Australia’s Recession Record
Yesterday we talked about the US now past the ‘due date’ for a recession whilst Australia is on the cusp of breaking the western world record for continuous economic growth.
The technical definition of a recession is 2 consecutive quarters of negative economic growth. Australia just escaped that last quarter after the previous went into the red. We are now neck and neck with Netherlands as we near 26 years since ‘the recession we had to have’ back in 1991 (post war Japan holds the record at around 33 years – but look what happened then!). Bloomberg recently ran an article on this and their opening 2 paragraphs are telling:
“Australia is close to seizing the global crown for the longest streak of economic growth thanks to a mixture of policy guile and outrageous fortune. But the nation is creaking under the weight of its own success.
While growth is being underpinned by population gains and resource exports to China, failure to spur productivity has meant stagnant living standards and electoral discontent; a property bubble fuelled by record-low interest rates has driven household debt to levels that threaten financial stability; and a timid government facing political gridlock could lose the nation’s prized AAA rating as early as May because of spiralling budget deficits.”
That debt binge on housing has seen private debt balloon to a world record 187% of income. As for how this could trigger the next recession:
“The RBA frets that anemic wage growth will force heavily indebted households to slash consumption, which could prove disastrous given their spending accounts for more than half of gross domestic product.”
Highly respected independent economist Saul Eslake believes the 2 quarter measure is not a good indicator, preferring the measure of unemployment rising by 1.5% or more in an 18 month period. Similarly Professor Gregory of ANU and ex RBA board from 1985 to 1995 looks at full time employment as a share of population. That’s not a nice picture either…. He says “What’s happening in Australia now is a long, drawn out, sort of slow recession,”
So whilst we staved off a technical recession by the usual rules last quarter, and may claim the ‘west’ record with 26 years from the “recession we had to have” we may be experiencing the “recession the data said we weren’t having” right now.
The only problem is, if the US enters one, and we will discuss that tomorrow, we will likely know full well we are in one then for sure.