Australia is in a per-capita recession. This should be big news, but most of the mainstream media remains dedicated to the illusion that our 0.2 per cent growth in aggregate GDP is the more important statistic. This would be relevant if the topic was geopolitical power or war preparation, but if the topic is economic prosperity and wellbeing, then GDP/person (or perhaps even GDP/hour worked) is the relevant metric.
The most recent economic data shows that our current recession has now extended to six consecutive quarters (18 months).
Graph 1: The current recession
To put this recession into perspective, I went back through the ABS data to compare our current situation with the worst economic performance from the past, always using a period of 10 quarters.
The results weren’t pretty. We are now living through the longest per-capita recession on record (which goes back 50 years), though some of the earlier episodes saw a sharper downturn.
The most recent comparable period was the Global Financial Crisis (GFC) from 2007-09, which saw GDP/person dropping in and out of negative territory, but managed to avoid two consecutive quarters of decline (the most common definition of recession). The current recession is both longer and deeper than the GFC.
Graph 2: Global Financial Crisis
Before the GFC there was the infamous ‘recession that Australia had to have’ in 1989-91, which dropped into negative growth several times, including a particularly sharp decline in early 1991.
Graph 3: 1990s recession
Going back another decade we had the 1981-83 recession, which was shorter than the current recession, but is the deepest on record, with GDP/person falling nearly 5 per cent in the 1982/83 financial year.
Graph 4: 1980s recession
The earliest recession recorded was the 1974-75 downturn, which included a couple of sharp drops followed by quick recoveries.
Graph 5: 1970s recession
The interesting thing to note about these last three examples is that they were all directly linked to a change of government. The 1970s recession preceded the fall of the Whitlam government, the 1980s recession saw the end of the Fraser government, and the 1990s recession marked the end of the Hawke government. It seems that people don’t enjoy getting poorer.
The exception to the rule was the GFC, though that occurred directly after a change of government, and never saw two consecutive quarters of decline.
Albanese should be worried.
Dr John Humphreys is the Chief Economist at the Australian Taxpayers’ Alliance, and was formerly a Treasury official and economics lecturer.