Recession in Australia
Many people have been visiting this site to learn more about the potential recession in Australian and whether or not the US Recession (as some call it) will effect Australians.
I previously wrote an article about the Recession in Australia as a way to look at what the potential impact of the US Recession on Australia would be. For the record, Australia is not in a recession currently, and economists who have said that it is have been labelled as ‘premature’ in their statements. Today I intend to look at the indicators of a recession and how an Australian Recession would work.
How does a recession work?
A recession is a large contraction phase within the economic business cycle. The most used analogy of what a recession is is when the gross domestic product (GDP) has negative decline/growth for two or more consecutive quarters.
A recession tends to be visible in real GDP, employment levels, income levels, industrial production and the retail/wholesale markets of an economy. A prolonged recessions turns into a despression.
Recession indicators
It has been stated that there is no real indicators of when a Australian Recession or US recession is coming, instead they have past experiences and indicators to work off. Here are the recession indicators;
- Share Market drops have preceded the beginning of recessions for many years. It has been noted though that a drop in theshare market does not always result in recession with a very small figure escalating to a recession.
- The three-month change in the unemployment rate and initial jobless claims.
- Real Estate value declines. It is said that the recovery of real estate prices long outlives the prospect of recession, meaning real estate is set to stay low for a while.
Australian Recession
Things we could expect to get worse are;
- Further drops in share market due to US exposure to sub prime mortgage issues.
- Further drops in real estate and land value.
- High unemployment rate.
- Spending to tighten up.
- The sale of luxury items as people battle debt, eg; boats, expensive cars, holiday property
Do you think Australia will have a recession?
I would like to hear from you, tell me your thoughts and indicators so I can share them with everyone.
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4 Responses for Recession in Australia
Does anyone have any information about the causes of a recession or whether Australia has had many recessions in the past?
First greed, excess and easy money, then the hangover after the party and the realisation that we have maxed the credit card out … lol. Look at the fear, panic and self interest … the rules to prosper and protect capital then collapse in on itself. We excacerbate the liquidity of our companies and banks in our flee to safer havens, and the spiral feeds the velocity and force of the downturn as various “boom time” enterprises are undressed for what they are. So does capitalism have any morality or responsibility to ensure a stable environment for punters ? When the markets were contracting you could see the glee that this may provide opportunity. At the end of the day its like a herd of hungry or frightened animals. I was asking myself the question of how I should react to the turmoil, leave my money in the bank … geez I don’t know. Maybe I will spend more on food and clothes .. will that help.
I believe that an economists view of the recession is three consecutive quaterly drops in gross domestic product (GDP).
I would suggest that since Australia is so dependent on China for its GDP it may not have been hit so hard as Europe and Japan; nevertheless, China HAS been affected by the so-called American-led recession and this will inevitably have a knock-on effect on Australia. This is simple macroeconomics.
It would be disingenuous of anyone, other than a qualified macroeconomist to suggest that Australia is unaffected by the global downturn and people on the ground, esp. the ones losing their jobs would wonder which planet you were on.
Wait for it…Gillard ” this is the recession we had to have again” Rudd and Gillard are Hawke and Keeting revisited. If you can’t see it coming your on a different planet.
