It has been almost 30 years since Australia’s last recession, so there would be plenty of Australians out there who have been wondering what to expect since Federal Treasurer confirmed earlier this month that the nation was now in the midst of a recession.
However this is not tipped to be a ‘typical’ recession, with Australia expected to rally faster than it did in the 1991 recession.
Writing in AMP Capital’s Insights Hub a week ago, AMP Capital’s Chief Economist and Head of Investment Strategy and Economics, Dr Shane Oliver said while going into a recession was ‘bad news’ there were some things worth noting that ‘might make it easier to bear’.
“Australia has been battling through a calamitous start to 2020 so far. We kicked off the year with devastating bushfires, which were already detracting from growth in the first quarter. February saw the beginning of COVID-19 disruptions to the local economy, starting with travel bans and moving to a lockdown from mid March which meant some sectors – like retail, tourism and hospitality – had to grind to a halt,” he wrote.
“This accounts for negative growth in the March quarter, and the worst is yet to come in the June quarter results, meaning Australia is likely in its first recession since 1991, when Bob Hawke was prime minister and Paul Keating was treasurer. Many Australians weren’t even born then, and for those who were, it’s been nearly 29 years of growth since.”
Dr Oliver said this was not an average recession, which was typically preceded by a boom. As inflation rises, the central bank tries to control it with higher interest rates, and this results in a bust.
“The situation preceding this recession was almost the opposite – growth was low, interest rates were at record lows,” Dr Oliver wrote.
“Because most of the economic damage has been caused by a disruption in the form of the coronavirus shutdown, and we haven’t had the classic build up of excesses you’d normally see before a recession, we should be able to restart the economy a bit faster than we did in 1991.”
Dr Shane Oliver, AMP Capital’s Chief Economist and Head of Investment Strategy and Economics, will be online at noon today (AEST) to answer your questions in an hour-long Q&A session.
You can ask your questions in advance in the comments below or during the session.
Due to the number of questions, Dr Oliver may not be able to answer everyone.