A trio of recession escapes
Australia has escaped a technical recession three times during a 29-year run of growth and avoided it 20 times since GDP figures were first tracked in 1960.
A technical recession, defined as two consecutive quarters of negative economic growth, is being forecast by all the big four bank economists, who have factored in a negative June quarter from the COVID-19 restrictions.
However, there are some who expect Australia can replicate the luck – or good economic management – it had in December 2000, during the dotcom crash; December 2008, during the global financial crisis; and March 2011, as a result of the Queensland floods.
Deutsche Bank chief economist Philip O’donaghoe is expecting a 0.1 per cent growth figure in the March quarter, which would bring up Australia’s 21st escape from technical recession.
“I don’t think the 20 times we escaped recession is just luck,” he said. “It’s good economic management and governments and banks being in a good financial position.”
The last negative quarter in 2011 was due to the weather, but avoiding a recession during the financial crisis was purely down to economic management.
“The stimulus package in the first quarter of 2009 after a negative quarter in December 2008 was entirely designed to ensure a positive March quarter,” Mr O’donaghoe said.
He said the Morrison government has had less time to respond to the shock of COVID-19 than the Rudd government had for the GFC.
In 2000, the shock of the dotcom crash and the introduction of the GST sent economic growth in the September quarter slumping to just 0.2 per cent, before the December quarter registered -0.4 per cent.
But before that there hadn’t been a negative quarter of growth since the country’s last recession of 1991, where the June and September quarters took a -1.3 per cent and -0.1 per cent hit respectively.
During the 1980s, there was a smattering of negative quarters – in 1989 there was a one-off -0.3 per cent hit in the December quarter, while in 1985 the December quarter took a -0.3 per cent hit, and in June 1986 a -0.2 per cent hit. But none of them ended up in recession.
In March 1974 – widely regarded as the end of the oil embargo, which led to oil prices rising 400 per cent – Australia’s March quarter flatlined at 0.0 per cent, and was followed up with a 0.2 per cent decline in the June quarter. But at 0.0 per cent economists do not consider that part of a technical recession.
“If we get a zero in the March quarter this time, we will be saying we have avoided a technical recession,” Mr O’donoghoe said.
Bank of America is another of the five economists – out of 24 – forecasting a positive number in March.