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Virus economics: you and whose numbers

Apr 17, 2020 • 13m 38s

With the global economy facing its biggest downturn since the Great Depression, the Treasury and the IMF are at odds on the extent of the damage in Australia. Today, Paul Bongiorno on the competing economic forecasts for the country, and the way forward.

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Virus economics: you and whose numbers

204 • Apr 17, 2020

Virus economics: you and whose numbers

RUBY:

Paul, before we begin - do you have any isolation tips?

PAUL:

Well, I think yes, isolation tips. I think it's good to try and build a routine into your day.I think it's good to get out of the house, get out of the apartment, get out of the unit, walk around the block, run around the park. I think that's important. The other thing that's important, I think is social contact via the Internet and other devices because.

RUBY:

Have you been doing that?

PAUL:

Yeah, very much so with family and friends. I think it's important because I am missing the fact that, for example, I can't go into the bureau a couple of times a week in Parliament House that I could do before the lockdown. And you know, when you go shopping, you just go shopping. You're not really having a natter to do it to anyone, you know, all that sort of stuff.

RUBY:

Well Paul if you're ready talk... let's dive in?

PAUL:

All right, I'm ready. Hot to trot, as they say.

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

With the global economy facing its biggest downturn since the Great Depression, the Treasury and the IMF are at odds on the extent of the damage in Australia.

Today, columnist for The Saturday Paper Paul Bongiorno on the competing economic forecasts, and the way forward.

Paul, where do you want to start this week with Josh Frydenberg or the IMF?

PAUL:

Well, Ruby, let's start with the Treasurer, Josh Frydenberg. Although they both had some pretty stark and worrying things to say. On Tuesday, the Treasurer took out some preemptive insurance, releasing Treasury's revised forecast for unemployment in the June quarter. That's the one we're in now. Really, he was trying to sugarcoat things. But it's still a very bitter pill.

Archival tape -- Josh Frydenberg:

We are facing an economic and health crisis simultaneously.

PAUL:

Frydenberg told a depleted gaggle of journalists. All social distancing at parliament's Mural Hall.

Archival tape -- Josh Frydenberg:

Today we released treasury figures indicating their estimate that unemployment is expected to peak at around 10 percent in the June quarter.

PAUL:

Now Ruby in real terms, that figure means 1.4 million Australians have lost or will lose their jobs. The Treasurer claims that without his $130 billion job keeper package, the jobless numbers would have peaked at 15 per cent..

Archival tape -- Josh Frydenberg:

5 percentage points higher, at 130 billion its a wage subsidy the size, the scale and scope of which Australia has never seen before.

PAUL:

Of course, what neither figures shows is the extent of underemployment or how many of the six million people in his scheme saved from the dole queues have seen their incomes smashed.

RUBY:

So let's go to the other numbers. What did the IMF have to say this week?

PAUL:

Well, the International Monetary Fund put out its own figures this week, and the challenge to the Morrison government's assumptions is startling.

Archival tape -- IMF:

The world is heading for its worst recession since the great depression, a sobering prediction by the IMF. Global growth will shrink by some 3 percent in 2020 and that's their best case scenario. This pandemic will wipe and extraordinary 14 trillion dollars off the global economy. This is a truly global crisis. No country will be spared.

PAUL:

The IMF forecast has the world economy contracting by 3 per cent this year, the biggest decline in eight decades since the Great Depression. Now, just as an indication at the height of the global financial crisis in 2008 09, the world economy shrank by just 0.1 per cent. The IMF assessment of Australia's outlook shatters any illusions this current crisis will be done and dusted within six months.

In its world economic outlook, the IMF predicts a 6.7 per cent contraction in the Australian economy this year, and that's the worst in our region, one of the biggest contractions in the world.

The analysis suggests that if Prime Minister Morrison and Treasurer Frydenberg don't extend their JobKeeper wages subsidy and their job seeker unemployment benefit programs beyond mid-year. Well, Australia will experience an even higher unemployment rate and greater shrinking of economic activity. I'm a barrel of laughs this morning..

RUBY:

Well it is grim stuff. Has the treasurer responded to the IMF’s figures?

PAUL:

Well, Ruby Josh Frydenberg points out the IMF is also predicting a strong rebound in the Australian economy next year.

This optimism is predicated on the world being much more successful in containing the virus than it hitherto has been. Frydenberg also says that when the IMF was preparing its analysis, Australia's corona virus curve hadn't flattened to the extent that it now has. And he says, nor was the wage subsidy program announced. Anyway, you'd have to say, therefore, that the Treasurer himself is arguing at the margins.

RUBY:

We'll be back in a moment.

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RUBY:

Paul, we're talking about some ugly realities ahead for the Australian economy and also about some differences in the numbers that have been quoted by the Treasurer and the IMF. Do we know anything more about the government's modeling?

PAUL:

Well, no, we don't. Ruby. Labor has now been calling on the government for a while to release the other economic forecasts that underpin the unemployment projection. This would normally happen, of course, in the annual budget. While the May budget has been postponed to October and so far the treasurer has ignored these calls. Former Prime Minister Kevin Rudd says without these forecasts, we can have no real idea of the growth gap that the government is trying to fill with its stimulus spending.

Archival tape -- Kevin Rudd:

That's a critical point therefore in evaluating whether it’s too much or too little or whatever.

PAUL:

Rudd says that we just can't know how much more is, in fact, needed.

RUBY:

And the reason we're talking about Kevin Rudd is because of his position as an advisor to the IMF, right?

