The recession we (didn't quite) have to have?

On June 3, the Australian Bureau of Statistics (ABS) released its estimates of the national accounts for Australia for the January-March quarter. Following on from a small overall drop in gross domestic product (GDP) of 0.6% for the December quarter, a fall in the March quarter would mean that Australia had entered a "technical" recession.

The ABS figure showed a small growth in GDP of 0.4%. Prime Minister Kevin Rudd and Treasurer Wayne Swan immediately gave a triumphal press conference, claiming that the government's stimulus packages had done the work.

"Australia is the only advanced economy, as of today, not in recession", Rudd said on June 3.

While admitting "we will face higher unemployment in the Australian economy", Rudd claimed "the government, however, has acted early, and decisively, with an integrated economic strategy ... to cushion Australia from the worst aspects of this economic recession".

Rudd said treasury estimated "the Australian economy would've contracted by around 0.2% [in the March quarter in the] absence [of] the government's stimulus payments".

Analysis of the ABS figures, together with other economic data released before and after the national accounts, shows a different story. While avoiding a "technical" recession, the Australian economy remains in a real recession, which is only likely to deepen.

Collapse of imports

The key economic data needed to understand the June 3 national accounts was released the day before.

On June 2, the ABS published the Balance of Payments and International Investment Position for the March quarter. It showed that imports of "intermediate and other merchandise goods" imported by business for production had collapsed by $5.3 billion.

"That points towards rising unemployment as do all the forward indicators on jobs", wrote ABC Online economics correspondent Stephen Long on June 3.

The fact that a collapse in capital imports is counted as a positive growth in the economy is contradictory. However, it points to a continuing decline in business investment, and therefore a decline in growth and employment, over coming months. Business investment fell by 1.1%, ABS figures said, in the March quarter.

A further indicator of increasing economic gloom came with the ANZ Bank job advertisements survey for May, released on June 9. The study of job ads in major metropolitan newspapers and the internet found that job ads in May had fallen, but only by 0.2% for the month. The fall in job ads over 12 months, however, was 49.1%.

"We expect these falls in employment to start coming through in the official statistics at anytime", ANZ Australian economics head Warren Hogan said.

On June 11, the ABS released the May labour force report. It showed the numbers of the unemployed rose in May by 27,200 to 651,200. There was also higher casualisation of the workforce, with 26,200 full time jobs being lost, while 24,500 part-time jobs were created.

Room for optimism?

Rudd and Swan claim credit for a growth of 0.3% in household spending during the March quarter.

"Household consumption has now grown by 0.8 per cent through the past year", Swan crowed on June 3. This allowed Rudd to make the tenuous claim that the stimulus packages stopped the economy from falling into (technical) recession.

On June 4, Reserve Bank of Australia (RBA) governor Glenn Stevens joined the songs of praise, predicting a return to growth in Australia based on exports to China, "where our estimates are that industrial production had recovered all the losses by March".

Speaking at James Cook University in Townsville, Stevens argued that despite weakened domestic demand "the economy will be well placed for expansion towards the end of this year".

A return to economic growth need not lead to a quick fall in unemployment, however. In the 1990s recession, unemployment climbed over 10% in 1991 and only fell below that mark in 1994. Yet the economy had begun to grow again in 1991.

Whether or not the economy returns to growth at the end of this year, unemployment is likely to continue to rise. Unless there is more organised resistance, to both business and government, living standards will continue to fall.

Bailing out bankers

Stevens's optimism also relies on the prediction that "the uncertainty in financial markets continues to lift". Stevens expects the financial crisis that sparked the global crisis to stabilise.

The International Monetary Fund, in its April 2009 Global Financial Stability Report, had a far less rosy outlook. "The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries", it said.

"Without a thorough cleansing of banks' balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalisation, risks remain that banks' problems will continue to exert downward pressure on economic activity."

The IMF's remedy includes the call for massive bank bailouts — using public funds.

It also recommends nationalisations where banks become insolvent — but only so the public may repair their balances and then return them to private ownership in the medium term.

In short, the IMF wants the taxes of working people to guarantee the profits of the bankers.

Bankers and financers created this global economic crisis. Their aim is to make working people pay for it. The government, the IMF and the RBA are their willing servants.

The only choice for working people is to fight for policy that puts our interests first. Demanding massive investment in renewable energy, nationalisation and reorganisation of companies that fail and nationalisation of private banks, beginning with the Commonwealth Bank, would be a start.

A reorganisation of the economy on the basis of people and the environment before profit might be the end result.

If you like our work, become a supporter

Green Left, a vital social-change project, makes its online content available without paywalls. But with no corporate sponsors, we rely on support and donations from readers like you.

For just $5 per month we’ll send you the digital edition each week. For $10, you’ll get the digital and hard copy edition delivered. For $20 per month, your solidarity goes a long way to helping the project survive.

Ring 1800 634 206 or click the support links below to make a secure payment.