Recession will officially begin soon, unless some fancy work can be done with the books.
What are the goods & services prices that most affect the normal citizen - shelter, fuel & energy, food? Maybe there are more....health care, education?
Well we read every day or worse, experience the staggering rise in the cost of shelter, be that renting or seeking to buy or paying off a mortgage.
Similarly the cost of electricity or gas and of course petrol have for a lot of people risen to levels not seen before.
And then there's food. Now I've had to do our supermarket shopping on my own for a couple of years I guess and frankly I've never taken much notice of the prices, until maybe the last few weeks. In that time you would have to be blind not to see what looks like almost a weekly rise, often a significant rise, in food and other prices
I imagine the statistics would show that rise over a period, but then again maybe they don't. Who knows what goes on in the Bureau of Census & Statistics, if it's still called that.
There have been serious questions by knowledgeable people as to what has been going on with official figures in the US.
OK, so what is so important about rising prices?
Well, unless they are matched by equivalent income rises, aggregate demand is going to fall while aggregate supply tries to sustain itself, but at some point it can't, it has to contract. If you can't sell enough, you've got to stop making or buying as much. The market as a whole winds back and enters recession.
It doesn't happen all at once in every segment of the market but over time that will be the result.
That's a recession. And it has been building momentum since last year at least.
Now, the Treasury and the RBA are charged with maintaining a stable market, as much as they can, but there is no magic tap to turn down or up. It's a matter of judgement. Sometimes we have better judges than other times and of course politics can get in the way.
It was good to see the new RBA Governor resist the substantial pressure to cut the official bank rate and even better to see her more or less suggest that it might have to go up. It's a pity she didn't in fact raise the rate this week but there you go. I would put money on it that she will soon. She better, imo, or things will just get worse.
If Paul Keating was still running the circus he would be saying this is another recession we had to have.
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