The Guardian’s Greg Jericho has penned a well-argued piece today debunking Australia’s pending growth record, which will supposedly see Australia overtake the Netherlands’ record run without experiencing a technical recession:
On Wednesday, the March GDP figures will mark 103 quarters without Australia’s GDP falling in two consecutive quarters. But we should not get too excited about this length of time without a “technical recession”. Not only is such a definition of a recession meaningless, the real focus should be that Australia’s economy is growing far too slowly to generate well-paying jobs…
We only say we have not had a recession because we use GDP as the measure that needs to avoid going backwards two quarters in a row. If instead we used GDP per capita growth then we would have had a couple recessions since 1991:
…If we used annual growth, it definitely looks like we had a recession during the GFC. Annual growth of GDP did not fall below zero, but GDP per capita did – in fact we had four consecutive quarters where GDP per capita was lower than it had been a year before:
But why even use GDP? Why not use employment? After all surely the prime reason we care at all about GDP growth is because we hope it leads to people getting work.
What if we judged a recession by the growth of the percentage of working age people in jobs?
What if we said we’re in a recession if the percentage of people aged 15-64 who are employed falls by more than 1 percentage point from where it was a year before?
That definition would have had us in a recession in the GFC. Such a measure would also highlight how since the GFC we have also experienced pretty pathetic economic activity:
…Better that we should look for signs of how the economy is performing than worrying about fake records and dumb definitions…
Whether the March GDP figures released next week show negative growth or not, the clear signs are that the economy is weak…
And we don’t need to debate technical definitions of recession or not to know that is not a sign of a healthy economy.
I have written previously how Australia’s so-called growth record has been driven, to a large extent, by us running a high immigration program, which has created a growth ‘mirage’ by inflating aggregate GDP growth while trend per capita growth slumps to recessionary levels:
It is also true that Australia’s per capita GDP growth performance has been poor when compared against the Netherlands’s, whose population has grown much slower than Australia’s:
To add insult to injury, Australia’s uninterrupted ‘boom’ has also been caused, in part, by an unprecedented build-up in household debt, which is now the second highest in the world when measured against GDP, and is also higher than the Netherlands’:
Clearly, much of Australia’s ‘growth’ success has been largely a mirage, brought about by running one of the world’s biggest mass immigration programs as well as the unprecedented build-up of household debt.