The latest GDP figures show the Australian economy grew by only 0.2% for the December 2018 quarter – a result below expectations set by the RBA.
The media has also been widely reporting a ‘per capita recession’ – with Australia recording its second straight quarter where the economy shrank on a ‘per capita’ basis.
But what do these metrics really mean within a longer-term context?
On an annualised basis, Australia’s economic growth for the 2018 calendar year is now 2.3% – this is below expectations of 2.5-3%. However, it is still a positive result – not a recession.
The ‘per capita recession’ refers to two consecutive quarters of negative economic growth per person. However, it’s worth noting this isn’t a common metric or one that is typically used in policy making terms.
As the ABC reports:
“Australia hasn’t had a “real” recession for so long that economic commentators have to search hard to find the next best thing.
It’s been close to 28 years since the nation had a “technical” recession — that is where the Bureau of Statistics’ key measure of economic activity, gross domestic product (GDP), falls for two quarters in a row.
The last one of these was the “recession we had to have”, which it turns out took place in the first half of 1991, even though then-treasurer Paul Keating uttered those words in November 1990.
You have to go back all the way to March 2011 to even find a single negative quarter, and that one was sandwiched between two strong quarters where GDP growth started with a 1.”
While the ‘per capita recession’ is not a common economic metric used for policymakers, it does offer a convenient opportunity for Labor or opposing political parties to take advantage of strengthening their campaign ahead of the Federal Election this year.
Politics aside, it’s important to note our overall GDP growth is still positive and this comes despite a slowdown amongst our key trading partners, such as China.
Australia also remains on track to record 30 years of continuous economic growth according to BIS Oxford Economics – an unprecedented achievement.
“It’s important not to underestimate this milestone – what Australia has achieved over the past 30 years is nothing short of impressive, considering we’ve experienced serious economic challenges, such as the GFC and the Asian Financial Crisis during this time.” Said Ironfish Head of Property William Mitchell.
According to AusTrade (Australian Trade and Investment Commission), Australia has achieved had the longest period of recession-free growth for any developed country in the world – again, quite a remarkable achievement.
At the same time, Australia is now the wealthiest nation in the world by median wealth per adult according to the study by Credit Suisse, outranking countries like Switzerland, Belgium and the UK.
Australia’s trend unemployment rate was recorded at a low 5% according to recent ABS data. It is currently at its lowest level since 2011.
A major driver for employment is Australia’s current infrastructure boom, with almost $120 billion worth of construction work in the pipeline. This is expected to continue to support strong jobs growth and further economic growth as major infrastructure projects continue through to delivery.
“Without discounting the GDP results, it’s important to step back from the headlines and political agendas and look at the bigger picture,” added Mr Mitchell. “The real picture is always more nuanced.”