Tuesday’s monetary policy statement by Reserve Bank of Australia (RBA) governor Phil Lowe projected a per capita recession for Australia, with GDP forecast to increase by 1.25% cent this year and around 2% over the year to mid-2025.
With extreme immigration, Australia’s population will grow by at least 2% this year, meaning the economy will go backwards in per capita terms.
In her analysis of Wednesday’s retail sales figures for March, CBA senior economist Belinda Allen noted that that “retail trade in nominal terms was flat in the March quarter, down from 0.9%/qtr in December quarter 2022”.
“But given price increases in the quarter –with core inflation rising by 1.2% – it implies that the volume of retail spending, roughly one-third of total consumer spending declined by ~1.2% in the March quarter and would follow a 0.2% fall in Q4 22”.
Moreover, “given the rapid rate of population growth, per capita spending is even weaker”, Allen added.
Allen also expects “consumer spending to slow from here as the impact of higher interest rates intensifies”.
“The fixed rate home loans roll off is just gaining pace and variable rate mortgage holders will face another lift after the latest interest rate hike by the RBA”.
Indeed APAC economist Callam Pickering also warned that Australia is looking at its largest non-COVID decline in retail volumes since 2001, with a per capita recession likely.
“If you have a weak household sector, you almost always have a weak economy”, Pickering said.
“Population growth means a technical recession is very unlikely, but it could very well feel like a recession for households and businesses”.
Per capita recessions have been common in Australia, as illustrated in the next chart:
Indeed, extreme immigration-fueled population growth has been the primary driver of Australia’s GDP growth for well over a decade, and is the primary reason why Australia remained ‘recession-free’ for so long prior to the pandemic.
History does not repeat itself, but it does rhyme.
The Albanese Government’s extreme immigration policy may stop the nation as a whole from falling into recession.
But Australians’ share of the economic pie will certainly shrink.
Regular per capita recessions are a feature of the Australian economy, not a bug.
