Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.

 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate


On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.


RSS 2.0

A short, sharp recession due, but we're a safer bet

By Henry Thornton - posted Tuesday, 4 November 2008

Is recession coming? Yes for the US; no for Australia, with rate cuts to come.

The US votes tonight in the shadow of recession. Consumer confidence is at record lows, equity prices are low and house prices are still plunging.

The "China effect" was meant to insulate Australia from major effects. But now the US is thought to be leading Euroland and Japan into recession and China has slowed appreciably.


Commodity prices are down by about 40 per cent, eliminating the bubble effect, perhaps showing some "undershooting" as markets adjust in the opposite direction.

Australian equity prices have fallen by about the same amount in percentage terms as Wall Street, Australian house prices are falling and consumer confidence is falling.

The graph on page 26 compares US and Australian consumer confidence. The data has been compiled since 1973 for Australia by Roy Morgan Research and by the Conference Board since 1977 for US consumers.

The US measure clearly picked the three US recessions - in the early 1980s, the early 1990s and 2001. The current reading is a record low, suggesting this recession will be severe.

The Australian data shares the gloom of the early 1980s and early 1990s, but conspicuously failed to dip in 2001. Now it is down but not (so far at least) to the depths reached in the earlier recessions.

There is one, more speculative, point to be made in comparing the two series. US consumer confidence appears to be more volatile than Australian consumer confidence. Except for the mini-boom of the mid-1980s, the lows of US confidence were lower and the highs were higher.


Does this perhaps reflect the more flexible, volatile nature of a freer, more innovative US economy?

Many influential people are saying the US is in recession now. This is effectively confirmed by the early estimation of US GDP, which suggests negative growth in the September quarter.

Will the US recession be deep or will it be long? Or could it be both deep and long?

  1. Pages:
  2. Page 1
  3. 2
  4. 3
  5. All

First published in The Australian on November 4, 2008.

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

1 post so far.

Share this:
reddit this reddit thisbookmark with Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at

Other articles by this Author

All articles by Henry Thornton

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Henry Thornton
Article Tools
Comment 1 comment
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy