Does anyone in Australia remember what recession looks like?

Scummo has a point at Domain:

“More than half the Australians voting at this next election will not have experienced a recession during their working lives and so I can understand that you need a long memory to understand what it was like to work through that type of a economic period of time,” he said.

“I did. I came out of university back in the ’90s, in the early ’90s, and I went in to [the workforce during] that period of time. Friends, others, couldn’t get jobs.

“We had a million people out of work. That’s not what I want to see for the future of our country.”

Then why have you overseen this outcome, Scummo? It’s not about Labor, it’s about you. GDP per capita is already in recession for only the third time since 1990.

More worryingly, the following UBS chart shows that real recession dynamics are taking hold of domestic demand:

Recessions usually transpire in the following manner:

  • Imbalances build up over the previous cycle. Often it is inflation but more recent cycles have been asset inflation bubbles. CHECK.
  • A shock transpires in which the great hope of ponzi borrowers for endlessly extrapolated gains in a key asset market are suddenly dashed. Like, for instance, Australia’s bursting interest only and Chinese property bubble. CHECK.
  • As prices fall demand stalls. In Australia’s case this is consumer demand and housing construction which also drags in manufacturing via inputs. This is sadly timed with a peak in infrastructure spending. CHECK.
  • Inventories begin to spike as those producing into the bubble suddenly find themselves facing much lower orders than expected. CHECK.
  • If nothing is done to short-circuit the shock, such as monetary or fiscal stimulus, then an inventory liquidation cycle begins to take over. We’re not there yet but it sure is looming as a distinct danger (see above chart).
  • As inventories are drawn down, output is idled and unemployment spikes.
  • If you do happen to be in an asset price bust, especially the most toxic kind of all in property, that unemployment spike lands of falling asset prices like an anvil and demand craters again. Rinse and repeat the above.
  • Eventually inventories stabilise and job losses end. Pent up demand is unleashed and you bounce out of contraction.

So, Scummo may be seeking to politicise a possible recession but he is also very clearly mismanaging the economy directly into one, either deliberately or unwittingly.

Neither the RBA, nor the executive nor the legislature seems to remember what a recession looks like which, unfortunately, renders the chances that we are entering one all the more likely.


  1. I see a great need in the future for a guillotine industry: design, manufacturing and servicing.

    • Jumping jack flash

      At the very least, manufacture of stocks and the coordination of teams for jeering, and for the collection and distribution of old sushi from the vendors around Martin Pl.

      • billygoatMEMBER

        No need for rope.
        Majority of punters wasted to the eyeballs on pain meds and anti press ants (depressants) god I love the irony in auto spell/correct:)))
        point is they can’t feel anything and brain so disengaged they can’t comprehend catastrophe let alone simple math.

      • I’d also expect the subscriptions for Netflix and Stan to surge as out of work Australians try and fill up their days.

    • Yes, I’d particularly like a guillotine designed for politicians and banker/corporate types where they are placed and restrained in the guillotine facing UP so that they can see what awaits them.
      The old school, facing down type guillotine is far too humane for these types.

      • Even that is too good for them. I recall seeing the Henry the eight exibition in London. Now those guys knew how to torture! Some absolutely gruesome stuff!

  2. “But he is also very clearly mismanaging the economy directly into one, either deliberately or unwittingly.”

    Bearing in mind that there’s a three year federal government term (the shortest in the G20), an unofficial 18 month maximum term for the office of PM and voting blocks split by a myriad of single issue parties, perhaps the statement above is inferring a little more ability of any government or politician to influence the economy than actually exists?

    • Fair point. To the extent that he has an impact I guess. Fiscal policy is headed towards surplus as demand crates.

      After all, it is he that claims the management mantle.

    • Any sitting PM would be very happy to claim 100% responsibility for good times if they existed – can’t have it both ways.

      • Sure you can. You regularly see police spokesperson claiming good job reducing road toll, but blame motorists if toll goes up. simples.

    • Which begs the other valid question: should the Govt have role in managing the economy at all?

      Bearing in mind that most pollies these days are of the career variety i.e. never had a job in the real world, what qualifications do they have precisely that they should be ‘managing’ an entire economy — never mind a small business.

      • kannigetMEMBER

        This government manages the economy like an old cat lady herds her cats… Dribbles of food here and there to get them to follow along but once She stops they pay no attention and go the opposite of what you wish.

      • This touches on the theme of my earlier comment regarding the shadow RBA panel interest rate call; the 1920/21 depression was (probably) so relatively short because of the unintentional laissez faire approach of the government. President Harding’s poor health and the fact that the Fed was still in its infancy resulted in very little intervention occurring. The rubbish was flushed out quickly and the economy recovered.

