Business Daily Media

It isn't right to say we are out of recession, as these six graphs demonstrate

  • Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

It’d be wrong to say that we are out of recession, although that’s how the graph of Wednesday’s GDP numbers makes it look.

Gross domestic product (the measure of everything produced and earned and spent) fell 7% between the March and June quarters after slipping 0.3% between the December and March quarters, and then rebounded 3.3%[1] between the June and September quarters.

It was the biggest bounce since 1976, after the biggest fall on record.

Quarterly percentage change in gross domestic product

It isn't right to say we are out of recession, as these six graphs demonstrate ABS National Accounts[2] But it hasn’t anything like got us back to where we were. When the levels rather than the changes in GDP are graphed, it is clear that, as Treasurer Josh Frydenberg put it, we have “a lot of ground to make up”. Quarterly real gross domestic product It isn't right to say we are out of recession, as these six graphs demonstrate ABS National Accounts[3] At first sight the graph of quarterly gross domestic product looks odd. Surely if GDP fell 7% and then rebounded by half that much it should have got back half its losses. But 3.3% of a small number is much less than 7% of a bigger number. We’ve regained only two fifths of what we lost. Read more: 6 things to watch for as Australia crawls out of recession[4] And we’ve lost more than that. Had the economy grown as the Reserve Bank forecast before the coronavirus crisis[5], we would have spent and earned A$509 billion in the September quarter instead of $476 billion. It’s consumer spending that’s bounced What drove the bounce was a rebound in consumer spending after months in which we were confined to quarters, and here the news is better than it seems. Quarterly change in household final consumption expenditure It isn't right to say we are out of recession, as these six graphs demonstrate ABS Australian National Accounts[6] Nationwide, household spending jumped 7.9% after falling 12.5%, but excluding locked-down Victoria (which will have its own delayed bounceback) household spending in the rest of the country rebounded 11% after falling 12%. And it bounced back in exactly the places it collapsed while we were locked down; in services such as tourism and hospitality. Household spending by category It isn't right to say we are out of recession, as these six graphs demonstrate National, percentage change between June quarter and September quarter. Australian Treasury Victoria’s economy literally went backwards. Spending in Victoria continued to fall while spending everywhere else bounced back. In only one category, home alcohol consumption, did spending in Victoria advance while spending in other places retreated. State and territory final demand, September quarter It isn't right to say we are out of recession, as these six graphs demonstrate ABS Australian National Accounts[7] Consumers financed the extra spending by saving less, but even so, Australia’s household saving ratio remained alarmingly high. In the June quarter Australian households saved a record (upwardly revised) 22.1% of what they earned. In the September quarter that fell to 18.9%, which is still far too high. In good times, less-worried Australians save less than half that. Household saving ratio It isn't right to say we are out of recession, as these six graphs demonstrate ABS Australian National Accounts[8] Frydenberg put the best spin he could on the extraordinarily high amount of saving by saying it would provide “ongoing support for the economic recovery in the new year as confidence continues to build”. Australia was as well positioned to recover as “any nation on earth”. Over the past year its economy has contracted less than Britain, France, Germany and Japan. Exports, business investment continue to fall Much of that success is due to Australia’s achievement in getting on top of the virus and the success of JobKeeper[9] in keeping Australians in work until conditions improved. The Reserve Bank believes it saved 700,000 jobs[10]. Working against that has been the forth consecutive quarterly fall in export income (something set to worsen[11] unless relations with China improve) and the sixth consecutive fall in business investment. In a quarter when consumer spending recovered, non-mining business investment fell a further 3% on top of a fall of 8.6% in the previous quarter. The US National Bureau of Economic Research[12] defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales On that basis Australia is still in one. Employment, income and production remain well down on where they were a year ago. GDP is down 3.8%[13] on where it was a year ago. It isn't right to say we are out of recession, as these six graphs demonstrate Reserve Bank Governor Philip Lowe. MICK TSIKAS/AAP Speaking as the national accounts were being released, Reserve Bank Governor Philip Lowe said he expected Australia’s unemployment rate to remain above 6% for the next two years. Annual wage growth would remain less than 2%[14] It was possible the economy could do better. His forecasts assume no widespread vaccination against coronavirus until late next year. They also assume international travel restrictions until 2022. But it was also possible things could be worse. Just three months ago that many were hailing a robust bounce-back in Europe. Now, Europe’s economy is expected to sink again in the December quarter as member states struggle to contain the virus. Australia was on a different path, but there was “no guarantee we will remain so”.

