1991–1992: The early 1990s recession mainly resulted from Australia's efforts to address excess domestic demand, curb speculative behaviour in commercial property markets and reduce inflation.
When has Australia been in a recession? Australia has been in a lengthy recession before, but it was a long time ago. The first recession, since the development of the United Nations' System of National Accounts, was recorded 1974-75, the second in 1982-83 and the most recent recession occurred in 1991-1992.
Australia is moving closer towards a recession and its chances of experiencing one in the next year is sitting at around 50 per cent, according to economists.
Australia's economy was buoyed by large resource exports to China, whose economy rebounded quickly after the initial GFC shock (mainly due to expansionary fiscal policy).
A technical recession is defined by two negative quarters of growth, which Australia incurred for the first time in nearly 30 years during the pandemic but quickly rebounded. Australia is now facing its toughest conditions since the 2007 global financial crisis.
1991–1992: The early 1990s recession mainly resulted from Australia's efforts to address excess domestic demand, curb speculative behaviour in commercial property markets and reduce inflation.
The recession of 1990-91 was dominated by financial failure. In most cases, it was the fall in asset prices that meant that loans could not be repaid, thus transferring the distress to financial institutions. — Ian Macfarlane, former Governor of the Reserve Bank of Australia, speaking in 2006.
Although Australia has avoided the worst effects of a recession for almost 30 years, 2023 may be the year of a recession - if one thing keeps rising. With GDP on an upward trajectory, a 0.6 per cent uptick to be precise, and unemployment at an all-time low at 3.5 per cent - we're in a good economic situation.
Prices could fall further
If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.
A term deposit.
Deposits up to $250,000 in savings accounts and term deposits with Australian banks are protected by the government, so if something were to happen to the bank (which is unlikely), your deposit would be safe. This is part of the Australian Government Guarantee Scheme.
The Bank of England no longer expects the UK to enter a recession in 2023, after announcing that the economy was expected to grow slightly in the second quarter of this year. This means the technical definition of a recession – which is two consecutive quarters of contraction – will not be met.
Commonwealth Bank of Australia on Friday puts the odds of a recession this year at 50%, predicting growth to slow to an annual rate of 0.7% in the last quarter and jobless rate picking up to 4.7% in mid-2024.
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
Australia is a low-tax country
Australia has one of the lowest overall tax rates of any high-income country in the world. Our tax revenue represents 29% of our GDP, compared to 34% across OECD countries. Australian social security taxes2 represent less than 1% of GDP.
High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.
Rising unemployment. Unchecked inflation. Asset bubbles (such as the housing bubble that caused the GFC). Significant stock market losses or crashes.
Overall, that means prices are still much higher than they were pre-pandemic. That has made it even harder for people to get on the housing ladder, with new research finding 90% of aspiring first-home buyers are unable to purchase a property.
Investment. The UK was the third-largest source of foreign direct investment (FDI) in Australia in 2021 ($128 billion), and the second-largest source of foreign investment in terms of total stock ($719 billion).
Distance from family is often cited as the first disadvantage of living in Australia. Not only is it expensive to visit family, but it's also almost impossible to get there quickly in case of an emergency.
The general consensus is that today, it is very difficult to live on the minimum wage in Australia. In 2021, the minimum wage was $3,090.40 per month. In 2019, the living wage was estimated to be $1,180 to $1,900 per month for a single adult. For a typical family, this can vary from $1,730 to $2,980.
Economic growth is expected to slow this year
Domestic demand growth stalled in the December quarter, and timely indicators suggest subdued growth in early 2023. Household consumption growth is expected to remain sluggish through this year as inflation and higher interest rates weigh on real disposable income.
The Great Recession in Oceania was the great recession of the late 2000s and early 2010s in Oceania. The Oceanic countries suffered minimal impact during this time, in comparison with the impact that North America and Europe felt.
We know that recessions vary in severity – just how bad will the 2024 recession be? We expect the 2024 recession will be a relatively mild one for US Industrial Production. However, before breathing a sigh of relief, understand that the recession will not be mild for every industry.