Is Australia Approaching Escape Velocity Out of Recession?
Different GDP measures yield varying pictures of the Australian economy. Though Australia narrowly missed a technical recession (as determined by expenditure GDP), the country feels like it’s in a recession, particularly an income recession, with unemployment rising, corporate profits and capex sliding, GDP growth well below potential, and real Gross Domestic Income sliding on a quarterly basis. The rising national income that led to the boom in consumer spending and business investment up until 2007 had disappeared into the global credit crisis. Without the trade boost and fiscal & monetary policy stimuli, Australia could have fallen into a technical recession. Going forward, an economic recovery will be muted by private sector deleveraging. St. George Bank estimated Australia’s potential GDP growth rate around 3.5% y/y but Australia is growing well below that. The service sector is the largest contributor to GDP (~76%) and employment (~85%). Manufacturing’s share of output peaked in
