What is a recession

Thu, 03 Sep 2015  |  

Below is an extract from my book, Myth Busting Economics.  It is a brief analysis of the definition of recession and rubbishes the notion of two consecutive quarters of negative GDP growth as a ‘techincal’ recession. 

Oh, and if you want to buy my book, here is the link:

What is a recession?

Conventionally, an economic recession is indicated by two consecutive quarters in which real GDP falls. The reality, however, at least from a business perspective, suggests this definition is somewhat artificial and, frankly, a little silly.

‘Two negative quarters of GDP growth’ takes no account of context — what happens over a slightly longer time frame, or the country in question.

Let me explain it this way.

Think of Australia and let’s assume we have the following quarterly real GDP growth rates:

▪ Quarter 1: −0.5 per cent
▪ Quarter 2: +0.2 per cent
▪ Quarter 3: −0.8 per cent
▪ Quarter 4: +0.3 per cent.

According to the textbook or conventional definition, there is no recession, because in this illustration there have not been two consecutive quarters in which GDP has fallen. But over the course of the four quarters that make up this particular year, GDP has fallen 0.8 per cent. If this occurred in Australia, the unemployment rate would be around two percentage points higher, businesses would be failing and plainly it would be a recession. 
Of course, much will also depend on the country you are trying to judge. Take China, for example. It’s potential rate of annual GDP growth is widely estimated to be around 7 per cent. That means China’s GDP can expand by 7 per cent before there are problems with inflation, capacity utilisation and potential imbalances in the broader economy.

Let’s make an assumption that in a particular year China’s GDP grew by 4 per cent, or about 1 per cent per quarter. This would be quite catastrophic for the economy. Its banking sector would be in turmoil, deflation risks would abound and for all intents and purposes the country would be in recession. It would simply be growing too slowly.

So, the best definition of recession?

It is a tough call to make, but it needs to take account of the extent to which a country’s growth drops below its long-run potential, the labour market deteriorates (the unemployment rate rises) and inflation falls below the central bank target.

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Wed, 29 Jul 2020



Covid19 has opened a door for Australians to positively accept significant changes that will lead to a shared good. This rare opportunity enables us to achieve sustainable economic and social goals that create a new ‘normal’ as our way of life.

These Ten Steps are presented as non-partisan recommendations to the Australian Parliament in the firm belief that, if they embrace them, the Australian economy and society will be greatly enhanced after the Covid19 pandemic has passed.

*A job for you if you want one.
A significant increase in part time and casual employment can be created that will enable you to enjoy a more creative and peaceful lifestyle and to live longer and better. The traditional age at which you would have been expected to retire will become obsolete as a result. An access age for pension and superannuation will become your choice. This will enable you to remain in paid work for as long as you want to, on a basis that you choose, while boosting the productivity and growth of Australia.

*You will get wage increases that will be greater than your cost of living.
A demand for enhanced innovative skills at all levels of employment will be created as the economy grows in strength, thereby enhancing your stature in the workforce and enabling executive salaries and bonuses to drop to levels that are accepted as justifiable by employees, shareholders and customers.

The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.