‘It is a tricky business’: How will we know if we’re in recession?

Australia will enter a recession in the near future. But millions of Australians were not even alive at the time of the 1990s recession.

As a result, there are different ways of deciding whether a recession has occurred, but none of them are perfect. A technical recession is two consecutive quarters of negative economic growth and, last week, New Zealand met the technical definition of a recession. Before the recession, in early 1990, the unemployment rate was a little over 6 per cent. It didn’t return to that level for a decade, after peaking at 11.2 per cent at the end of 1992.

Fraser says we can’t compare today’s economic situation to that of the 1990s. Early in 1990 interest rates were 17.5 per cent, unemployment was 6.5 per cent and inflation was near 9 per cent. “That massive package of government expenditure, that actually saved us during the GFC,” McKenzie says. “And that was fairly clear because Australia managed better out of that than a lot of other countries did, and that was because we had a bigger fiscal stimulus at the time.”

Fraser says supply pressures – which have accounted for more than half of Australia’s inflation, according to new RBA research – have also complicated the RBA’s task. Fraser says keeping the pressure up without any pauses will make everything go awry, particularly when part of the problem, such as external supply constraints, is not being fully addressed.

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‘It is a tricky business’: How will we know if we’re in recession?Economists are increasingly worried we are on the verge of a recession. Millions of Australians were not even alive during the 1990s recession, the one we “had to have”.
Fonte: brisbanetimes - 🏆 13. / 67 Consulte Mais informação »