Recessions happen more often than you think
Posted March 12, 2020
The Australian economy has not experienced an annual decline in Gross Domestic Product (GDP) since 1990-91. Many people assume that almost three decades of continuous economic growth means that many Australian’s have not seen a recession during their working lives. However, this is not the case.
The economic evolution within Australia over of the past three decades has resulted in a far more complex regional economic picture.
The rise of inner-city knowledge-intensive services, the resources construction boom and bust, the changing nature of manufacturing and other changes have created a patchwork economy. Australia’s three decades of continuous economic growth has impacted cities and regions differently.
Regional economies have experienced varying levels of economic growth
An analysis of annual GDP data across Australia’s capital cities and regions since 1990-91 highlights locations that experienced a decline in GDP – or what could be described as a recession.
Since 1990-91, many parts of Australia experienced an economic contraction (or what could be described as a recession). Melbourne experienced a second successive fall in GDP in 1991-92 (-1.4 per cent) but has seen economic growth every year since.
When the Goods and Services Tax (GST) was introduced in 2000-01, Brisbane saw a -2.1 per cent decline in GDP, which had a big impact on its housing construction sector. Adelaide avoided a recession in 1990-91 but saw a decline of 2.3 per cent in 1991-92. Tasmania experienced recessions in 2000-01 (-1.0 per cent) and 2012-13 (-0.3 per cent).
The end of the mining boom hit Perth hard. Perth had the largest and most recent regional recession, with a -2.9 per cent in 2016-17. There has been almost no growth in the Perth economy of over the past five years. The size of the Perth economy in 2018-19 is virtually the same as it was in 2013-14.
Sydney and Canberra were the only economies that did not contract during the 1990-91 national recession.
The regional section of each state is a collection of communities each with its own history, strengths and challenges. While the recessions may not have impacted all communities within a region, there have been regular economic recessions across regional Australia. This is in part due to the drought conditions in many rural areas. Falling agriculture production is directly affecting related industries such as manufacturing, wholesale trade, and transport and storage. The end of the mining construction boom has also impacted Regional Western Australia and Regional Queensland’s economies.
National economic growth has relied on Capital Cities
Capital cities account for 70 per cent of Australia’s economic activity. Sydney and Melbourne alone account for 43.4 per cent of the Australian economy. After growing at similar levels for much of the past five years, Sydney and Melbourne diverged in 2018-19. Sydney’s GDP growth in 2018-19 fell below its ten-year average while Melbourne’s growth continued to be well above the ten-year average. Australia has avoided a national recession over this time due to the strength of Sydney and Melbourne.
The national economy has coped as the downturns have touched different industries or locations at different times. In effect, national businesses respond to regional recessions by looking for opportunities in other locations, and workers move to locations with better job prospects. However, if Australia experiences an economic downturn across multiple industries and locations at the same time, there is less ability to respond at the national level.
For example, if Australia’s international gateways, Sydney and Melbourne, are both impacted by reduced demand across tourism and international education at the same time as ripple effects from disruptions to global supply chains, it’s likely to impact national economic growth.
As of 11 March 2020, the Australian Government Department of Health confirmed that 67 per cent of the 112 confirmed cases of coronavirus (COVID-19) in Australia are located in Sydney and Melbourne. How Sydney and Melbourne respond to the public health emergency from the COVID-19 outbreak will determine the outcome for the national economy.
Australian regional recessions since 1990-91
|Region||Recession||Per cent fall in GDP|
|Regional South Australia||1990-91||-2.1%|
|Regional Western Australia||2015-16||-2.8%|