It was Treasurer Paul Keating who coined the phrase "the recession we had to have." His statement was made in 1991 as much of our nation entered a very bleak economic period.
In some respects Keating is correct in respect to recessions generally.
The business cycle, like so many other cycles, is part of human nature. Optimism begets a boom that becomes overly enthusiastic which eventually leads to a more pessimistic outlook which becomes a bust.
Hence growth and correction are entirely normal but over the decades governments have sought to avoid the correction by any means possible.
It's politically damaging to see the economy shrink, even though there is little the government can actually do to other than kick the can down the road. Every choice only delays the day of reckoning.
Over the past 29 years, Australia has recorded continuous growth in Gross Domestic Product (GDP). Keen observers know this is principally because of population growth through immigration and the demand for our goods and services from China.
An over-reliance on those two things are very dangerous for us all.
Immigration is important to Australia but recent numbers are neither healthy nor sustainable. Too many are coming here without the requisite skills or finances and seemingly happy to live a lifestyle funded by taxpayers.
The wrong type and amount of immigrants brings about cultural dislocation and often breeds resentment. It also has a big impact on the infrastructure demands of our cities.
Of course governments love immigration because it brings more 'consumers' into the economy which shows GDP growth. But when broken down to income per capita, the figures suggest it doesn't really benefit the individual Australian.
That's why our cost of living seems so high and our cities so crowded.
An over reliance on China is also not in our long-term interest.
Any business dependent on a single customer is in effect owned by that customer.
One of the largest businesses in Australia is the Chinese foreign student trade. I've been calling this a multi-billion dollar scam for years as student visas are often just a back-door way of getting a work permit and ultimately residency here.
We have also seen the compromise of intellectual rigour because of the demands of foreign students with reports of widespread plagiarism and reduced academic standards.
How is it that a person who cannot speak, write or understand English can actually graduate from an Australian University?
I have actually seen that for myself. It makes a mockery of our higher education system but enables the vice-chancellors and professors to be paid exorbitant amounts in salary and benefits.
But it isn't only foreign students. An over reliance on China in agricultural or mining markets is just as dangerous.
The Chinese government can turn the purchase tap off at will whenever it suits, leaving our exporters high and dry. We've seen that recently with Barley and wine trade sanctions as payback for questioning the Covid-19 origins.
However, this recession isn't a normal part of the business cycle.It has been induced by government response to Covid-19 and compounded by their reluctance to allow market forces toapply previously .
A massive over-reaction saw the economy effectively shut down for much of 2020. That was neither necessary nor prudent.
Things would have been much worse if the government hadn't injected hundreds of billions in borrowed cash into the economy in welfare and handouts. When that stimulus is withdrawn, the true extent of the economic devastation will be evident.
Remember, our economy officially contracted by 7 per cent last quarter. That's after government stimulus of around 20 per cent!
Of course the government cannot afford to continue to splash the cash around for ever and that means more economic pain is set to come.
I started this post by agreeing with Keating about recessions but this downturn is not necessary. Had we allowed the business cycle to run as it should, with periodic corrections, we could have avoided much of this unfolding catastrophe.
Australia would have been stronger and more resilient as a result. Our national debt would be much, much less and we wouldn't have sold our sovereignty (and national dignity) to a foreign power for a relative few dollars.
If we search for a silver lining to the current circumstances, it is that more people are now aware of the pitfalls befalling us. As such, this time should be considered 'the great awakening' as it shakes many from their complacency.
Even though it could have been avoided, maybe this truly is the recession we have to have?
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
