Australia’s recession: GDP per capita records three consecutive negative quarters

Australia’s recession: GDP per capita records three consecutive negative quarters

Attending my undergraduate degree in the early 1980s, there was a big focus on gross domestic product (GDP) per capita. This meant economists took out the often-large stimulus from a rising population, and analysis was done over the population of the day.

If we take Australia’s National accounts, for example, the experts have you believe our economy grew at 1.5 per cent in 2023 relative to 2022. However, as the table below illustrates, on a GDP per capita basis, the Australian economy went backwards by 1.0 per cent in 2023. And from a per capita perspective, it went backwards in each of the June 2023 Quarter (-0.2 per cent), the September 2023 Quarter (-0.5 per cent) and the December 2023 Quarter (-0.3 per cent).

Making matters far worse, is the Living Cost Index – which does not include mortgage and other interest payments within the CPI data. 

For “typical” Australian employees the Living Cost Index grew by 6.9 per cent in 2023 relative to 2022. Thankfully, this was down from its June 2023 peak of a whopping 9.6 per cent. Commentators need to stop talking about real wage growth, given the CPI measurement lacks integrity when interest on mortgages have jumped by over $60 billion to an annualised $120 billion from rising interest rates and the expiry of fixed mortgages written when interest rates were at record lows.

To summarise: 13 official interest rate increases from the Reserve Bank of Australia over the 18 Months to November 2023 are (belatedly) starting to bite.  And let’s not forget the historically high net migration, fewer jobs advertised and likely rising unemployment from the current 4.1 per cent. On a per capita basis, Australia is in a recession and on a cost-of-living basis, the average family is feeling the pain.

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Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

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