New data from the Australian Bureau of Statistics (ABS) released today confirmed that the nation’s GDP rose 3.3 percent in the September quarter.
That comes after the nation’s gross domestic product fell 7 percent in the previous quarter, marking the biggest quarterly drop since ABS began tracking in 1959.
Most likely it was the biggest drop since World War II.
But what if not sensation like Australia is coming out of a recession? And how does it affect ordinary people who work normal jobs?
Here’s what we know about living through a recession:
The first is the first. What is really a recession?
A recession is generally when a country’s economy declines.
Technically, economists couldn’t label it a recession if the Australian stock market has a bad day – it takes two successive quarters in which Australia’s gross domestic product (GDP) has fallen.
Has Australia had a recession before?
Yes. You may remember Paul Keating saying in 1990 that Australia endured “the recession we had to have.”
Keating argued that a downturn in Australia’s economy was ending soaring inflation in the 1980s.
Inflation is where the price of common goods, such as bread, milk, eggs, grows over time.
Keating argued that Australia’s recession in the early 1990s ended costs of living that were beginning to exceed ordinary wages.
Technically, that recession ended in 1991, which means this year’s dip in recession was the first in 29 years.
Australia is officially in recession. In 2020, you personally feel:
Okay, so a recession is an economy in decline. I am not a paid investor. Surely what happens in the bag will not affect me.
It’s not instantly devastating, but a recession has trickle-down effects that affect everyone in the country.
In tough times, it’s ordinary people – those who deliver Uber Eats on bikes, have two or three jobs to make ends meet, or work in the service industry – who tend to suffer.
Let’s analyze it: if the economy stops growing, large companies are forced to cut costs.
No new products are created, and because “ordinary” people fear a recession, they cut spending.
If the average family home stops spending, small businesses suffer.
Coffee shops may need to lay off additional staff because people choose to make coffee at home.
Gyms may have to downsize as people drop out of their memberships due to tight budgets.
Homeowners may not list their homes for fear of a smaller market of buyers and, as a result, home prices could drop.
First-time home buyers may be less likely to commit to an expensive purchase should they need to lean on savings during unemployment.
These are just some examples. It is impossible to accurately predict how ordinary consumers will react during a recession.
Do we keep looking down in tough times?
It’s hard to say, but the first hint from people who have spent their entire lives studying economics is that Australia is “remarkably resilient.”
There is much we can do in our communities to support each other and local businesses.
In short, getting regular Australians to freely spend money in the community is one way to grow the economy or at least slow down the decline.
Of course, with rising costs of living and stagnant wages, not everyone simply has money to invest in local cafes and retailers.
In some cases, government initiatives prompt people to spend money.
We also have some experience in this. In 2009, the Labor government of then Prime Minister Kevin Rudd distributed payments of up to $ 950 to 13 million Australians in an effort to avoid a recession.
The move was considered a waste as people lined up to buy flat-screen televisions, but it worked.
It’s hard to say in the wake of COVID-19 if something similar would work again.