Next week Australians could find themselves waking up to an unexpected headline: the country is already in recession.
Economic activity in the September quarter has been crushed by Delta lockdowns and make a severe contraction a certainty. Looking ahead, the talk and pointed questions from journalists to politicians have all been about whether we’d get another drop in GDP over the final three months of the year.
Maybe they should have been looking backwards.
A growing number of economists are warning Wednesday’s national accounts could show the economy contracted – albeit only slightly – in the June quarter, not least due to some Covid disruptions after a very strong start to the year.
Citi chief economist Josh Williamson, for example, says he now “reluctantly” forecasts GDP to contract by 0.1 per cent.
Which means “Australia is likely to have the headline of going back into a technical recession this year,” Mr Williamson says, with the “technical” definition being two consecutive quarters of contraction.
AMP chief economist Shane Oliver also projects a 0.1 per cent economic contraction in the second quarter, which would mean “the economy will have slipped back into recession” by the end of September.
Other experts are flagging the possibility, if not outright predicting it.
Bank of America chief economist Tony Morriss says the risk of a technical recession is “relatively high”. NAB has been warning of the risk for a while.
This may all sound a bit strange, but consider that last year’s recession played out in essentially the same way: a lot of bushfires and a bit of Covid sent GDP down 0.3 per cent over the first three months of 2020, before the almighty, record-breaking 7 per cent collapse in the June quarter.
While meeting the technical definition of a recession could come as a shock and trigger some big headlines, it would not come as a huge surprise to the millions of workers and businesses enduring lockdowns.
Indeed, there are parts of the country which have been enduring recessionary conditions constantly since Covid first landed on our shores.
Think shops, cafes, restaurants, gyms and hairdressers in the CBDs of Sydney and Melbourne.
Think those working in and around the international travel and study industries.