Economic implications of a SARS/Coronavirus outbreak

[basilio]

Main one is about the long term.

With so much uncertainty there aren't going to be many willing to spend on anything not essential. So even things which haven't been directly affected and which are still open will, if they aren't some sort of essential product or service, likely see a decline in sales volume.

I doubt there'd be too many people thinking of renovating the bathroom using paid traides (as distinct from DIY) or getting a new car right now for example. There's going to be a reluctance to spend given all this.

Good point. In my view this crisis will change everything. Where things will go is totally uncertain. I think governments NOW should be planning as very strong series of new investment priorities to come on stream as we (hopefully) sort out this crisis.

Do we simply go back to a consumption based economy with endless flights to lookalike holiday places and buying endless counterfeit tat ? Do we build bigger and bigger houses and yachts as monuments to obscene wealth ? Or are there more worthwhile and necessary priorities ?

What vision should our governments offer our communities when we come out of this situation particularly if the crisis turns totally ugly (as distinct from just a middling catastrophe ..)

 

[Smurf1976]

While I do not disagree, I am hoping it is more around 15% which is still very very bad, given the RBA chased lower IR's to decrease unemployment.

But lets say you are correct. 25% unemployment would see property crash at least the same amount, resulting in a death spiral of even higher unemployment rates.

This chart covering Australia's unemployment rate for the whole of last century illustrates a few key points:



https://images.theconversation.com/...lib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip

First obvious point is that once the rate goes up, it takes a very long time to come back down. Went up with the 1929 crash, didn't come back down until WW2 was underway.

One could argue that we still haven't recovered from the 1973 Oil Embargo either. It never came back down to what had been considered normal for the previous 30+ years.

Or for a less extreme example, consider the last two recessions. Both ended up close to a decade long event in terms of resultant unemployment indeed it was straight out of one and into the next.

I have trouble believing that we'll see a quick rebound for that reason, history shows otherwise. A quick drop to some extent as things re-open sure but it's very unlikely that we'll see everyone back to business as usual straight away. People without jobs don't go on expensive holidays and so on.

 

[satanoperca]

Thanks Smurf, great analysis. So what first is a reasonable unemployment level that is both sustainable and efficient, for me is it somewhere between 4-5%, but that is dependent on the measurement of unemployment.
I also agree with your statement above, this time like all times, it will take years for the unemployment levels to return to perceived normal.

 

[wayneL]

While I do not disagree, I am hoping it is more around 15% which is still very very bad, given the RBA chased lower IR's to decrease unemployment.

But lets say you are correct. 25% unemployment would see property crash at least the same amount, resulting in a death spiral of even higher unemployment rates.

End result, anarchy. Only the strong and those willing to fight for survival will get through this.

My words might be strong, but we only minutes away in the global time clock from this happening. But we must be thankful that we live in Oz, where most people do not have guns.

Unlike the US, the second amendment is going to be the downfall of the US govnuts.

Re the unemployment rate, it is not likely to include the self employed who are out of work, so you could be right about that lower figure, but it won't reflect the true picture.

My own industry had an even chance between between declared essential, and shut down.

 

[barney]

Re the unemployment rate, it is not likely to include the self employed who are out of work, so you could be right about that lower figure.

+1 …. I'm self employed … Phone has literally stopped ringing. I'm fortunate my wife still has her job so a lot better off than many.

 

[sptrawler]

I have trouble believing that we'll see a quick rebound for that reason, history shows otherwise. A quick drop to some extent as things re-open sure but it's very unlikely that we'll see everyone back to business as usual straight away. People without jobs don't go on expensive holidays and so on.

The psychological scars that will be left over will take years to heal, some people will lose their houses, cars and may be evicted, they will have to learn to compromise and possibly share accommodation, learn to live within their means and adapt to public transport.
A lot of these people just three months ago were probably working out what holidays they were going to have this year, now they are wondering how they are going to manage next month, it will be the biggest shock some of the younger generation have ever faced.
The money dries up but the bills don't stop piling up, it wont have sunk in yet, but if this goes on for the rest of 2020 it will stay in peoples minds for a long time.
It will also change the landscape of our retail sector, in recent years it has been struggling, well now it will be decimated.
It is amazing how quickly the business landscape has changed, unfortunately as happens when crashes like this come along, not many are in the financial position or mental position to risk pouring in more capital.
Just my opinion

 

[Smurf1976]

I'm self employed … Phone has literally stopped ringing.

I've heard that from quite a few people over the past couple of weeks.

Calls stopped and they mean completely stopped. Nobody even wants a quote.

 

[Humid]

I reckon in a months time the unemployment rate will be at least 25%. In fact with 10s of thousands of self employed and sole traders also eligible who knows how high it will go. Any other thoughts ?

I can understand why the Government postponed the budget until October. The opposition is in lock step as well so the only criticisms will be implementation rather than policy.

Totally uncharted waters here.

