The recession we feared is here - but it’s hidden in the headlines.
Yes GDP grew by 0.2% in the Sept qtr but….per capital GDP fell for the second consecutive quarter.
So each of us is worse off even though the government can use the headline numbers to say we are not in recession. I think most Australians would be more concerned about their personal circumstances.
And boy are those personal circumstances looking grim - real household disposable income fell for the 8th consecutive quarter (that’s right 8 quarters or 2 years of falling personal incomes.)
Not surprisingly the ABS tells us that “Households continued to tighten their belts. Fresh food purchases from supermarkets and grocers fell 0.2 per cent, while purchases of alcoholic drinks from bottle shops fell for the fifth quarter in a row. “ Things are really grim if Australians are buying less fresh food and alcohol” (Not even enough disposable income to drown our sorrows!)
In fact, the chart below from the ABS would probably be better titled “what household consumption”
The silver lining of all this is that we are unlikely to see further RBA rate hikes
The recession we didn't need to have?
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OK so first of all you might ask what recession? - Australian Q2 GDP today was +0.2% or +1.0% through the year to June. BUT......and it is an important but....per capita GDP (essentially how we are doing individually) fell for the 6th quarter in a row. That's right, GDP per person (accounting for an increase in population from immigration) fell for the past 6 quarters.
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This is worse than former Treasurer Keating's 1990 "recession we had to have". So why do I say we didn't need this (per capita) recession? Simply because while the RBA has been using interest rates to slow things down and control inflation, the governments (federal and state) have been undoing this with tax cuts, electricity subsidies and encouraging larger wage rises.​Thus, the RBA has had to keep interest rates higher for longer (and insists they need to stay there for some time yet). The biggest cost of living factor for anyone with a mortgage is interest rates -so the government's "cost of living help" has led to a higher cost of living for longer for mortgage holders.
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We see this in the ABS release today which states that "Household consumption was weak and detracted 0.1 percentage points from GDP, due to reduced discretionary spending". Households are doing it tough! On the other hand, ABS tells us that "Government expenditure contributed 0.3 percentage points, driven by continued strength in social benefits to households."