        Correlation isn’t causation but compare an 18 month recovery with the subsequent ones.

    • There’s words and there’s actions. Even if we say their actions are restricted by circumstances out of their control, they should at least get the words (narrative) right. For an organisation with their own polling operation, it’s bewildering how out of touch they are.

    • “.. the 1920/21 depression was (probably) so relatively short because of the unintentional laissez faire approach of the government…”

      Couldn’t agree more. The sooner you allow all the imbalances to be flushed out the sooner the recovery can begin. Interventionist central banking has been a rank disaster as all they’re effectively doing is preventing said imbalances from unwinding. The most positive thing any Govt or central bank can do is stand back and let things take their course — let the economy and its actors (incl. speculators) take their medicine.

      The evidence in favour of that view is overwhelming.

      • Only problem with that, is with Australia at the moment, it would take out our entire financial system. I would gladly see the banks and speculators wiped from the face of the earth, but I don’t imagine it would be much fun for the nation as a whole.

      • DominicMEMBER

        I don’t wish collateral damage on innocent parties, however, the answer to the problem is not to blow these damaging bubbles in the first instance. Policy-makers have failed us all and enriched a select few.

        The way forward is short-term pain, long-term gain.

      • DominicMEMBER

        I don’t wish collateral damage on innocent parties, however, the answer to the problem is not to blow these damaging bubbles in the first instance. Policy-makers have failed us all and enriched a select few.

        The way forward is short-term pain, long-term gain.

    • AtaraxianMEMBER

      18 month parliamentary terms – pollies can’t fix (at least on their own).
      Unofficial 18 month PM terms – caused by breathtakingly poor performance by both major parties.
      Myriad single issue parties – caused by breathtakingly poor performance by both major parties.

      Ergo, the ability of governments or politicians to influence the economy didn’t just disappear – it was thrown away by both major parties in an orgy of personal ambition, self-interest and soft corruption.

  3. Any thoughts on Canberra property market?
    I feel it differs to others in that there are a wealth of effectively govt guaranteed 100k pa jobs around, and in a recession, Govt may actually stimulate and buff up the size of govt in the hope of driving some growth.
    The downside is the apartment construction boom and influx of foreign students that surely can’t go higher. With a decline in students, vacancy rates will rise. With an end to the apartment boom, unemployment will rise and with it the marginal price setters of houses (all those leverage construction workers) will make house prices fall.
    No doubt in my mind apartments are a risk, but what about a house?
    $600k for a house in Canberra seems cheap compared with Sydney and Melbourne.

    • kannigetMEMBER

      Sure Canberra has a relatively high number of public servants but that is not the total picture. Its been used as a reason for Canberra real estate market exceptionalism for years.

      I think this has lead to a higher level of denialism in the market. the number of conversations I have had with people down here where this is brought out as a reason why the market is not struggling…. Even when discussing why the house next door has not sold in 5 months…. had one person tell me that the asking price is very low and that they should get a lot more because ‘public servants’

      Reality is that Canberra also has a fairly high level of poverty too, the disparity between the low end of town and the top her is quite large.

    • If government wants to stimulate by creating government jobs, they’ll be call centre or Centrelink officer type jobs in Sydney or Melbourne (where the votes are), not in the bureaucracy in Canberra.

      The other consideration is a large proportion of Australian government employment is in contractors and consultants. I think it’s likely that in a serious downturn, a lot of contractors won’t have their contracts renewed, and a lot of consultancy work will dry up

    • I was cleaned up in 74 over a 1 tonne holden ute under hire purchase from Custom Credit
      will never be caught with credit ever again.
      had to work nights as a cleaner at Buranda bus depot, to clear that debt.

      • Who would even contemplate doing that these days? That’s assuming they could beat the recent PR holder to the job in the first place, either because of the sub-award rates on offer or because it’s simply another visa rort for which Australian’s need not apply.

    • @nyleta completely agree! I genuinely believe that the impost of higher inflation will sting far, far more than can be generated uin terms of upside from what’s left of a tradables sector we burned over the past 30 years before scattering the ashes throughout the mining boom.
      The only manufacturers left are those with low labour costs – ie they really don’t employ many people, so the effects of their production, even if it was to benefit from being artificially boosted by strong export led growth, is going to be sweet FA. Contrast that against EVERYBODY having to pay more for not only clothes, footwear, furniture and anything else you want or need for your house, but quite a lot of our food stuffs, which are increasingly either being imported directly or are most often made here with both local and imported ingredients.
      Yes there will be opportunity in all of this, but it will take a long, long time as we just don’t have the skills (mosty mfg jobs were baby boomers who are retiring), the equipment (we’ve offshored or scrapped much of it) or particularly the capital to acquire them.

