LIKE an omen of the road ahead, Australian Treasurer Josh Frydenberg suffered a coughing fit in the middle of his economic update speech in parliament on May 12, which replaced the budget speech traditionally held on the second Tuesday of May.
Mr Frydenberg was tested for COVID-19 and the test came back negative, but the image of the treasurer coughing over the treasury coffers was hard to shake amid global pandemic and a national lockdown.
His speech warned Australians, and the states, to go gently ahead.
Treasury estimated 850,000 jobs could be returned if the economy successfully re-opened in a three-stage program.
But if the scheme failed and the states had to re-impose restrictions, then the false start would cost taxpayers billions.
Financial economist Brisbane Deacon Adam Walk said there had been hope for a sharp, short slowdown where markets could get back to normal by the end of the calendar year, but he was not confident that would happen anymore.
“That kind of scenario is being described as a V-shape recovery – straight down, straight up; the consensus I’m hearing is more of a U-shape recovery, where the bottom is longer,” Deacon Walk said.
“‘Unprecedented’ has been way over-used, but it’s true; I don’t think we really know what the recovery will look like.”
Business owners were under increased financial pressure and many had become frustrated with how slowly and unevenly restrictions were being lifted.
“There’s a lot of pain being felt and you can sense some frustration,” Deacon Walk said.
“For example, the ten-person rule in cafés – you can have a huge café and have 10 people, or you can have one the size of a phone box and have 10 people – that doesn’t seem to make a lot of sense to me to be honest.”
Deacon Walk said the “ideal” re-opening rate was unknown.
He pointed to the COVID-19 death toll in the United States, where deaths were in excess of 86,000 people, and that had to weigh heavily on domestic decision making.
But economic lock down was not cost-free either, he said.
Mr Frydenberg said the treasury had forecasted the unemployment rate to reach around 10 per cent, or 1.4 million unemployed people in the June quarter.
Government debt totals had jumped more than $50 billion from coronavirus spending – from $560 billion to $618 billion.
Mr Frydenberg warned there was “no money tree” and that the debt taken on to fund programs like JobKeeper payments would have to be paid back eventually.
Deacon Walk said there was an ethical question to be answered about how much debt was fair to pass onto our grandchildren.
He also warned how unemployment and business closure could lead to significant financial and health problems of their own, including mental illness and suicide.
But even if the coronavirus restrictions lifted and business doors flung open tomorrow, it was unclear how many consumers would want to sit down at restaurants or pack into shopping centres.
Confidence was going to be crucial to recovery.
Deacon Walk had noticed a discrepancy in confidence from observing the stock market and local shops.
“If you walk around the streets or walk down the mall, or drive to work in the morning, there’s not a lot of activity going on – it’s probably increasing a bit – but it’s not… bustling.
“And yet, the stock market has been going great since the March lows.
“So, someone’s wrong.”
The economic numbers would decide who was wrong, he said.
Mr Frydenberg’s treasury estimates had GDP falling more than 10 per cent in the June quarter, which amounted to the largest fall on record.
“At $50 billion, this is a loss equivalent to the total quarterly production of South Australia, Tasmania, the Northern Territory and the ACT,” Mr Frydenberg said.
For now, the government was doing everything it could to keep consumer confidence and spending as high as possible.
Deacon Walk took some solace from the fact that these events might let society “look at itself a bit differently going forward”.
He said events like these, like the world wars or the Great Depression, sharpened people’s focus about what’s important in life.
He said existential challenges were all around and there were none more important for him than going to Mass.
“I mean seriously, it’s the source and summit of the life of a Catholic and we can’t go to Mass – it’s pretty serious stuff,” he said.
“Hopefully, if anything, it gives us time to reflect on what’s important.”
The date for the Federal Budget has been pushed back until October.