It’s not just that the working people they used to count even though they did minimal hours will be counted for the first time
The REAL unemployment figures

 

[Smurf1976]

The psychological scars that will be left over will take years to heal, some people will lose their houses, cars and may be evicted, they will have to learn to compromise and possibly share accommodation, learn to live within their means and adapt to public transport.

One thing is I think those under the age of 40 are about to understand why the word "recession" brings a fearful look to the eyes of the older people.

That said, this is going to be worse than the last recession since what worked then in many cases can't possibly work now due to being banned.

 

[jbocker]

I have a few friends (grey nomads) who start packing their vans around now and plan to migrate north from Perth late April. I have yet to ask, but wonder if any will travel now.
They (being city folk) might not be welcome in the towns they pass through, I have visions of blockades set up by the locals (Have I been watching too many movies?).
If our towns in the country are relatively clean maybe a lockout isn't such a bad idea. While they would like our $ they wont want our bugs.
Road Trains excepted.

 

[ducati916]

NZ just gone into lockdown mode as of today. Only essential services. We have a 1 month target currently, although that could change.

Even in the height of the IRA bombings in London, never had anything quite like this.

jog on
duc

 

[moXJO]

Round my local area tradies were doing it tough just before the drought broke (during the fires).
The rain made people spend again and saved a lot of tradies.
A lot were already stretched before this came along.

 

[frugal.rock]

I've heard that from quite a few people over the past couple of weeks.

Calls stopped and they mean completely stopped. Nobody even wants a quote.

+1. Hang in there Barney. Got a lawn mower?
We are lucky, the cheese and kisses (formerly known as the trouble and strife) had around 240 hours personal/sick leave accrued... by the time she gets back to work (Friday week) it's all gone... 5 years worth, she only had 2 or 3 sickies in 5 years. Genuine sickies I might ad...
F.Rock

 

[barney]

"Fast Test Kits" further reported on this morning so it looks the real deal.

The fast test was developed by China in response to the outbreak.

Initially 500,000 kits to be purchased/imported … more if we need them! ….Doh! ….


Quoted from the news report:- While Australian health officials say the tests have merit, some experts have expressed concerns about the kits and their efficacy.

(My view):- If they have any doubts ... TEST the test kits against the proven long test procedure and see how they stack up ....... Bureaucrats some times need a red hot poker employed in a strategic position.

Even if the tests are only 80-90% accurate, its a damn site better option than what we are being given at the moment!

I'd suggest they buy 20 million kits if possible and get this thing under control. If all carriers are quarantined, the problem is diminished by around 99% ...... "wake up Jeff time!"

Apologies if I sound frustrated ….. but serious problems which are exacerbated by inaction from those who can afford it, at the expense of those who can least afford it, really annoys me

link:- https://www.theguardian.com/austral...ive-urgent-approval-from-australian-regulator
​

 

[barney]

... by the time she gets back to work (Friday week) it's all gone... 5 years worth, she only had 2 or 3 sickies in 5 years.

She sounds like my better half .... great work ethic

ps. I'm not a lawny but it may be one job that doesn't get totally demolished. Grass keeps growing, although I suspect a lot of people will start mowing their own from now on so even the lawnies will suffer some down turn.

 

[qldfrog]

I suspect a lot of people will start mowing their own from now on so even the lawnies will suffer some down turn.

The only small jobs like that during the recession was basically donations by the few slightly better off to the one starving;
The last thing I want with no income is to pay someone to cut my lawn or repaint my shed

 

[sptrawler]

She sounds like my better half .... great work ethic

ps. I'm not a lawny but it may be one job that doesn't get totally demolished. Grass keeps growing, although I suspect a lot of people will start mowing their own from now on so even the lawnies will suffer some down turn.

That is interesting, because a mate who works on the council verge pick up, was saying recently how he can't believe how many good lawnmowers were on the verge.
There may be some people who wish they had waited, before outsourcing the job.

 

[barney]

The only small jobs like that during the recession was basically donations by the few slightly better off to the one starving;
The last thing I want with no income is to pay someone to cut my lawn or repaint my shed

You are right Frog ….. I was initially thinking …. Elderly and wealthy people will still need their lawns cut …. but the elderly will have a lot of "out of work" neighbours probably happy to cut their lawn for a cup of tea and an iced vo-vo. Given the "wealthy" are a small % minority group, there will not be enough lawns to go round.

Two of my immediate neighbours (1 retired, 1 elderly) employ a Lawnie … I will be interested to see whether they continue.

 

[Humid]

I have a few friends (grey nomads) who start packing their vans around now and plan to migrate north from Perth late April. I have yet to ask, but wonder if any will travel now.
They (being city folk) might not be welcome in the towns they pass through, I have visions of blockades set up by the locals (Have I been watching too many movies?).
If our towns in the country are relatively clean maybe a lockout isn't such a bad idea. While they would like our $ they wont want our bugs.
Road Trains excepted.

Remind them when they get crook not to come to my hospital in the city

 

[jbocker]

The fast test was developed by China in response to the outbreak.

Initially 500,000 kits to be purchased/imported … more if we need them!

I would sincerely hope China is donating them.