A recession is generally defined by economists as two consecutive quarters of negative GDP, an event which last occurred in Australia in 1991 which became known as “the recession we had to have”. Since that time, Australia has had the odd negative quarter, such as in the September quarter of 2016 and the March quarter of 2011, but not two in a row.
The latest figures released by the ABS indicated December quarter GDP grew by 0.4%, just under the 0.5% expected by economists. Growth in the December quarter was less than September’s 0.7% and the year-on-year growth figure fell from a revised rate of 2.9% to 2.4%.
Markets were largely unperturbed by the figures and bond yields finished the day a little lower while the local currency remained unchanged. 3 year bond yields fell 2bps lower to 2.10%, 10 year yields fell 3bps to 2.78% and the local currency finished at 78.25 U.S. cents.
Growth in the quarterly figures was primarily driven by increased spending on consumables and, to a lesser degree, government investment. Private sector investment and lower exports were the primary drags on growth.