We are one of the few countries in the world stupid enough to be handing out $750 per week to over 30% of the working population, whilst continuing the scare tactics and authoritarian shut down of some parts of the country. It is now clear that this package (to give out free money to a third of the population) was never sustainable and indicated a total lack of competence by the Australian politicians.
You cannot shutdown an entire country, and pay businesses their salaries for them, and then expect to businesses to function as per normal when you stop the said payment but keep the borders and economy closed.
So, the question is, how can we make money off the Government's stupidity? I personally believe buying into Australian Government bonds is generally a great idea, however given the fiscal stupidity exhibited by the Government in this crisis, I would suggest limiting exposure to the ASX listed debt securities of our Government. I have reduced my position in these from 10% to 5% of my portfolio.
The damage from spoon feeding millions of Australians during the crisis (which the Government exacerbated during Covid-19), will be over $200 billion, and will take generations to repay.
I would suggest looking at broader economic movements post-crisis and building them into your long term investment plan. There will be an increase in the rate of inflation in the coming few years, coupled with a higher interest rate by the Reserve Bank, which will be passed on to the consumer. Any companies with high debt levels coming out of this crisis may find their debt isn't as serviceable in Q2/Q3 2021 as it was in Q3/Q4 2020. Companies and businesses will start to fail, building companies will find the lack of new immigration will cause a shortage of new home buyers, whilst the rising interest rates will cause an additional burden on their books. Farmers are facing a backpacker shortage and some say they will be losing a huge amount of their harvest due to lack of workers. We have entire industries shutting down because of the lack of workers and freedom of movement.
In summary, the Government has done tremendous damage to the economy during this crisis by completely locking down some parts of the economy, whilst at the same time handing out money to people to sit at home. They have bred an entire new generation of dole-bludgers, whilst at the same time destroying an economy which wasn't doing too well to support these workers in the first place.
The Government will have hundreds of thousands of people dying from starvation or suicide over the next decade due to their decisions, all to save perhaps 1000 lives from Covid-19.
The effects of this mismanaged economic response to Covid-19 will be felt for a long time. Taxes will rise, inflation will rise, base interest will rise, deaths will rise, and the levels of starvation and poverty in this country will also rise.
