The Great Recession

On my Essays page I have a link to the then ANZ economist Saul Eslake post called “The Truth about Recessions & Depressions”, it is almost required reading for this post.

The media and the public generally poorly define what is actual meant by a recession.  The popular definition being two quarters of negative growth.  Some call it a technical recession.  This is an inaccurate definition.

Saul Eslake goes on to say:

Defining a recession as any period during which the unemployment rises by more than 1½ percentage points in 12 months accurately identifies all of the designated recessions in the US since 1945, without giving any ‘false signals’.

This rule also accurately delineates the five genuine recessions Australia has had in the last 50 years (in 1961, 1974-75, 1982-83 and 1990-91) without giving any ‘false signals’ – unlike the ‘consecutive quarters of negative GDP growth’ rule of thumb.

The unemployment rate for July 2008 was 4.3% according to statistics found on the Reserve Bank of Australia website.

According to the ABC, the unemployment rate for July this year is listed as 5.8%

Australia has, in fact, been in recession since March using the unemployment figures.

So despite popular reports by the media, the Australian, Bloomberg, BBC, Alan Kohler, and the ABC, AUSTRALIA IS IN A RECESSION!

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3 responses to “The Great Recession

  1. Nom de Plume

    Whilst it is that the measures for unemployment remain consistant overtime, this is a good yard stick to assess for recession or not, but if those measures are changed, as they have been changed now, then that yard stick is not necessarily picking up on the recession until it is well and truely in play.

    Youth Unemployment sky rockets during a recession. Employers have a preference to keep families and non youth adults employed because the youth can rely on their parents.

    The measure for youth unemployment has been changed, effective 1/7/09, so that, those youth who are not working and do not have their VCE and are under the age of 21, will not be measured on the unemployment stats because they will not qualify for a ‘looking for work’ payment and rather must gain study so as to claim a ‘study’ payment, or ‘looking for work’ payment with ‘youth activities’ (meaning study) as their only option.

    This impacts the unemployment stats and therefore the timing of when recession occurs.

  2. If a recession involves cash handouts, school building infrastructure, and record low interest rates, let’s have more of them!

    • Nom de Plume

      Hehehe… and then we pay it back though such things as a mega revamp of FTB as has been advised to be expected in the Henry Tax Review out at the end of this year.

      In it, he has said he will be recommending less FTB for school age children, using the savings to promote full time employment for both parents. He has found that the generousity of FTB has acted as a deterent for parents engaging in full time employment.

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