    • I worked through 1 in Ireland, it’s not so bad if you keep your job. Lots of other people were feeling the pain though. I still think recession is healthy, but given we haven’t had 1 for 25 odd years. We’ve built too much complacency, if we had 1 every 5-7 years on average then punters wouldn’t saturate themselves in too much debt.

  4. GunnamattaMEMBER

    He has a point that nobody remembers,

    …….but the great unspoken is that he, the corporate, banking and real estate interests he represents, even the ALP in their single greatest act of policy idiocy since going into opposition in 1996 (because they sure didn’t want anyone thinking about it when in power between 2007 and 2013), the media, and the population ponzi lobby,  not to mention the guardians of monetary policy (RBA), corporate probity (APRA and ASIC) have made it their raison d’etre to ensure that everybody forgot.

    For an entire generation anyone noting the risks of Australias economic trajectory has been hosed down and ridiculed.  People observing the same issues that are addressed here at Macrobusiness every day have been driven out of the mainstream of public discussion until very recently.  It is still being cavilled at now, and the great policy evil which has been visited on Australia over the course of a generation since it last experienced a recession dare not let people know still.  It will of course seek to apportion blame – to ordinary everyday people, to an incoming ALP government, to racism – to avoid any suggestion that for a very long time Australia has completely coqued up its economic narrative.  But utterly coq it up Australia has. And the key concern of those who have coqued it up is that their little patch of vested interest isnt touched in the great economic reckoning that will unfold.

    It gave up on competitive value adding in manufacturing and technology, and fried a generations worth of investment in improved productivity in a high Australian dollar and non tradable inflation for the punterariat.

    It took the easy goal of a mining boom and sacrificed the rest of the economy for that, but it told everyone about the 1000 year boom and went to sleep at the regulatory wheel as the implications of that sentiment flowed through to the public mindset.

    It opted for giveaways from the budget and monetary policy for the generally aged part of society, as an entitlement, and embedded debt peonage for anyone younger than about 50.

    It turned a world leading superannuation scheme into a tax avoidance façade.

    It embedded a great deal of economic luck and the fruits of a previous generations focus on productivity into debt funded real estate speculation frenzy and told a whole society about FOMO and rungs on ladders, while holding them to ransom on behalf of corruption beneficiaries from offshore and tax avoiders in Australia, and is bequeathing these same a world of part time aged care and services jobs to pay off some of the worlds most insane mortgages. And it put the budget behind that dynamic with the blessing of the RBA.

    Instead of real economy it has opted for bums on seats and GDP, fuelled by an economically irresponsible population ponzi which has never been articulated to the electorate as a formerly reasonably competitive society stifled itself with infrastructure bottlenecks.

    The only way Australia’s economic paradigm in the last 20 years could be more discredited is if it had been blessed by George Pell………which he probably has. What he did to two altar boys in Archbishopric robes after mass has been done to a whole generation of Australians by smooth talking arseholes in suits, with a backing choir of the media.

    The next recession is going to hurt.  I was working (as a teenager) in 1981 and was in work in 1990.  I recall the widespread sense of despair which current Australia is going to be learning about.  The only upside is that that Australia in my opinion taught itself to be far more economically literate than the Australia of today, and coming governments are going to have to relearn the ability to generate and articulate meaningful economic policy.

    That’s all a long way away, and for the here and now it’s a matter of buckle up and prepare to shoot the rapids, and we should be under no illusions it is going to hurt some people.

    And the ones we want it to hurt the most are the people who have allowed it to happen over the course of a generation – starting with this, the most utterly inept government Australia has ever had. I really do hope it hurts for them. Starting with ScoMo and those currently making decisions in government.

      • GunnamattaMEMBER

        Thats about the sum of it @bolstrood

        Someone needs to look everyone in the eye and say (just like Clint in the good, the bad, and the ugly) ‘We’re gonna have to work for it’

  5. Was only a kid in the 90s, but remember it well. Parents bought a house in cash, and that was on a single income. A few years ago I would have said it was impossible for me, despite earning more than double for half the time and saving a stupidly large amount. With prices dropping, it’s actually looking like a real possibility.

    Back then we had a family friend who had a single IP from overseas inheritance. They had a long term tenant paying only the minimum amount of rent for years to avoid paying extra tax. None of this negative gearing for capital gains stuff. In fact, they wanted to keep the price down to not have to pay so much in council rates.

