing Coalition and its political substructure. Don’t take my word for it, take the prime minister’s: ‘We are living in unprecedented times with the twin battles that we face and that we fight against the virus and against the economic ruin that it can threaten. This calls for unprecedented action.’ In one fell swoop the commitment to small government and privatisation, to the eradication of debt and deficit as the measure of fiscal rectitude and efficiency, tumbled into the abyss.

If anything crystallises the brutal impact of the coronavirus crisis in Australia, it is the thousands queued outside Centrelink offices around the country this week. The lines began forming the day after the prime minister announced that vast sectors of the economy were to be shut down, with income support for those affected. Here was the intersection of life or death measures, crashing the livelihoods of millions and again exposing a government response that was poorly thought through and executed.

There in the prime ministerial courtyard of Parliament House, Scott Morrison finally admitted his world had crumbled. ‘Life is changing in Australia, as it is changing all around the world,’ he began his news conference midweek. ‘Life is going to continue to change as we deal with the global coronavirus.’

For decades, Australians have been sold an imagined poverty. We have been told we need to ‘rein in’ government spending – that if we want to spend more on health or education, we will need to spend less on the age pension or childcare. But the reality is that if we had a bigger public sector today, we would be better prepared to weather the health and economic crises triggered by the coronavirus.