EDITORIAL WEDNESDAY 03.06.09.
Let the rejoicing begin! Australia has defied the odds and avoided an “official” recession, and there is no doubt there will be much self congratulation for a day or too. And having achieved a positive figure for Gross Domestic Product growth in the March quarter, the clock is effectively reset on the technical definition of recession which requires two consecutive quarters of red ink before the “R” word is given official status. That means it will be six months before the opportunity for such conditions to be met can occur again. The government will presumably claim success for the stimulatory policies of the past six months, and bask in the warm sunshine of renewed public adoration for saving the nation from almost certain doom.
Of course, it’s not really like that at all. The growth registered for the March quarter is less than the decline recorded in the previous quarter so in trend terms we are still down for the six month period. The forecasts for the coming months continue to point towards falling business investment and rising unemployment, while in the rest of the world most of our trading partners continue to experience quite severe recession. Just because the rain has stopped falling for the moment doesn’t mean the flood waters are not still racing down the river towards us.
At the same time, today’s positive news does achieve two important things. To some extent it does vindicate the government’s policy of economic stimulus, because against all the predictions official recession has been held back. And the indicators are quite clear that the cash bonuses have found their way into retail spending, the first home buyers grant boost has inspired more dwelling approvals, and the assistance to banking and business is both bolstering the economy and preserving jobs. To that extent, the government is entitled to claim credit, even though it would be premature to claim victory over the recession we didn’t have.
The second thing that it does is that it provides a psychological boost. Having achieved a positive GDP figure against the odds, no matter how modest, is a symbolic victory that can only serve to encourage optimism. Already, the share market has responded today with a surge in value immediately following the announcement. Following on from a run of share market gains in recent days, it is clear to see the impact of a little bit of optimism translating into a tangible gain. While such gains can disappear quickly in the fickle stock market, the fact that the economic sword of Damocles won’t be hanging over the markets for the next six months provides just that much more room for a cheerful outlook.
So, for now, let the rejoicing begin, after all it is the Australian thing to do. Every Australian knows that any excuse will do for a party, and of course there is the added benefit that throwing a party will help to boost the economy even more. Think of the money spent on balloons and bubbly all adding to the bottom line of the nation’s economic activity. So, Australians all let us rejoice for we are recession free, just so long as we realize that the recession hasn’t been cancelled, it has only been held back. Today we can have a small celebration, but tomorrow the serious work of keeping the economy afloat in difficult times will continue.