When sailors wake up to a red sky morning, the adrenaline begins to build.
Why? It is a sign that a deep low pressure system is about to hit.
Sailors in this year’s Sydney to Hobart yacht race may have faced a red sky morning earlier in the week.
In all, more than 35 boats said it stopped when COVID-19 horrors and bad weather exposed the fleet.
For those who have or want to sail across the finish line, a little more disappointment awaits because fewer people are there to cheer them on.
Economist Angela Jackson is vacationing in Hobart to witness the arrival of the Navy.
She says Hobart is missing the usual race buzz this year.
“You know this is going to be a boom for Hobart, and it’s a lot quieter than usual,” he said. Jackson.
“It’s clear people are staying home, people don’t want to go out to restaurants, just there are fewer people on the street.”
If Hobart is anything to go by, it’s clear that the economy is being hit with its own version of a low-pressure system.
Treasurer calls for calm
A fundamental building block of any economy at any given time is the confidence of business and consumers.
What does this mean in practice?
Well, simply that shoppers and those who run businesses need to be optimistic enough with regard to the coming weeks and months to spend money.
See the federal treasurer.
When the national mood begins to sour, it is not a bad time to announce “new” Ministry of Finance forecasts showing that the economy is doing OK.
Josh Frydenberg first hit the media Tuesday morning to calm any frayed nerves.
“We have 180,000 more Australians at work today than at the beginning of the pandemic, compared to the United States, which has 3.6 million fewer Americans at work today than at the beginning of the pandemic,” he says.
“So there are challenges that are certainly not room for complacency, but Australians can be very proud of the resilience of their own economy.”
No more support
Resilience is a vital quality in any crisis or downturn, but how do you handle financial hit after financial hit?
An obvious answer is that the government is offering more income support to workers and businesses.
With the pursuit of a profit at any cost now out the door, the government has some leeway when it comes to throwing taxpayers ‘funds behind more income support for workers’ businesses.
Alas, it’s not going to do that.
“We have to learn to live with the virus,” Frydenberg says.
“I am convinced that the hospitality sector, that the tourism sector, that other sectors can get through these challenges and come out stronger on the other side.”
Hanger for shock
So here is the status.
The pandemic is ready to roll into its third year, and the vaccine works well enough to prevent an overwhelming increase in hospitalization rates and deaths.
But because the virus continues to spread, and many in society remain vulnerable to it, some restrictions remain in place, and society as a whole is probably still a little afraid of catching the virus.
That is the fundamental problem we are facing now.
In addition, companies are careful to protect their staff and customers – or struggle to stay open in the midst of cases and close contacts – which sees events canceled and opening hours cut.
And employees who are unable to work due to illness or closures are not being helped by federal government incentives like JobKeeper, as they were at previous outbreaks.
All of this would not be so much of a problem for the economy if the key objective of growth – gross domestic product (GDP) – were not so dependent on consumer consumption to remain in positive territory.
This means that shoppers’ consumption in stores is a major factor in economic growth.
Angela Jackson says the economic models drawn on to complete the Reserve Bank’s latest assessment of the economy and the Mid-Year Economic and Fiscal Outlook (MYEFO) already look old.
For example, the MYEFO economy has turbocharged right now, heading for an annual GDP growth rate of 3.75 percent for this fiscal year, “as vacant labor market capacity is absorbed, [and] the pace of wage growth is expected to increase “.
But Dr. Jackson warns of an employment boom, and wage increases in general already look too optimistic.
“I think where the weakness will come through is really in selected industries, so those that have been most exposed to COVID-19 – especially hospitality and especially tourism,” says Dr. Jackson.
“They are big employers, they are an important part of the economy, and I think what we are going to see is that they are going to struggle in this period, more than they would have expected.”
So what to do about all this?
The answer to “what now?” is very simple: no one really has any idea.
Sorry for referring to texts from the Disney movie Frozen again, but when faced with darkness and insecurity, the advice of a key person is “just do the next right thing”.
Australians across the country do just that: they are tested – often waiting in cars with screaming children for hours.
The economy is in danger of faltering again, but it has shown resilience before, and the Australians themselves are once again showing what the Australian spirit of getting on with it is all about.
But it is clear that the resilience of the economy is being tested again. This time without any additional state support and with the strength of an exhausted nation.
“I am convinced that our economic recovery will maintain the momentum we have seen in recent months,” Frydenberg insists.
Well, we’re figuring out what the cut of the economy’s jib looks like when it sails toward an ominous horizon.
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