With only three weeks left until the end of the year, it seems that somehow, by a combination of good luck and good policy, Australia is going to emerge from this annus horribilis in relatively good shape. It is a scenario that was hard to imagine in March, when Australian COVID-19 infections were surging and the economy was crashing, taking jobs and businesses down with it.
This week, Australia recorded its greatest quarterly jump in gross domestic product since 1976, with the economy growing by 3.3 per cent in the three months to September. And that was with Victoria still in lockdown. In Melbourne, house prices rose 0.7 per cent last month, although they are still down 0.9 per cent on this time last year. House prices across the country are also growing and in Sydney they are now 3.7 per cent higher than this time last year, despite predictions of big falls.
Much more retail therapy will be needed to get the economy back growing strongly.Credit:Louie Douvis
Yet the economic hit earlier this year was so great that we will still finish 2020 with an economy that’s 3.8 per cent smaller and unemployment figures that are not expected to rebound for another two years. The road to recovery is full of uncertainty.
We do not know when Australia will gain access to a COVID-19 vaccine or whether we will experience another peak in infections that will force the economy to shut down again.
China, our largest trading partner, is turning its wrath on one Australian export industry after another in apparent retaliation at our call for an inquiry into the origins of the COVID-19 pandemic. The wine industry is the latest victim, with Beijing imposing crippling tariffs of up to 212 per cent on imports. No one knows how long this diplomatic row will last, or how much it will have hurt the economy by the time it is over.
Winemakers are the latest victims of China’s trade war with Australia.
Finally, the JobKeeper government stimulus package, which has stemmed the economic bleeding, ends in March. The OECD has called for an extension of government support but this is probably a good time to remove the bandage and see if the wound has healed. Shops and hospitality venues have reopened, making employment in these sectors more secure. For industries that have not recovered, like international tourism, the government must be ready to offer further sector-specific support.
JobSeeker requires a different approach. It is also set to fall back to basic, pre-COVID unemployment support at the end of March. Yet there is a growing recognition that we must fund a permanent increase in unemployment support. It is unfortunate that it took a pandemic for the nation to realise what welfare advocates have been crying out for decades – that our base unemployment benefit is woefully inadequate. The higher payment this year is credited with pulling many families above the poverty line. We must hold them there.
Such uncertainty on so many fronts requires a nimble federal government, able to respond quickly and cleverly to challenges as they arise. This includes reinstating JobKeeper if it is required to keep Australians in jobs and businesses afloat.
Australians, for their part, should have confidence going into the Christmas season to spend some money. We have gone from having worryingly low levels of household savings to worryingly high ones – we’re saving 18.9 per cent of our income right now, up from 6.2 per cent this time last year. That’s understandable – we have had less to spend our money on and a lot more to worry about. But for the economy to keep growing, we need to put some of that money back into cash registers.
This year has opened our eyes to the fault lines in our economy. But if we’re smart, we will learn from 2020. We must look to diversify our trading partners, rely less on international markets and immigration and provide much deeper support for local innovation and manufacturing. The pandemic has effectively cut us off from the rest of the world, to our benefit and detriment. If we’re going to get through it, we will need to keep supporting each other.
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