Recession in Australia? Where?
There seems to be some debate amongst economists about what the real definition of a recession is. Ive always understood it to mean 2 consecutive quarters of negative growth. Economics commentator Tim Colebatch prefers a different measure, an increase in unemployment of 1.5% or greater in the preceding 12 months. By that definition, Australia has been in recession for the last few months.
But what does it all mean? How does a definition of a non specific event actually affect average Australians? The answer is that it doesn't. Do we feel worse off because some economist or commentator suggests we are in recession? I'm not sure why we should.
So why is the Australian Recession a myth? Because by any measure, the vast majority of Australians are actually much better off. Interest rates have hit rock bottom, saving an average mortgage holder about $800 every month. Wages have increased significantly in the last year. And the Rudd Government has been splashing money to all sections of the community.
Lets go further. Property prices have remained high, making it difficult for the first time buyer but a blessing for the other 70% of Australians who actually own their own home. So despite some superannuation losses over the past 2 years, net wealth is about the same. We need to keep in mind that superannuation grew at staggering levels for the 5 years prior to their losses.
Yes, if we take Colebatch's definition, unemployment has risen significantly. But off such a low base. So we have between 5 and 6% unemployed. That still leaves at least 94% of the available working population in jobs.
I remember when Kim Beazley said that he could see a time in the future where unemployment would drop to 5%. He was scoffed at by the Howard Government and commentators. It was unachievable they said.
But it happened and it went even lower, closing on 4%. Now unemployment has crept to mid 5%'s and we are in crisis mode? Show me an unemployment figure above 10% as we saw in the last "recession" and i might start to take notice.
To get a real gauge on how the community is faring we need to look at something more than just unemployment and growth figures. Have a look at personal wealth and disposable income. By that measure, we are doing fine. If this is what they call recession, we need never be worried about that word again.
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2 comments
A lot of the jobs lost have been a result of a overseas companies failing. Also a lot of companies that have gone belly up have done so not because no one was buying their product, but because of poor financial management.
The GFC is also being used as an excuse for companies to downsize or move perations off shore.
Exactly right - poor financial management only holds up in good economic times. Just like GM and Chrysler in the States - these things catch up with you eventually.
Fantastic site by the way Clubwah. Big fan over here. YG
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