PAUL:

Well, that's right. He was seconded by the IMF a month ago. And as he wrote in The Saturday Paper last week and told our own breakfast show this week, we are still to see what happens in Africa, South America and the rest of Asia, which is to say we still don't know how great this crisis is going to be here or abroad.

Archival tape -- Kevin Rudd:

What I fear is what we are going to see in May and June, which is the explosion of the virus as well as its economic consequences in much of the developing world. That has direct consequences for us in our neighbourhood and more broadly.

PAUL:

The truly horrific death toll in the United States and the rebound of infections in parts of Europe and Asia suggest international travel, which, after all, is an engine room of the global economy, will likely be severely restricted for some time to come.

Look, the other part of this is that in diplomatic circles, there are real concerns for the damage Australia is doing to its international reputation with stimulus policies that exclude foreign workers and international students.

It's a particular worry to the tourism, education, agriculture and construction sectors that depend, for example, on many foreign workers. And it's in stark contrast to Singapore, which has told its foreign workers how important they are and has guaranteed their incomes and health care.

RUBY:

So, Paul, where is the government at now with regards to the shutdown and what happens next or afterwards, if we can talk about afterwards?

PAUL:

Well, Ruby, what we do know is that the aftermath will be very different to that before. The Australian economy will be smaller, population will be declining rather than growing thanks to those travel bans that, according to one pessimistic estimate, will last probably two years. And the reality is and the experience is it takes longer to recover than it does to go into these recessions.

RUBY:

Have our political leaders begun planning an exit strategy yet?

PAUL:

Well, Ruby, yesterday Scott Morrison, the premiers and chief ministers who make up what's called the national cabinet or the Covid National Cabinet, well, they reviewed the latest health advice and began looking in earnest for a staggered way out of the economy-crushing lockdowns and key to this exit will be more testing so that we know exactly not only where there are localized outbreaks, so-called clusters, but just how healthy, if you like, the broader community is.

Archival tape:

This is a real change in thinking from a couple of weeks ago where we told you unless you've got three or four symptoms, don’t go and burden the health system, don't go and get tested. You've probably just got a cold.

PAUL:

And mid-week, Victoria and New South Wales announced the widest testing criteria in Australia beyond travelers and suspected cases.

Archival tape -- newsreader:

Right now if you experience any symptoms of Covid-19 you are encouraged to get in touch with your GP and get a test.

PAUL:

So once in place, it should enable the identification of the virus beyond the clusters, making it easier to risk lifting restrictions in the broader community, but the falling infection rate is no leave pass.

The Prime Minister is well aware there is no room for complacency. He told us SBS News that Australia still has quite a number of things to get in place before restrictions of any kind could be lifted. For, he said, many, many weeks.

Archival tape -- Scott Morrison:

And we got to lock in those gains, this is not a sprint, this is by no means a sprint.

RUBY:

Paul, is Canberra different at the moment without parliament with so much happening but so little of the ordinary day to day business of politics?

PAUL:

Well, Canberra, the city is certainly less busy. The streets are even emptier than usual as people observe the isolation and lockdown rules.

But you have to remember, 40 per cent of the population of the national capital is employed by the Australian Public Service, and many departments are, in fact, working overtime.

The prime minister has moved his family from Sydney to the lodge in. Kamber and key ministers are working from their Parliament House offices.

One reason, of course, for that is that much of the infrastructure of the federal government is here.

But On the business of politics, you'd have to say, the venom and hyper-partisanship is on the back burner as we all tried to unite as a nation. I guess how long it lasts is the question. I suspect the longer the extreme measures last, the more we'll see a fraying of everyone's patience.

RUBY:

How about you? How's your patience?

PAUL:

Oh, so far, so good. I'm keeping, sir, keeping myself busy. You should see my garden. That's never looked better.

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RUBY:

Also in the news,

Prime Minister Scott Morrison has announced that the current rules around social distancing would be in place for at least another four weeks.

Morrison said after that period they would be reviewed, and if contact-tracing and testing capacity had reached an “industrial scale”, the restrictions could potentially be relaxed.

The Prime Minister also confirmed that the government was not pursuing a strategy of complete eradication, like that being implemented in New Zealand, but going down a path of suppression, to minimise and track Covid-19 cases.

Morrison also announced that he expects Parliament to return to regular sittings next month, following a planned trial-week sometime in May.

--

The Australian Bureau of Statistics has reported unemployment in Australia as just 5 point 2 percent as of March, a number which economists say doesn’t reflect the total impact of Covid-19.

Prime Minister Scott Morrison shared a similar sentiment, noting yesterday that, quote: “that is the best figure we will see for some time.”

--

And a study conducted by French researchers has found that Hydro-oxy-chloro-quine - a potential Covid-19 treatment hailed by Donald Trump - has no benefit to those affected by the virus.

The study is the most comprehensive to date, and was conducted on 181 patients who were all severely affected by the virus.

--

7am is a daily show from The Monthly and The Saturday Paper.

It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show.

Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

New episodes of 7am are released every weekday morning.

Make sure you don’t miss out by subscribing on your favourite podcast app. You can also find us on instagram and twitter - just look for 7am podcast.

I’m Ruby Jones, see you next week.

With the global economy facing its biggest downturn since the Great Depression, the Treasury and the IMF are at odds on the extent of the damage in Australia. Today, Paul Bongiorno on the competing economic forecasts for the country, and the way forward.

Guest: Columnist for The Saturday Paper Paul Bongiorno.

Background reading:

IMF forecasts dire economic outcomes in The Saturday Paper
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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204: Virus economics: you and whose numbers