There are two distinguishing features of the current recession. First, it has not been caused by a financial market collapse, but rather as a direct response to policies designed to weaken economic activities to contain COVID-19. Ironically, there may still be a serious financial collapse to come.
Second, there also seems to be a serious disconnect between the stock markets and the real economy - although volatile, stock markets have been recovering as the depth of the recession is becoming evident.
The lockdowns, border closings and social distancing have seriously disrupted both the demand and supply sides of our economy.
Our governments hope that the effect of these policies will only be temporary - having only placed our industries and jobs in hibernation - and they have assumed that when these policies are reversed, albeit cautiously, economic activity will bounce/snap back to the way we were pre-COVID.
However, what if this period of hibernation has caused significant structural adjustments in consumer and business confidence, attitudes, and practices?
There have been significant shifts in the way we work - now many from home, and relying more on technology platforms such as Zoom - and in the need to travel, which have changed the economics of working (and studying) and the way we do business.
Many large employers and their employees, especially in the service sectors, have seen how efficient it can be to work from home, such that this may be a permanent adjustment, with consequent savings in required office/work space, use of personal or public transport, congestion and so on.
Many businesses and consumers have less confidence in their future, likely to contain their spending, and encourage savings. Businesses that were marginal pre-COVID may simply not reopen. Many others are restructuring their supply chains.
Some of our bigger employers in industries that have been hard hit, such as international tourism and education/training, will perhaps take years to recover, depending importantly on the development and deployment of an effective vaccine. While it will be hard to get an accurate read from the published unemployment numbers - particularly due to the complications introduced by JobSeeker and JobKeeper - it seems reasonable to expect a more significant fall in hours worked, and increase in underemployment. Even if the government achieves its assumption of the return of some 850,000 jobs by end July, and assuming no significant reinfection.
A significant sleeper issue will be the medium-term impacts of weaker immigration, and therefore population growth, on overall economic activity and as complications in the job/skills market. In these terms, calls to use the crisis to further cut immigration are bordering on irresponsible.
I have been struck in recent weeks by the way the stock markets have responded to the increasingly alarming revelations about the seriousness of the global recession. It has been all too easy to forget, that the global economy was already in a very precarious position pre-COVID, with weakening activity, under the threat of another, debt-induced, global financial crisis.
There will be a day of reckoning, and it won't be pretty.
Quite frankly, I was staggered to see the markets effectively brush off the significance of events such as the Bank of England declaring the deepest recession in the UK for some 300 years. Likewise the collapse of the US job market approaching Great Depression levels of unemployment, with the Trump administration seemingly incapable of effectively managing the virus and pressing for premature relaxation of restrictions. One of the main policy responses to COVID-19 has been for central banks to flood markets with even more liquidity (that is, over and above the phenomenal cash injections post-GFC) to back additional bank and other lending to governments, businesses and households to cushion the direct impacts of the recession.
In a longer-term sense, this has compounded the debt overhang problem - sovereign (eg, Italy, many emerging nations and now bloated budget financing tasks), increasingly "junk" corporate debt and household debt. There will be a day of reckoning, and it won't be pretty.
At worst, a debt driven financial crisis could come as tenuous recoveries in key economies start to gather momentum. While our governments have done well to date in containing the virus, we can't be complacent about the risk of renewed infection, nor about the ease of our recovery.
John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.