Australia’s record recession-less run

Australia’s economy has now gone 27 years without a recession, which can be defined as two consecutive quarters of negative or flat growth. If this continues for another couple of quarters, we will extend this world record run to 28 years.

We will see the latest estimation of Australia’s GDP growth released on Wednesday, which will indicate the pace of gains for our economy during the fourth quarter of 2018. Consensus estimates suggest our economy grew at a rate of 0.4% percent during the quarter.

These results have looked pretty good for almost three decades now, especially when you compare them with the annualised GDP numbers with other major, developed economies. However, drill down a bit deeper and the numbers aren’t perhaps as good as they initially seem.

Indeed, in the third quarter of 2018, Australia’s GDP grew by 0.3%; when you factor in the quarterly population growth (0.4%), you’ll notice that on a per-capita basis, Australian GDP actually contracted by 0.1% during the period.

Were the GDP numbers to match estimates of 0.4% growth for the fourth quarter of 2018, Australia will be in a per-capita recession; with two consecutive quarters of negative or flat per-capita growth.

This result will be avoided if GDP surprises to the upside. However, some major economists are predicting an even more negative outcome. Westpac and St. George economists forecasting the economy grew by just 0.2 per cent through the December quarter, Morgan Stanley are estimating an even smaller level of growth – just 0.1%.

Unless there is a positive surprise from GDP on Wednesday, the only thing keeping us from an actual, non-per-capita recession will be population growth, as GDP per hour worked has fallen in six out of the past seven quarters according to FM Investors chief economist Alex Joiner.

Australia currently has a population growth rate of around 1.6-1.7%, which is primarily driven by net overseas migration. When you compare this to the OECD average of around 1%, you can see that population growth is probably the main driver of our record run of recession avoidance.

If you were to look at recessions on a per capita basis, Australia would have twice experienced a recession since the year 2000.