Mike Hosking: Recession shakes out the weak and that's not a bad thing

COMMENT:

It's hard to ignore the starkness of the retail numbers - 6700 businesses are at risk of closure, 17,000 out of the 27,000 could shut for good, only 10,000 are in a stable financial position, 24 per cent are expected to cease trading, and 37 per cent hang in the balance.

That's ugly and may well go some way to giving a clearer insight into how artificially the economy is currently being propped up by borrowed government money.

But what it might also show, and I hope I am right, is that they are being way too pessimistic. Increasingly from all parts of the world, not just here, the forecasts of doom are being proven wrong, and in many cases badly and wildly so.

Not unlike all the deaths they said would happen with the virus, the calls, forecasts and predictions of dire recessions come depressions don't appear real.

This is not to say it isn't bad, because it is. It's a mess. And part of it is being exacerbated as we have already seen this week by the Cabinet leak over days without community spread, and why we aren't in level 1 yet.

We are not helping ourselves the way we might. Things don't need to be as bad as they could be, and approach is everything. As I've said, we need to be operating on gut instinct and courage. Not policy wonks in the public service looking to cross the last "t".

Spending was down 80 per cent in lockdown, 37 per cent in level 3, and now only 12 per cent in level 2. Twelve per cent is bad, but it's not the end of the world. With level 1 potentially coming in next week, with a tail wind and the right intent, there is no reason to think it can't be back to largely normal.

So why then are so many businesses going out of business? Could it be there were barely hanging on anyway? Could it be some areas of business has changed? The money has gone elsewhere? It's probably both those things.

But it's also the fact, not enough people back themselves. It might well be, like so many of the other numbers that have been wrong, the numbers of closures is wrong as well.

The simple truth is a recession shakes out the weak, always has. And it's not a bad thing. And maybe new businesses, when they start, start with better backing, better planning, and better foundations. Let's hope so.

But if there is a strong theme emerging, it's that a lot of what we thought would happen hasn't. And it hasn't because when we thought it might, we didn't know, so we went negative to cover our bets and backs.

Level 1 changes all that. Most of it now sits with us. Do we want to succeed? Or do we want to pack up before we start?

The choice is easy and it's ours.