A recession is generally defined by economists as two consecutive quarters of negative GDP, an event which last occurred in Australia in 1991. That recession became known as “the recession we had to have” after the then-Treasurer Paul Keating referred to it in that way. Since then, 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. However, population growth has had a noticeable effect on the figures and “per capita” figures look less impressive.
The latest figures released by the ABS indicate September quarter GDP grew by 0.3%, well below above the 0.6% expected by economists. Growth in the September quarter was less than June’s revised figure of 0.9% and the year-on-year growth figure slowed from 3.1% to 2.8%. Growth rates in previous quarters were also revised lower.
Westpac chief economist Bill Evans said, “This result will come as a disappointment to the Reserve Bank.” He calculated GDP growth in the December quarter would need to rise to 1.3% in order to meet the RBA’s forecast, a growth rate which he views as “highly unlikely”.
Markets reacted by sending local bond yields and the Aussie dollar lower. 3-year ACGB yields fell by 4bps to 2.00% while 10-year and 20-year ACGB yields both lost 3bps to 2.51% and 2.85% respectively. The Aussie dropped from 73.50 US cents immediately upon the release of the report and finished afternoon session at 72.90 US cents.