TOn Wednesday, the latest GDP figures will be released marking a year since the economy began its sharp fall into a recession. In all likelihood, the latest figures will show that we are (or almost) back to where we were before the pandemic hit. But as good as it may be, the numbers will only highlight how far the recovery has yet to go.
The numbers for the March quarter of this year should be pretty good. In the past two quarters, economic output in Australia has grown by more than 3% – the first time this has happened in consecutive quarters.
Of course, this is due to a 7% drop in the June quarter of last year, more than three times the largest quarterly drop on record.
But if the economy in the first three months of this year grew 1.1%, we’ll be back to where we were at the end of 2019.
If this happens, it will suggest several things.
First, because it will still be a historically significant jump (the sixth biggest jump in the last decade), it will mean that we are still very much confronted with the impacts of Covid.
As the most recent employment figures showed earlier this week, most workers in the private sector employ even fewer people than before the pandemic. But despite this, we still see bizarre jumps in retail sales and unusually large drops in unemployment and underemployment.
Usually, savings don’t bounce back – think of more container ships than speedboats. And like a container ship crashing into the Suez Canal, things stop quickly and once finally freed, everything goes as fast as possible to make up for lost time until finally things turn around.
There is no rhythm in the economy at the moment; but a lot of uncertainty mixed with hope.
Second, while the March figures show GDP has returned to the size it was before the pandemic, that does not mean, despite what will likely be announced if this happens, that we have recovered.
Historically, yes, that would be a quick return to pre-recession levels. The ’90s recession took seven quarters and the’ 80s recession took two years to rebound, but that doesn’t tell us about the size of the hole.
But we have to remember that getting back to level is not a recovery – because the economy is expected to grow.
If on Wednesday we see that the Australian economy has returned to the size it was at the end of 2019, we will still be almost 3% behind the growth we would have expected over the past decade.
And that would mean that we would have lost almost 6% of expected production and consumption over the past year.
It is a huge hole that will probably never be filled.
This is why focusing on a quarterback is so lacking because it ignores what has happened in the past.
If you’re a business owner, having three good months now doesn’t mean the debt you incurred a year ago is gone; and the employees you let go also don’t get all the wages they lost because they have a job again.
This is why last year the quasi-guarantee of employment, the guardian of employment, was so important.
It’s hard to come out of recessions because people’s incomes are falling, and recovering from it isn’t just about getting back to work, it also means taking into account the loss of income you incurred while you were out of work. .
Jobkeeper has maintained household spending and business turnover during times of foreclosure.
However, as we are currently seeing in Victoria, lockdowns are still ongoing. But Jobkeeper is not.
This will likely make this week the costliest foreclosure of the past year – many shifts lost with no income.
This will of course not affect this week’s GDP figures, but highlights the reality that not only is there still a big hole of lost income and production from the past to fill, but the future remains precarious.
And that is also why when the GDP figures are released on Wednesday, it will be far too early to raise the banners of mission accomplished.