The 25 years of consecutive growth line only works if we include the impact of population growth, because in per capita terms, growth fell in 2008-09:
In the December quarter of 2008, GDP per capita fell 1.2 per cent and it took till September 2010 to get back to the level it had been in September 2008:
That’s two years where Australia’s economic output per head of population was lower than it had previously been. That sounds like a recession to me. It was also a period where annual household consumption growth fell two quarters in a row—the first time that had happened since 1961, and soon after domestic demand also went backwards:
In the 12 months to June 2009, the unemployment rate also rose by 1.6 percentage points—as fast as that which occurred in the 1982-83 recession. It’s pretty clear the mixture of both the stimulus and exports got us through the GFC relatively unscathed compared to the rest of the world, but scathed we still were. Certainly the recession of 2008-09 was much shallower than that of the early 1980s or 1990s, but it is having an extremely long tail.
One way to look at this is the decline in the average hours worked by adults since the GFC compared to after the recessions of the 1980s and 1990s. The drop-off in average hours worked in the first 12 months of the GFC was actually faster than during the 1980s and 1990s recessions. But after the stimulus measures kicked in, hours worked increased before falling again at the start of 2011. Adults on average work nearly five and half fewer hours a month than they did back in June 2008—a worse drop off than was experienced in the same period after the 1990s recession hit.
In June, our GDP grew by 3.3 per cent. In the past 30 years there have been two other quarters where the economy grew by that exact amount—September 1995 and September 2005. In both 1995 and 2005, when the economy was growing as fast as it is now, full-time employment grew by 3 per cent; in the 12 months to June it grew by just 0.6 per cent:
In the past 12 months the unemployment rate has fallen by 0.4 percentage points. Over the past 35 years such a drop would be associated with strong annual employment growth, and also strong full-time employment—of around 2.5 per cent on average. But not now. Since 1979, when the unemployment rate had fallen by at least 0.4 percentage points in a year, male full-time employment has never also fallen in that same period—until this year:
In 2005 when GDP grew 3.3 per cent, wages grew 4.2 per cent—double the 2.1 per cent annual growth in June this year, despite the same economic growth. Are we really to believe that talking up GDP growth is a winning argument?
Greg Jericho writes on economics for Guardian Australia and is the author of the Grogs Gamut blog. This is an extract from his column of 15 November 2016, 'Harping on about economic growth makes politicians seem out of touch', reproduced courtesy of the Guardian News & Media Ltd's open licence terms.