After a “prosperous pandemic”, reality is set to hit Australia – and our greatest weakness is about to be exposed.
When the pandemic first hit Australia’s shores, Prime Minister Scott Morrison promised the federal government would provide a bridge to where the economy was before Covid-19.
Looking back, the end of 2019 seems like a bygone era in some ways. No virus, no political battle between the United States and Australia over the challenges of the worst bushfire season in years.
But when you look back economy at the end of 2019Well, it’s quite a different story.
Instead of seeing an economy on the cusp of another year of strong growth, various indicators at the time suggested that Australia was facing a major economic downturn.
Yet the irony is almost what we’ve expected from the Australian economy, the pandemic’s $507 billion in stimulus saved the economy from a year of sluggish growth and perhaps even recession.
After five years of strong development, The housing construction boom had finally run out of gas, especially in the apartment and unit building sector.
In March 2018, construction of 30,797 houses and 29,111 units/apartments began.
By the time the RBA paper was written, a little more than 18 months later, the number of homes starting construction had dropped by 19.1 percent, with unit/apartment construction starting down 45.3 percent.
With a large number of construction expected to be completed during 2020 and a paucity of new projects beginning construction, it was clear that there was going to be some pain for the economy and the construction sector.
In rba paper It concluded that the reduction in construction activity would reduce GDP growth by 1 percent and that the impact on allied industries would be “somewhat larger” than the 1 percent.
In the fourth quarter of 2019, the economy grew by only 2.2 percent during the year.
With the population increasing by 1.5 percent over the same period, an increase of 0.7 percent was not an impressive result after accounting for population growth.
In July 2019, George Therenau, senior economist at UBS, warned that it expected construction investment to fall by 10 percent.
“Our tracking of construction work ads is in line with a further 100,000 job losses,” Tharenau said.
In fact, instead of losing 100,000 jobs, the construction sector is likely to be affected by government stimulus programs such as home builder and new home grants of various state govt.
Meanwhile, in the labor market, things were less than stellar despite a relatively average year in terms of overall job creation.
In the fourth quarter of 2018, private sector job growth came to a sudden halt and public sector job growth almost completely wiped out.
The Australian economy was in a challenging place in early 2020, the construction industry was slowing, private enterprise was not particularly keen on hiring and the country was gripped by the aftermath of a disastrous bushfire season.
At the beginning of January 2020, AMP’s chief economist Shane Oliver predicted That bushfires would cut 0.4 percent from Q1 GDP, as the impact on the affected regions and the broader economy became clear.
Amidst all these various factors, it was clear that the Australian economy faced a challenging 2020 even before the virus hit our shores.
But now we know that was not to be the case. Instead, Australians have faced a very different range of challenges, but ironically, most have enjoyed a remarkably prosperous pandemic.
I bet you never thought you would have read those words together two years ago.
At the end of 2019, Australia’s economic growth cycle was arguably coming to an end, as the various booms supporting the economy had faded and we had a heavily public sector-backed job market and headline growth majority driven entirely by population growth. was inspired.
Like many other strokes of luck over the past 30 years, Australia never saw the end of that particular boom, instead a stimulus commitment of more than half a trillion dollars by the Morrison government created an entirely new boom on top of the faltering old one.
This unprecedented cash splash has given Australia a lot of time, but the question is how much?
Is this the start of an entirely new economic cycle, with several years of strong growth yet to come, or is it just a prolonged Chinese hit that will fade and leave us more vulnerable than we have been on this journey? was started?
The simple truth is that we don’t know. We are truly in unknown waters, and there are no signposts or landmarks to help guide us.
The Morrison government’s stimulus programs created a huge economic boom that has left some Australians with far more work than they ever thought possible.
But ultimately, most major surges eventually end in some form of recovery as the economy regains its equilibrium and things return to normal.
Tarrick Brooker is a freelance journalist and social commentator. @AvidCommentator