  6. kannigetMEMBER

    If Scomo started working in the early nineties then the economy was already in the later stages of the recession cycle and has no clue about the causes due to no real experience of it. He also has no experience of the down slope or how it plays out.

    All he has is his ideological view that the NLP pulled the country out of it and as he has organised concentrated thoughts and prayers it will be all ok.

  7. I remember. Same age as the PM, left school at the end of 85 and lived in rural WA. If the PM thinks he saw it tough he should of been where I was.
    Though WA at the moment is very similar…

  8. Is Australia the only OECD advanced economy that it about to tip into a long recession due to the overload of nearly 5 million third world unskilled migrants?

    🔹1.9 million third world unskilled PR (78% dependent)
    🔹2.5 million third world unskilled non resident TR
    More migrant guestworkers than Gaddafi at his peak and his third world guestworkers paid tax.
    🔹440k third world unskilled illegally working tourist visitors onshore at any one time (5% of the 8.8 million tourist visitors enter to work illegally – ABF).

    ➡️ 4.8 million third world migrants.

    unskilled / dependent / old / useless / sick / the detritus and misfits of the third world exported to Australia to join into the onshore foreign run blackmarket cash economy. To be our healthcare, welfare and social burden.

    4.2 million or 86% in Sydney & Melbourne.

    🔻Housing bubble
    🔻Mass homeless
    🔻Wages destroyed
    🔻Gdp per Capita destroyed
    🔻Education destroyed as it prostituted itself as a migrant guestworker visa alibi
    🔻Public infrastructure & transport overloaded
    🔻Standard of living destroyed

    ➡️ The most economically & socially destructive migrant intake program of any western advanced economy.

    • DefinitelyNotTheHorribleScottMorrisonPM

      The most wonderfully vibrant. Every reasonable person would agree that diversity is our strength. That’s what we always say when looking at federal tax revenues.

    • blindjusticeMEMBER

      havent you seen the abc ad break music video played all day and all night? Its all roses

      • More nationalities, less chance of Fascist dictatorship! and the variety of food is just great…and those immigrants are willing to work hard for little money which is great for efficiency and profits!


    Hey Scomo!
    Whaddya talkin’ about?
    It’s been 27 year of prosperity as Straya has found the secret to the economic fountain of youth.
    When GDP and profit per capita begins to abate, just move the throttle to add more ‘capitas’.
    Also, coat the population with debt and you can be sure of a compliant and reticent populous who’ll put in the hard yards to realize the ‘dream’. We’ll curse and grumble under our breath at the additional burden, but we won’t rebel or revolt; we’re the ‘stiff upper lip’ of the South Pacific!

    Anyways, our solid big 4 banks and esteemed RBA have solved those economic ‘issues’ that seem to plague other, less worthy nations and don’t underestimate the luck and fortune that has been assured to the exceptional (see Southern Cross just adjacent to Orion’s belt in the night sky).
    Quit ‘talking down’ the economy or you’ll surely put the mozz on us!

    It’s a good thing we never had to study world economics in school as all those dodgy things that happened overseas will never happen here. They just can’t! Was way better to learn about ‘To Kill a Mockingbird’ and the US Civil War as these are both topics that require unending examination for the benefit of future Strayans for centuries to come.

    • BubbleyMEMBER

      The alternative is Frydenberg.

      At least Bowen has some policies that are not recycled Abbott rubbish.

  10. Jumping jack flash

    “But he is also very clearly mismanaging the economy directly into one, either deliberately or unwittingly.”

    No, no, no.

    There is no management. There is a void where management should be.
    What we’re seeing is the natural progression of the undamped system.

    Pollies have had it so easy since they sold off all their responsibility they have forgotten how to manage. Indeed they have no right, jurisdiction, capacity nor desire to manage anything involved with this failed experiment any more. All they have is pleading and bargaining with the entities that are actually in control, and that’s worth nothing at the end of the day when push comes to shove and people yell for their turn at instant riches.

    We are “managed” by unchecked greed – essentially people doing whatever they can do to manipulate the system and increase the efficiency and speed of “getting rich” quick. There is no easier or faster way to “get rich” than by convincing someone there is no other choice than to borrow a mountain of debt and then hand it all over. Simply no other way. The trick comes in justifying the transaction, and almost everyone has been fooled into thinking that this is now the norm – mostly because everyone is waiting for their chance at doing the same thing, and that’s also part of the game – the idea that everyone will even get a chance at it.

    I really can’t see a solution other than direct market manipulation by the government to be able to wrest any kind of control back, and the government sold out their share years ago. They’ll either have to rebuild it, or buy it back, if they even care.

