V-shaped recovery? Don't bank on it

By Adam Triggs
Updated July 1 2021 - 4:31pm, first published October 12 2020 - 4:00pm
The budget's V-shaped recovery assumes not only no more outbreaks but also the widespread availability of a vaccine by 2021. Picture: Shutterstock

Economic models predict that most recessions will be V-shaped: having declined sharply after a shock, growth then rebounds quickly to pre-recession levels. The thinking is straightforward. As a recession begins to subside, forward-looking households and businesses see the light at the end of the tunnel and make the consumption and investment decisions they put off during the downturn, buoyed by low interest rates, low prices, a weak exchange rate, and supportive fiscal and monetary policies.