05 Sep 2019

Tags

• Edmund Tang

• OECD

Australia's economy grew by 0.5% in the fourth quarter (Q4), lifting Australia's annual economic growth rate to 1.9% in FY2018/19, according to the latest National Accounts figures released by the Australian Bureau of Statistics. The economy grew by 2.9% in 2017/18.

The result is in line with the latest projected rate from the International Monetary Fund (IMF) but marginally lower than the 2¼% predicted by the Reserve Bank of Australia in its August 2019 Statement on Monetary Policy.

Given the current economic uncertainties, the latest outcome is a positive sign. Australia has sustained the momentum that has delivered a record 28 years of uninterrupted economic expansion. The period since 1991 is now the longest continuous stretch of growth that Australia has recorded for at least the past 50 years, with an average growth rate of 3.1% per annum.

First among the OECD

In the 1970s and 1980s, our growth phases lasted only six or seven years before another recession hit. By comparison, since 1991 all of the other 36 member countries in the Organisation for Economic Co-operation and Development (OECD) have experienced at least one recession – as defined by two consecutive quarters of negative GDP growth.

Many economies experienced two recessions during that period: one in 2001 following the collapse of the dot-com bubble; and one in the 2008 Global Financial Crisis (GFC).

By our count, Australia’s tally of consecutive quarters of positive growth has now exceeded all OECD member countries including the Netherlands (96 quarters between Q4 1981 and Q2 2008), South Korea (79 since the Asian Financial Crisis in 1998) and the USA (66 quarters Q2 1991 and Q2 2008).

Our estimates for Australia’s growth performance are based on the national accounts collected by the OECD . At first glance, the Japanese economy came close to matching Australia’s recent economic record. However, the total number of positive quarterly consecutive growth rates in Japan was actually 63 from Q1 1975 to Q1 1993 instead of 119.

The history is interesting: Following the Arab oil embargo Japan went into a severe recession with GDP shrinking by 1.2% in 1974. Note also that although no two consecutive negative growth numbers were reported on a quarterly basis between 1960 and 1974, Japan did suffer a sharp GDP slump of 3.4% in Q1 1974.

The Japanese economy then experienced a modest recovery of 0.7% and 1.3% in the following two quarters and then fell again in the Q4 1974.

The outlook remains positive

Australia’s economic resilience has been the envy of many economies in the world. Australia sailed through the Asian economic crisis of 1997–98, prospered through the US stock market bust and recession of 2001, and continued to grow through the GFC of 2008–09.

Looking forward, the IMF predicts that Australia’s real GDP will grow by an average rate of 2.7% per annum between 2020 and 2024, up from an average rate of 2.5% per annum between 2015 and 2019, which is well ahead of most major economies. ^[1]

Australia’s impressive performance over the past two and half decades has been largely attributable to a wide range of factors including economic reforms, longstanding trade ties with booming Asia, and strong population growth.