We’re in the middle of a pandemic that is out of control. We locked in our homes and locked in our country.  Now we’ve discovered the past almost two years of devastation has actually had an effect on our economy.

We’re close to a recession – defined as going negative in two quarters. Can anyone be surprised?

The debate was all about the R word. But actually the lockdowns and cut backs of  three months to June 30 did little to dampen household spending and investment.  We stumbled over the line with economic growth on the plus side by 0.7 per cent for the quarter.

Given tourism – which once delivered $65 billion to our coffers – has been stopped, and foreign students, who spent $45 billion in our universities are also banned, the real cost of COVID is yet to come.

Yet our stock market has been booming and property is soaring.  Both look extraordinary given what may happen over the next few years. Indeed, we’ve just had a record dividend season showing many of our companies are making a lot of money.

Why is this happening?  Well, you keep hearing the phrase “pent up demand”  and “revenge spending” – in other words, many businesses believe there is going to be a huge wall of money that will hit the economy once we are “out of the pandemic”.

Not that phrase:  “out of the pandemic”.  The suggestion being there will be a magic time when someone clips a switch and COVID is gone.

But it won’t be like that. It will be patchy, with masks and vaccinations around for some time.  Just look at Europe, where vaccinations are higher than ours. It’s stop-start for travel…and many other economic activities.

Though business confidence has been strong before the latest round of lockdowns, many are now realising there won’t be the bounce back of late 2020.

The government will not be as willing  – nor is it able – to subsidise the economy without serious damage to our reserves.

And many sectors are now being hit by “negative revisions”. According to the Australian, from a high point a few months ago, when analysts were expecting earnings growth next year of 13 per cent, the forecast has now dropped to 10.5 per cent.

That said, we’re one of the most resilient nations and, despite our arguments with China, they continue to buy our raw materials.

We’re better off than billions of other citizens.  And the game is still being played.

We’re NOT in recession.  But hold tight.  Don’t panic! There is more to come….

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