By definition, a technical recession is where a nation’s economy suffers two consecutive quarters of negative economic performance. This refers to decreasing economic output, or negative growth (i.e. shrinkage), and implies that the economic activity of a country is declining1.
What has happened in Australia over the last two quarters is not a technical recession, because that is only based on total economic activity and is independent of population growth. However, what Australia is experiencing now is a ‘per capita GDP recession’, a term coined by economist Stephen Koukoulas, and refers to the economic activity relative to population growth2. As an example; if an economy grows by 0.4% in a quarter, but the population grows by 0.5%, that is a decline of 0.1% in per capita GDP. Two successive quarters like that and we are in a ‘per capita GDP recession’. It is perhaps a more accurate and useful measure of what is happening in an economy.
The Business Council of Australia (BCA) have jumped on this and, in a press release, have stated that “today’s national accounts figures reveal a sluggish economy growing too slowly to deliver the growing wages and new jobs Australians deserve…Australians are rightly crying out for wages growth but we can’t deliver that with an economy standing still.” They added: “we need a comprehensive plan to grow the economy, lift productivity and grow wages for Australian workers.”3
By growing the economy, the BCA means to make their members’ turnover increase. By lifting productivity, the BCA means to pay people less to produce the same amount of goods and services, or paying people the same to produce more goods and services. By growing wages, the BCA means you can have a wage increase but only if profits go stratospheric. Seemingly, the recent surge in profits have not been stratospheric enough to increase wages. Since the turn of the century, profits have surged from about 25% to 28% of GDP, while wages have fallen from 24% to 20% of GDP4. In addition, since the beginning of this decade (2011) annual wage increases have fallen from 3.9% to 2.1% so that now the rate of increase is about the same as that of the Consumer Price Index (CPI). In fact, workers in the private sector, which make up 85% of the workforce, have seen their wages grow by only 1.9%, lower than the CPI increase5; that means their wages are effectively decreasing. The salaries for Chief Executive Officers (CEOs) of Australian Stock Exchange top 200 companies rose 17.3% in 2017 (the most recent figures available); in the same year, wages rose 1.9%6.
As usual for the BCA, they have managed to get their economics arse about, again. They are most into self-serving advocacy for their members as you would expect. However they always cloak it in the usual drivel about ‘what is good for Australia’. They are unconcerned about the wellbeing of Australians beyond how much money they can gouge from them for their members. They do not seem to realise that the continued profitability of their businesses is dependent on the wellbeing of all Australians. It is the neoliberal ideology to which the BCA adheres which has increased inequality, and inequality is damaging, not just in their credibility (which is already declining), but for the profitability of the BCA’s members. All they have to do to see where they have gone wrong is to look at how Australia avoided the worst depredations of the Global Financial Crisis (GFC). It wasn’t by decreasing corporate taxation, or shovelling more money to the rich in the hope it would ‘trickle-down’. Apart from infrastructure and housing spending, it was by handing out money to average Australians, which raised consumption, probably to a level over 7% better than in countries where consumption wasn’t supported7. This is the economics that works: trickle-up. Trickle-down economics is just a con perpetrated on average people by the wealthy. The adherence to it by the Liberal Party will be one of the reasons for their demise.