This was published 4 years ago
Opinion
Bears hibernate, companies don't
Shane Wright
Senior economics correspondentBears across the northern hemisphere are emerging from their annual hibernation.
They've been in their dens from late December or early January, waiting out the coldest months of the year.
After losing up to 30 per cent of their weight, and for female bears it could be 40 per cent, their first interest after hibernation is to find food. Soon after, their efforts will turn to mating.
Bears hibernate, but economies and businesses are not built to do so.Credit: Eric Fisher
Scott Morrison believes our companies, in fact much of our economy, can act like the bears of the United States, Canada and Russia (among other nations).
A string of policies are being put in place that the government believes will effectively "hibernate" our companies so that when the coronavirus pandemic is over, they will spring from their torpor and get back to normal.
At a rhetorical level, it is all about reassuring Australians that once the pandemic has moved on there will be jobs and commerce. At a time of immense uncertainty, reassurance of normality is vital.
But companies and economies are not bears. Particularly the Australian economy.
Before going into hibernation, bears go on a feeding frenzy. They lay down a large amount of fat that enables their bodies to survive the two or three months in which they lay dormant.
Australian businesses were not on a frenzy before the pandemic.
The summer from hell had already knocked many businesses about. Remember, retail sale figures dropped sharply in both December and January, long before anyone thought to start hoarding loo paper and canned tomatoes.
But before that, the Reserve Bank of Australia had started cutting official interest rates in June with the stated aim of driving down the unemployment rate, to get the economy growing faster so that wages would also lift.
The Morrison government brought forward $3.8 billion worth of road and rail projects in November, a concession to the RBA's demands for more infrastructure spending to boost the economy. State governments were also joining the cause.
Through the September and December quarters, Australian GDP grew by about 1.1 per cent. If not for a run-up in inventories and a drop in imports (as consumers shed demand for overseas products), it would have been half that level.
Bears eat moose, salmon, insects and all manner of plant material but the Australian economy was effectively getting by on gruel with some sugar hits from governments and the RBA.
All that before getting poleaxed by the rolling closures of the past fortnight that has wiped at least 150,000 jobs from publicly listed companies, let alone the hundreds of thousands lost from small businesses or private firms.
Six-month dormancy
The other difference between bears and the economy is that the furry mammals sleep away about three months of the year.
Morrison has been clear he thinks this is a six-month issue at least.
With some luck, the government hopes a little normality could be returned before then, at least in retail.
But no one is talking about the normal operation of our airports or our entire tourism sector on the same sort of timeline.
We haven't got to the point of discussing how Australia, so heavily dependent on international visitors and students, is going to reopen these vital markets. We're not even sure how we are going to reopen restaurants and bars when so many people have been scarred by social distancing or self-isolation.
Cruise ships. No thanks
And does anyone really expect people to flock back to cruise ships any time soon?
While the government looks to effectively suspend rents, ongoing costs and even the partial cost of wages, businesses are still looking at six months without any real form of income.
The other difference between bears and the Australian economy is that bears aren't carrying some of the biggest debts in the developed world for their dens.
Australians, on the other hand, went into this situation with huge mortgages as a share of their income and a property market that was again showing signs of stupidity.
Our banking sector is built upon this desire for bricks and mortar and home improvement programs. This pandemic is shaping as a shock to any part of the economy connected to property.
Bears know by instinct what to do after their hibernation. How Australia comes out of its enforced sleep is much more of a guess.