    • Good summary
      but did this occur as an undamped system
      or was it managed?
      TIme will tell as the forces are revealed
      If it was a truly undamped system, for all western economies,
      to get this thingy back under control will take generations,
      cos humans are the mechanism

      • Jumping jack flash


        There’s a lot of debt that needs to be repaid, and that will also require a lot of interest.

        That alone is a few generations’ worth in my opinion.

  11. Buckfast Abbey

    will The debts BE Repayed? Doubtful. Using Ireland as an example, many people held onto their houses for the last 10 years despite not paying one penny in repayments, as the scale was immense and the banks can’t kick everyone out on the street or the country would be overturned by rioting. I have one relative who held onto his holiday home for the last 10 years for free, despite having a 90k euro mortgage on it..he told me the other day he got his friend to offer the bank 20k to buy it..offer accepted, now he owns the house outright. Australia’s future maybe?

  12. Tassie TomMEMBER

    I remember what the ’90s recession looked like (I was in high school at the time). It was like businesses were collapsing one at a time and anybody could be next, and it was like there was never going to be another job created again.

    There’s a saying “In a downturn businesses lose money. In a recession businesses go broke.” And two quarters of negative national growth usually means businesses are not just losing money but going broke.

    This is why I dislike terms such as “The state is in recession” or “We are in a per-capita recession”. This can happen, and happens all the time, with the properties of a local or general “downturn”, but not the properties of a “recession”. If a state is going poorly you can move states or FIFO. If there is a per-capita but not a GDP recession, then total demand is still growing and this protects businesses from going broke.

    But if there is a national recession there is no escape.

  13. Recessions and gravity have a lot in common; your awareness of them, or your belief in them, is not a prerequisite for being subject to their effects…

    Not sure what ScoMo is getting at or why it’s even relevant, other than to acknowledge that millions of Australians heretofore unfamiliar with what a recession actually looks like, are about to get up close and personal with one.

  14. As the old Joke goes
    Recession is when your neighbor looses his job
    Depression is when you loose your job

    The interesting thing about this “definition” is that it’s built on the late 20th century concept of a man/woman having one job and being able to live from the remuneration associated with that one job.
    This employment model is increasingly shown to be wrong for our 21st century work environment. The younger an employee is the more likely they are to have multiple jobs “Gigs” where they earn coin. this means that they’re not showing up in the statistics as being unemployed, despite being most definitely under-employed.
    It’ll be interesting to see which age sectors of the economy find themselves most able to adapt to the realities of an economic Recession. I’ve got a feeling that the younger workers will adapt because they’ve been born into this gig-economy concept and they really don’t know permanent employment (with anything like a 20th century job-for-life or even profession for life concept) . The elderly workers (those over 50) will scrape through if for no other reason than that the last 2 decades have been so good to them and delivered to them wealth which was simply unimaginable for prior generations.
    That leaves middle aged men and women with mega mortgages (and their families) to put on a smile while the economy Rogers them unmercifully. I can’t imagine that I’ll shed a tear for all the would be landlords when their IP portfolios collapse but I will be thinking of their families. Not sure if I’ll be in the serves-you-right-you greedy-ba5tard-camp especially not if it comes to kids being punished for the sins of the farther.
    However you slice it, I suspect this next recession is going to be foundational for all Australian’s, it’ll give young Aussies a chance to be heard and hopefully banish forever the self serving economic notions of the boomer class.

  15. Party is over…time for Australians to get used to lower wages and unemployment … and things will never get as good as they have been, because on a global scale they are pretty lazy and inefficient! This two party state is the most incompetent democracy ever…a #ucking banana republic.

  16. Yeah I remember what the last recession was like. It took me a long time to get another job at my age so I took a contract even though I need full-time keep my head down and don’t rock the boat. Even when the newbie graduate next to me gets more than I do even with the 20 plus years of experience I have. How is it a newbie graduate gets full time and the best I can do is a contract. And he still makes more. And what a jerk he is. So full of himself.

  17. Remeber what 2008 in London looled like. 12 people standing out in the cold holding potfolios and university degrees wainting to be interviewed for a part time florist van delivery driver. What really struck everyone is just how quickly jobs evaporate in not just the professional fields they were in, but also all the part time retail and restaurant jobs people be hoping to fall back on. People thought, Im not worried, if things get tough i will pick up any job just to get some money; well they dissapeared as well and grown adults were back at their parents place

  18. About the only thing that would stop the current “full retard” levels of immigration IS a severe and sustained recession.
    If that is what it takes, then I’m all for it.

    • I’m with you.

      It will have to be super-nasty to stop the Mexicans. (Ie stop us accepting Mexicans)