In the years since Australia took its first steps as an independent nation, we have generally enjoyed a well-deserved reputation as a “Lucky Country”. Australians have experienced some of the highest living standards in the world and enjoyed an enviable quality of life.
Since the COVID-19 pandemic exploded onto the global stage in January last year, Australia has once again been one of the luckiest nations on the face of the planet.
Across the world, almost every continent is struggling with the pandemic. Healthcare systems are stretched, economies are on life support and many face an uncertain future.
And while Australia hasn’t been immune to coronavirus, as illustrated by the months-long Victoria and periodic flare-ups, in relative terms, we enjoyed a much better 2020 than the vast majority of the rest of the world.
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As a result of nations around the globe struggling against the virus and its impact on their economies, governments have provided unprecedented levels of ongoing support to households and businesses.
This has been particularly true of countries that have been hardest hit by the pandemic such as the United Kingdom. After multiple lockdowns, the now infamous mutated strain of the virus and the National Health Service being pushed to near-breaking point, the people of Britain have arguably suffered more than any other nation.
Based on this fact, one would imagine the level of support provided to the Australian economy by the Morrison Government would be significantly less than that provided by the UK government to the British public.
But that isn’t the case.
The stimulus spent by the Morrison Government as a percentage of GDP is actually 86 per cent larger than that of the British government. Despite the fact that Britain has experienced around 46 times more coronavirus cases per capita than Australia.
It’s not just Britain either.
Canada, France, Italy, New Zealand and a long list of other nations have all spent less on their stimulus packages index to GDP than Australia.
Our Kiwi friends across the Tasman Sea have arguably coped with the pandemic just as well as Australia if not better. Yet the stimulus deployed by the government of Prime Minister Jacinda Ardern is 35 per cent smaller than that of Australia’s, relative to GDP.
Even though other nations have experienced significantly worse outcomes due to the pandemic, the scale of the Morrison Government’s stimulus program is certainly on the higher end relative to the rest of the world.
With so much extra cash flowing through the economy, some sectors have seen an enormous boom in activity.
While some parts of the retail economy have suffered horribly during the pandemic, overall when contrasting the latest retail sales data with that of 12 months prior (November 2019), spending is up more than 13 per cent.
When comparing retail sales numbers for November 2018 and November 2019, total sales growth was just 3.3 per cent. Much of that increase was driven by the cultural shift towards Black Friday sales being used for early Christmas shopping.
Meanwhile in the used car market, prices have boomed and total stock levels have plummeted, as Australians used their super to buy a car or chose to buy a vehicle as an alternative to public transport.
With the luxury of hindsight and the ability to contrast with the fiscal support packages of other nations, we can now see that the government’s stimulus response was perhaps disproportionate, given how well the pandemic was managed.
But with the lion’s share of stimulus now in the rear view mirror, the sugar hit will begin to fade and the economy will soon need to begin standing on its own two feet once more.
In the words of Prime Minister Scott Morrison during an address to the National Press Club on Monday: “You can’t run the Australian economy on taxpayer money forever.”
In the end, the Prime Minister is right.
But short-term, the large pool of cash Australians have saved over the course of the pandemic may provide some temporary relief to the economy. In fact, $109 billion in household savings has amassed between March and October 2020 alone.
As a nation, Australia effectively spent its way out of trouble.
But it’s the removal of stimulus or government spending in general that is always a challenging task for even the best economic managers. Some sort of large-scale economic contraction generally results when stimulus is deployed and then withdrawn on this sort of scale.
So with JobKeeper and JobSeeker supplements stopping at the end of March, and the stash of savings set to quickly dwindle, the post-stimulus hangover awaits.
With a significant economic contraction seemingly inevitable, Australians now face a nervous wait to see if the Lucky Country can once again do the seemingly impossible.
Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator