This week there was a delightful bit of instant karma for Scott Morrison, who after stoking fear about a recession under an ALP government, was confronted with economic growth figures on Wednesday showing that GDP per capita had gone backwards for the second consecutive quarter and thus we were in a “per-capita recession”. Talk about knocking you right on your head.
Morrison of course had been very careful not to say the Labor party would actually lead us into a recession, just that the economy would slow and that in the past they have had recessions so, you know …
He was doing the standard sneaky politician/oped writer trick of not actually saying the thing he wanted everyone to think but making damn sure everyone was thinking it.
And now thanks to the latest GDP figures we very much are thinking about recessions.
But thankfully we are not actually in one.
Recessions are terrible, life-destroying events, and we are not experiencing one of those right now.
I say this not to give Morrison or Josh Frydenberg a free pass, but because we should not at any stage devalue the horror of a recession or undervalue (as we have) the great achievement in avoiding one – as occurred during the GFC under the guidance of Kevin Rudd and Wayne Swan.
If we had unemployment now at the 11.1% peak of the 1990s recession there would be around an extra 850,000 people out of work – the equivalent of 1 in 20 people currently in a job being sacked.
So no, we are not in a recession.
But just because we are not, doesn’t mean per-capita GDP growth is unimportant – nor is a “per-capita recession” a “made up” statistic not used by economists as Morrison would have us believe. It’s a fairly common term (even If I’m not particularity enamoured with it myself).
And GDP per-capita growth is used by every economist to measure the state of the economy.
It perfectly encapsulates Morrison that he believes the decline of emissions per capita is important, despite it being quite irrelevant, but he thinks we can ignore declines of GDP per capita despite it being one of the key ways of measuring the economy.
GDP per-capita growth is often described as how the economy is performing without population growth. But perhaps a better way is that total GDP growth is how the economy is performing with population growth.
And the economy right now is performing pretty poorly – with or without population growth.
Annual GDP per-capita growth has not once grown above the 25-year average during the period of this LNP government, and the current growth rate of 0.7% is around a third of the long-term average.
Even using the more standard measure of total GDP growth, things are bad. In the December quarter the whole economy grew by just 0.28% in trend terms – that is the worst quarterly growth for more than 15 years.
I don’t care how good your spin is, that is not good.
GDP per-capita growth, while perhaps not a great measure of whether or not we’re in a recession, is a good way to measure how productivity growth is flowing through to the economy. And here as well the story is not flash.
Over the past three years productivity has grown each year on average by just 0.9% in the private sector. When the LNP took over government in September 2013 it was averaging around 2.4%.
All of the LNP’s big talk about fixing industrial relations and improving productivity is rather lacking in any evidence to support it.
But as with a lot of things to do with the economy, you don’t need fancy economic data to tell you what is going on. You know how much money you have to spend, and how confident you feel about spending more money.
The reality is we are not confident. Over the past year the monthly growth of retail spending has slowed every month – the longest run of slowing growth ever recorded.
People don’t need GDP per-capita figures to tell them the economy is weak and that what is strong in the economy is not flowing through to workers. They know it already and they know it each time they go shopping, or when they think about buying something big like a new car (which we are doing less now than a year ago).
Morrison is right to say we are not in a recession, but he was also the one who warned this week that “the economy under Labor will be weaker than it is under our government”.
From someone who has presided over an economy that is weakening quite dramatically, that’s a pretty hollow statement which is clearly more about stoking fear of an ALP government than reality.
But as with all fear campaigns, evidence has a way of revealing the truth and destroying the fear. And the GDP figures this week did just that.
We made a choice…
… and we want to tell you about it. Our journalism now reaches record numbers around the world and more than a million people have supported our reporting. We continue to face financial challenges but, unlike many news organisations, we haven’t put up a paywall. We want our journalism to remain accessible to all, regardless of where they live or what they can afford.
This is The Guardian’s model for open, independent journalism: free for those who can’t afford it, supported by those who can. Readers’ support powers our work, safeguarding our essential editorial independence. This means the responsibility of protecting independent journalism is shared, enabling us all to feel empowered to bring about real change in the world. Your support gives Guardian journalists the time, space and freedom to report with tenacity and rigour, to shed light where others won’t. It emboldens us to challenge authority and question the status quo. And by keeping all of our journalism free and open to all, we can foster inclusivity, diversity, make space for debate, inspire conversation – so more people have access to accurate information with integrity at its heart.
Guardian journalism is rooted in facts with a progressive perspective on the world. We are editorially independent, meaning we set our own agenda. Our journalism is free from commercial bias and not influenced by billionaire owners, politicians or shareholders. No one steers our opinion. At a time when there are so few sources of information you can really trust, this is vital as it enables us to give a voice to those less heard, challenge the powerful and hold them to account. Your support means we can keep investigating and exploring the critical issues of our time.
Our model allows people to support us in a way that works for them. Every time a reader like you makes a contribution to The Guardian, no matter how big or small, it goes directly into funding our journalism. But we need to build on this support for the years ahead.