How Australia’s recession will affect you 

Houses might be cheaper but you probably won’t get a pay rise: How Australia’s recession will affect you

  • Australian economy fell into a per capita recession for the first time since 2006 
  • Expected to make everyday things cost more and hamper wage growth
  • Australia’s economic growth is failing to keep up with the population growth
  • Comes after property market record fall and six years of minimal wage growth 

A per capita recession has hit the Australian economy and is going to hinder wage growth and slash house prices.  

For the first time in 13 years, the country is experiencing a per capita recession, where Australia’s economic growth can’t keep up with population growth.

The plummet follows a drastic drop in house prices over the last year, as well as low to no wage growth over the past six years.  

A per capita recession is a time of negative economic growth where economic output, or wealth generated by every person in a country, shrinks.

For the first time in 13 years, the country is experiencing a per capita recession, where Australia’s economic growth can’t keep up with population growth (stock image)

Comes after the property market saw a record fall in house prices in the last year and six years of low to no wage growth (stock image)

Comes after the property market saw a record fall in house prices in the last year and six years of low to no wage growth (stock image)

Australia’s GDP growth level diminished in the second half of last year, shrinking by 0.1 per cent in the September quarter and 0.2 per cent in the December quarter, according to the Australian Bureau of Statistics.  

For the everyday Australian, the per capita recession is going to affect wage growth, which will make things more expensive when combined with an increasing cost of living, news.com.au reported.

The lower wage growth is also predicted to put pressure on house prices, as people won’t be able to pay as much for a home loan.

Senior economist Stephen Koukalas said while it’s a sign things aren’t progressing the way they should be, it’s not ‘catastrophic’.

Professor of Economics at UNSW Business School Richard Holden says he isn’t surprised by the news of the per capita recession.

‘This is a reflection of what’s already hurting Australians,’ Mr Holden said.  

Australia's GDP growth level shrank in the second half of last year, shrinking by 0.1 per cent in the September quarter and 0.2 per cent in the December quarter (stock image)

Australia’s GDP growth level shrank in the second half of last year, shrinking by 0.1 per cent in the September quarter and 0.2 per cent in the December quarter (stock image)

Mr Holden said the per capita recession is a sign the retail industry is suffering and isn’t hopeful it will bounce back.

What is a per capita recession?

A per capita recession is when economic output, or wealth generated, by every person in a country shrinks.

Population growth is removed from the equation to give a truer picture of economic activity.

Per capita output per person fell by 0.1 per cent in the September quarter and by 0.2 per cent in the December quarter.

This was the first per capita recession since 2006. 

This has followed a record fall in Sydney and Melbourne house prices and flat wages.

A per capita recession, however, is different to a technical recession, defined as the economy shrinking for two consecutive quarters.

This hasn’t happened since the first half of 1991.

Overall economic growth is based on the expansion in gross domestic product.

This rose by 2.3 per cent in 2018, which was much lower than the Reserve Bank’s forecast of a 2.8 per cent growth pace.

GDP grew by 0.2 per cent in the December quarter. 

Not only has consumer confidence been low over the past six months, but house prices have also taken a plunge over the last year.

Another large impact putting a strain on the economy was the lack of wage growth over the last six years.

‘It’s a reflection on the amount of economic activity on the economy and how wages are determined and now directly connected to that,’ he said.   

Commsec Chief Economist Craig James said Australia took a large blow last year when global trade slowed down and the drought affected farming.

‘You’ve got to remember we had very strong growth in the first half of the year. This was reflected in the company profit report,’ he said. 

Despite it affecting everyday Australians, economists agree the future of the country’s economy isn’t all doom and gloom. 

Mr James said consumers and businesses should remain positive as they have a lot to look forward to in the future.  

Mr Koukalas supported this and said despite being in a current per capita recession, Australia would not be seeing a full-on recession anytime soon. 

Australia hasn’t seen a technical recession since June of 1991, when the economy contracted for two consecutive quarters.  

A per-capita recession is a time of negative economic growth where economic output, or wealth generated by every person in a country, shrinks (stock image)

A per-capita recession is a time of negative economic growth where economic output, or wealth generated by every person in a country, shrinks (stock image)

Read more at DailyMail.co.uk