Let’s start off with two important definitions:
Recession = when a country’s economy declines. A recession is normally visible in the real gross domestic product (GDP), real income, employment, industrial production, and wholesale retail sale. The technical definition of a recession is two consecutive quarters of negative growth in real GDP. Don’t know what GDP is? We’ve got an explainer here.
Double-dip recession = a recession followed by a short-lived recovery, followed by another recession.
What are some examples of a recession?
Here are two of the most notable times in recent history where economies experienced a recession is the global financial crisis (GFC):
- It began in 2008, and was caused by falling U.S. house prices and a rising number of borrowers unable to repay their loans. It is often dubbed “The Great Recession” as it was the most severe economic recession in the U.S. since the Great Depression of the 1930s. Despite the flow-on consequences of the GFC, Australia managed to avoid a recession during that time.
- The second and most recent example of a recession (where many countries experienced a recession at the same time) was due to the effects of the pandemic in 2020. Last year’s recession was Australia’s first in almost 30 years. By the end of the last year, Australia was technically out of recession.
Why are we talking about this if Australia isn’t in a recession?
Prime Minister Scott Morrison was asked in a press conference yesterday if Australia is headed for a double-dip recession as a result of the multiple lockdowns in Australia, particularly NSW. Morrison responded with “we get the country to those levels of vaccination, we open up the country, the economy comes back strongly. And so the sooner we achieve that, the sooner that’s realised. And that should address the very issue that you’ve raised. That’s why it’s so important that we maintain this pace on vaccinations”.
Morrison remains optimistic, further saying, “the timing of these things, that’s a separate issue, but at this pace then … I do remain optimistic, I do remain confident in the Australian economy because there is no issue with the Australian economy. There is an issue of the impact of COVID-19 and restrictions that are holding that economy back”.