One year ago, I landed back in Perth with Robyn, having flown home from a trip to New Zealand to visit friends and attend the Craggy Range vineyard’s Club Day. It was a glorious trip to the North Island, bathed in autumn warmth, and a truly memorable week of scenery and time with great friends.
It’s strange how many times I have reflected on that last overseas trip – I’m not sure why – perhaps because it is surreal that our international borders have been closed ever since. Who knows when we will travel overseas again?
A week after we landed, we were entering lockdown and embarking on a new era of working, of technology acceleration and adopting new ways of doing things. It’s incredible how quickly we were able to pivot as a community and adopt these new ways.
There’s been much talk about ‘surviving’ the last year, and I guess for some people, that has been true. Still, I have been inspired by the resilience and growth, particularly in business, of those who have made the best of a very challenging situation. I have seen people adapt and thrive in the face of adversity.
What has been truly eyewatering has been the sheer scale of the numbers associated with the pandemic. Since the WHO declared the pandemic in the year, it has been interesting to observe the scale of the crisis and the response.
- Globally there have been 120 million confirmed cases of Covid-19 and 6 million deaths. Australia has had 29,000 confirmed cases with 909 deaths.
- The US Government is on track to spend US$5 trillion on support and rescue programs, and the US Federal Reserve has further opened its cheque book to ease pressure on financial markets, spending a further $7.5 trillion.
- In Australia, the economic stimulus has been enormous, too, with commitments exceeding $200 billion.
- The economic impact has been severe, notably on the jobs market. There are 5 million fewer jobs in the USA today than there were one year ago, despite a recent spike. In the June Quarter of 2020, Australian GDP fell by 7 per cent, the biggest quarterly fall since 1974, with an estimated loss of 1 million jobs. In an astonishing turnaround, the Australian unemployment rate today is 5.8%. In normal economic times, that’s considered to be close to full employment.
- In the US, there have been over 600 corporate bankruptcies, fewer than in the GFC according to S&P. This included big names like Hertz, J.C. Penney. In Australia, struggling businesses were supported by the moratorium on insolvencies and the Job-keeper payment.
- The Reserve Bank reduced interest rates to historic lows in November 2020 from 0.25% to an all-time low of 0.1%. This was accompanied by a bond-buying program valued at $100 billion to keep long term interest rates down.
- Government debt is estimated to be $700 billion in 2021, rising to almost $1 trillion in 2024. (That’s triple Australia’s 2017 debt number).
- So far, Australia’s stimulus spend has been the second-highest in the world (measured against GDP); only Qatar has spent more.
- Financial markets saw dramatic falls in March 2020, followed by extraordinary recoveries. At the time of writing, the US S&P 500 is up 64 per cent, while the ASX/S&P 200 is up a more subdued – but respectable – 36 per cent.
- Finally, the vaccine rollout has commenced in earnest. To date, 400 million people have received their first shot globally. In the US, over 80 million people have received their first shot, and almost 150 million shots have been administered.
These numbers add weight to my proposition that we are in the Biggest Experiment of all Time, and the simple fact is that no one knows what will happen next. The fiscal stimulus we have seen worldwide has been enormous, which has saved the world from untold pain. This was a lesson well learned from the great depression, where governments uniformly failed to act, leading to the global economy’s near-collapse. We are left with a global economy awash with liquidity and governments more indebted than they have been since World War 2.
As we reflect, I don’t think anyone expected financial markets to bounce the way they have, nor did anyone seriously believe that there would be a vaccine rollout well in train within twelve months of the pandemic being declared. As things stand today, there is good reason to be optimistic. But in the years and months ahead, I think it would be foolhardy to be too optimistic – there will be breakthroughs and setbacks on the road to recovery.
We don’t really know what the long-term impact of all the stimulus will be – that’s the experiment. But rising consumption, strong economic growth and inflation are all possibilities. We can say for sure that 12 months on, the global economy is in the best shape we could have imagined.
In time, we will look back on the last twelve months and shake our heads. A fiction writer couldn’t dream up a script like that.
Sincerely,
