Australia is staring down the barrel of a per capita recession, with economic data due to be released this Wednesday expected to show weak national growth – raising fresh concerns about the country’s economic trajectory.
Economists and market analysts are bracing for subdued figures in the upcoming national accounts, with minimal – if any – headline GDP growth expected. However, what is more concerning is the per capita GDP, which adjusts growth to account for the rapidly increasing population. That measure is tipped to show negative growth for the third consecutive quarter, signalling what experts refer to as a "per capita recession".
Per capita recession occurs when economic output per person declines over two or more consecutive quarters. While technically not a full-blown recession (which is defined by two quarters of negative overall GDP), this trend is being viewed as a serious red flag for living standards, household spending, and productivity.
Economist Sarah Hunter, from KPMG, noted, “Population growth is masking the real story. When we strip that out, the economy isn’t going forward — it’s going backwards.”
Key factors dragging the economy include soft household consumption, slow productivity gains, and declining business investment. Higher interest rates, imposed by the Reserve Bank to tame inflation, have also weighed heavily on consumer sentiment and spending.
While the government points to strong jobs growth and a relatively resilient labor market, analysts warn this could provide a false sense of security. “You can have job creation alongside falling living standards. That’s what a per capita recession illustrates,” said independent economist Saul Eslake.
Wednesday’s figures are expected to prompt renewed debate over fiscal policy, immigration levels, and interest rate settings, particularly with inflation remaining stubbornly above the RBA’s target range.
Treasurer Jim Chalmers has attempted to reassure the public, saying the economy is “in a better position than many comparable nations,” but acknowledged that many Australians are still doing it tough.
The concern now is whether the government and central bank can steer the economy away from a deeper downturn — or if a more traditional recession may soon follow.
