‘Obviously, the number is very bad. Australia’s economy contracted by 7% in the June quarter, which is the worst quarterly fall on record, and a million Australians are unemployed.
‘At the beginning of the pandemic, econocrats were hopeful this would be a V-shaped recovery. Now, nobody has been talking about a V-shaped recovery for some time.
‘But the point is not the negative number in the gross domestic product column for the June quarter of 2020, even though the number is terrible. The point is the event the number heralds.
‘… the scale of the economic downturn, both here, and around the world, suggests that deeper thinking will be needed. The environment is strongly suggestive that what’s required to turn things around will be more than reverting, mindlessly, to the orthodoxies that have dominated postwar economic thinking.
‘Morrison has been able to shape shift to manage the crisis, but a big question remains about whether he can be the leader Australia needs during the recovery.’
From here on our recovery will need more than fiscal policy, it’ll need redistribution
Michael Keating writes in The Conversation (26.11.20) about the economic response to the pandemic conditions required in the year ahead, and how the government will have to direct future support to the Australians most likely to spend.
‘From the 1980s right through to the global financial crisis, the standard response in Australia and elsewhere to too weak or too strong an economy has been monetary policy – the manipulation of interest rates by a central bank, in our case the Reserve Bank.
‘Rates can be moved quickly, and central banks are seen to be independent and to behave responsibly, while governments are seen as making decisions for political rather than economic reasons.
‘But since the global financial crisis (in much of the world) and since COVID (in Australia) managing the economy has come to be seen once again as the role of the government through spending and tax decisions – so-called fiscal policy.
‘… One of the great benefits of fiscal policy is that it can be targeted in this way, refashioned to improve income distribution and consumer demand.
‘It is another reason for preferring it over monetary policy for some time to come.’