Recession could be over soon after it's finally confirmed
By Garry Shilson-Josling, AAP Economist15 May 2009 4:34 PM
SYDNEY, May 14 AAP - Australia's economic recession could be almost over before figures confirm it's "officially" under way.
Like it or not, most commentators use an old rule of thumb to identify recessions - two consecutive quarters of contraction in the volume of gross domestic product (GDP).
So far, we have only had one confirmed by the Australian Bureau of Statistics (ABS) - a relatively steep fall of a half per cent in the December quarter of last year.
It seems highly likely that GDP fell in the March quarter, and most likely the June quarter as well.
The problem is that we don't know that yet - not for sure anyway - because the March quarter national accounts report won't be released until June 3.
But it should confirm the second of the two quarterly falls in GDP, and that the standard definition of recession has not just been cleared, but cleared easily.
Economic growth in the June quarter, which ends in six week, appears likely to have contracted as well.
However, if growth resumes in the September quarter, which begins in July, then the recession will be over in less than month after its confirmation.
Still, that might be too much to hope for.
At the moment, a positive September quarter looks like a long shot, despite the fiscal stimulus flowing through economy and the boost from lower interest rates and petrol prices.
If GDP does fall again in the September quarter it will be an unfolding collapse in business investment that does the damage.
But the end of the September quarter is only a little over four months away.
And all around the world there are tentative signs of "greens shoots", to repeat the term used recently by US Federal Reserve chairman Ben Bernanke..
Credit markets are settling down, share markets are well off their lows and in the real world businesses are well into a the process of inventory reduction.
It seems reasonable to expect growth to re-emerge in Australia, albeit tentatively, later this year.
That would be consistent with the forecasts published by the Reserve Bank of Australia (RBA) last week, as well as the Treasury forecasts underlying the budget on Tuesday this week.
And those forecasts are by no means optimistic.
Both the depth and length of the recession, as well as the rate of exit from it, would be a virtual repeat of the 1990-91 episode if the forecasts from official circles turn out to be right.
And the 1990-91 slump is hardly renowned for its shallowness or brevity, not for the vigour of the subsequent recovery.
But even if the current downturn mimics the early-1990s recession, we are already more than half way through it.
The current recession began - to the extent that it can be said to have a definite start date - at the beginning of the final quarter of last year.
That was when the Lehman Brothers collapse in September turned a global slowdown into a slump of historic proportions.
That was eight months ago and growth is set to resume in no more than half that time.
This is not to say the official theme song for the December quarter will be "Happy Days Are Here Again".
Growth, according to the forecasts from the RBA and the Treasury, will not be sufficiently rapid to stop unemployment from the rising until the dying stages of 2010.
And even then the labour market respond will be long-delayed as shell-shocked firms put off hiring as long as possible.
The labour market will be a demoralising environment for job-seekers until well into 2011, and 2009 is less than half over.
But at least, by the end of this year, policymakers should be able to occupying themselves with managing the recovery rather than cushioning the downturn.
