Australia is on the edge of recession and ordinary Australians have been in recession for some time.
The December quarter national accounts show that while the Australian economy shrank in the December quarter, creating a precondition for the 2 quarters of negative growth commonly taken to define a recession, non-farm GDP shrank for the second successive quarter and GDP per person shrank for the third consecutive quarter.
Declaring that he did not want to get into a "definitional discussion" about what constituted a recession Treasurer Wayne Swan vowed to do everything in his power to cushion Australia from the downturn saying if he didn't, it would "be longer, harder and have even more tragic human consequences, and I don’t think our children will thank us for that. There’s been a savage contraction in global demand; it's ripping through economies in all sorts of predictable and unpredictable ways."
Between September and December the total value of goods and services produced and consumed in Australia shrank 0.5 per cent. So weak was the preceding growth that over the year to December the total climbed a mere 0.3 per cent...
Victoria appeared to swim against the tide, recording quarterly growth in state final demand of 1.2 per cent, but the result merely partially reversed a slide of 1.7 per cent in the quarter before. Over the six months and year to December Victoria's growth was amongst Australia's weakest.
The $8.7 billion December stimulus "cash splash" appears to have been largely saved, with consumer spending climbing a mere 0.1 per cent while the household saving more than doubled to 8.5 per cent, its highest point since the 1990s recession.
"About 80 per cent of the cash handout appears to have been saved," said UBS economist Scott Haslem, some $7 billion of the $8.7 billion package.
Opposition Leader Malcolm Turnbull said it was clear the payments had produced "very little bang for the buck."
"If ever there was a time people were going to spend a cash hand out it was two weeks before Christmas. As you can see, exactly as we predicted last year, the vast bulk of it has been saved. But it will produce a big economic drag in years to come as will every cent of the $42 billion the Government is undertaking to spend right at the moment."
Prime Minister Kevin Rudd defended the payments saying there was "no credible alternative". Mr Swan said the saving the payments was no bad thing "because to the extent that people save to repair their domestic balance sheet if you like, it takes them one step further towards consuming at some stage in the future".
AMP chief economist Shane Oliver that for all intents and and purposes Australia was already in recession gone into recession and the forecasts of both the government and the Reserve Bank delivered just weeks ago were out of date.
The bookmaker Centrebet suspended its market on the Australian economy in the lead-up to yesterday's accounts after a flood of bets backing a recession. It will reopen this morning offering to pay $4.85 to anyone punting $1 on Australia avoiding a recession this year. Punters spending $1 backing a recession will only get back $1.15 if proved correct.
The accounts punch a deeper hole in the government's budget, showing that income tax revenue has fallen for the last 3 quarters. Total tax revenue slid 3 billion in 3 months.
The Treasurer said he knew when he published the Budget update last that all of the risks were on the downside. He said the economy looked weaker even than it did last fortnight. "The Opposition has said that we have over-hyped the global financial crisis and the global recession. Well, here’s the consequences."
"We've written down revenues by $115 billion since the budget. That’s a stunning figure. There will be further flow-throughs I should imagine. I’m not going to speculate about the quantums."
The accounts show that exports fell 0.8 per cent in the quarter, imports fell 6.8 per cent, profits fell 5.4 per cent and the business sector's ratio of stocks to sales hit an all-time low.
JP Morgan economist Helen Kevans said the slide was "good news" because firms would need to rebuild stocks as sales improved, although she added the process would be "gradual, given expectations of a prolonged period of weak demand, both locally and abroad".
Separately released news showed that motor vehicle sales fell a seasonally-adjusted 17 per cent in February, indicating that the December quarter downturn is continuing into the March quarter.