One frequently quoted economic fact I think is a bit dubious is that Australia has had a record breaking expansion of 27 years. Although Australia avoided a technical recession (by not having two successive quarters of declining real GDP) during the financial crisis, we nonetheless had a significant downturn which saw the unemployment rate climb from a low of 4.0% in August 2008, the month before the Lehman Brothers collapse in September, to 5.9% in June 2009. Furthermore, Australia had a significant contraction in Real Gross Domestic Income in the first half of 2009 (see chart below), due in part to falls in commodity prices during the financial crisis.*
Given my concerns about the robustness of the 27-year economic expansion claim for Australia, I’m grateful to Brisbane-based freelance journalist Anthony Fensom for quoting me in his latest article for Morningstar on Australia’s economic record: Australia’s economic record outscoring rivals but for how long?** Here are some relevant quotes from the article:
…economist Gene Tunny warns that Australia’s economic sunshine will not last forever.
“Eventually there will be a downturn; it’s just the nature of the business cycle. We’ve learned that you can’t fine tune your economy to never have a downturn – that’s impossible,” he says.
Tunny, principal of Adept Economics, notes the impact of population growth on supporting Australia’s economy, unlike other advanced economies. He also notes the nation suffered an “income recession” during the GFC.
“Based on the data, we’ve grown every year, but it’s not as if we haven’t had any downturns – we haven’t completely eliminated the business cycle,” he says.
While Tunny notes the concerns around Australia’s high level of household debt and the risk of a global trade war or other geopolitical shock, he says conditions remain generally positive amid synchronised global growth.
Incidentally, I had an enjoyable chat with 612 ABC Brisbane’s Steve Austin last year on my experience in the Treasury during the worst days of the financial crisis in late 2008 and early 2009:
*Given the major impact changes in commodity prices now have on business conditions and government budgets in Australia, in my view we need to supplement GDP, which effectively measures the volume of production, with measures such as Real Gross Domestic Income which measures “the purchasing power of the total incomes generated by domestic production”, according to the ABS definition.
**Unfortunately, the link I originally had to this article no longer works. I’m trying to obtain a new one, but the article may be behind a paywall.