References

  1. ^ 3.3% (www.abs.gov.au)
  2. ^ ABS National Accounts (www.abs.gov.au)
  3. ^ ABS National Accounts (www.abs.gov.au)
  4. ^ 6 things to watch for as Australia crawls out of recession (theconversation.com)
  5. ^ forecast before the coronavirus crisis (www.rba.gov.au)
  6. ^ ABS Australian National Accounts (www.abs.gov.au)
  7. ^ ABS Australian National Accounts (www.abs.gov.au)
  8. ^ ABS Australian National Accounts (www.abs.gov.au)
  9. ^ JobKeeper (theconversation.com)
  10. ^ 700,000 jobs (www.rba.gov.au)
  11. ^ worsen (theconversation.com)
  12. ^ National Bureau of Economic Research (theconversation.com)
  13. ^ 3.8% (www.abs.gov.au)
  14. ^ less than 2% (www.rba.gov.au)

Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Read more https://theconversation.com/it-isnt-right-to-say-we-are-out-of-recession-as-these-six-graphs-demonstrate-151210

Business Today

3 in 4 fundraisers have experienced sexual harassment on the job – often because of inappropriate behavior from donors

Sexual harassment is a common workplace hazard for nonprofit fundraisers.fizkes/iStock/Getty Images PlusWhile the #MeToo movement that raised public awareness of sexual harassment is making fewer headlines than it did in 2017 and ...

Cathay Pacific 2021 Sustainability Report

New commitments in carbon neutrality and diversity, and supporting the Hong Kong community during the pandemicThe Cathay Pacific Group has released its annual Sustainable Development Report that addresses its commitment and prog...

Cozycozy, is tackling consumer manipulation in the travel industry

With its user-centric algorithm, Cozycozy fights against the Online Travel Agencies' rampant manipulation of consumers’ choices. In 2019, 112.3 million domestic trips and 11.3 Million international trips were taken by Austral...

Foreign companies exiting Russia echo the pressure campaign against South Africa's racist apartheid system

McDonald's is leaving Russia after three decades of operating there.Sefa Karacan/Anadolu Agency via Getty ImagesMcDonald’s provided many Russians with their first taste of capitalism three decades ago. Now, the global fast-f...

Jennifer Westacott's interview with Ross Greenwood

Ross Greenwood, host, Business Now: Joining us is the chief executive of the Business Council of Australia, Jennifer Westacott. Jennifer, many thanks for your time as always. Quite clearly the government is setting out its age...

Business success as Aussie kids skateboard brand, Ookkie, launches in UK and Europe

Australia’s leading kids skateboard company, Ookkie, has set the wheels in motion for global business success, expanding into two new overseas markets thanks to growing demand for its products from ‘skateboard loving paren...

Business Daily Media Business Development

Rishi Sunak's £15 billion cost-of-living package and windfall tax: four experts respond

Rishi Sunak, the UK chancellor of the exchequer, has unveiled a £15 billion package of measures to help households with the cost of living, after energy watchdog Ofgem announced it wou...

Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open University - avatar Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, The Open University

the economic tactics that drive Liverpool and Real Madrid

Liverpool against Real Madrid in the Champions League final is a fixture for football fans to savour – two giants battling it out for one of the most prized trophies in the game. And r...

Simon Chadwick, Global Professor of Sport | Director of Eurasian Sport, EM Lyon - avatar Simon Chadwick, Global Professor of Sport | Director of Eurasian Sport, EM Lyon

Cathay Pacific 2021 Sustainability Report

New commitments in carbon neutrality and diversity, and supporting the Hong Kong community during the pandemicThe Cathay Pacific Group has released its annual Sustainable Development Repor...

Business Daily Media - avatar Business Daily Media

Cozycozy, is tackling consumer manipulation in the travel industry

With its user-centric algorithm, Cozycozy fights against the Online Travel Agencies' rampant manipulation of consumers’ choices. In 2019, 112.3 million domestic trips and 11.3 Million i...

Business Daily Media - avatar Business Daily Media

How to talk to your employer about trauma

Chanintorn.v / ShutterstockThe impact of trauma and post-traumatic stress disorder (PTSD) is a hidden chronic mental health issue in the workplace. A 2016 survey of UK adults found that one ...

Stefanos Nachmias, Principal Lecturer and Deputy Head of HRM Department, Nottingham Trent University - avatar Stefanos Nachmias, Principal Lecturer and Deputy Head of HRM Department, Nottingham Trent University

Jennifer Westacott's interview with Ross Greenwood

Ross Greenwood, host, Business Now: Joining us is the chief executive of the Business Council of Australia, Jennifer Westacott. Jennifer, many thanks for your time as always. Quite clear...

Ross Greenwood - avatar Ross Greenwood



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion