What is recession? : A reprise : Discussion Paper No 95

This paper draws its title from a paper written over 30 years ago by Geoffrey H. Moore (1967). Why the need for a reprise? First, there would appear currently to be somewhat diverging views – particularly in Australia – as to what properly constitutes a recession. Second, largely as a result of this, in Australia and many other countries other than the US, there is no single widely-accepted business cycle chronology for the country in question. This paper will argue that in addition to an output dimension, there are other important dimensions to aggregate economic activity which need to be taken into account in determining the business cycle, viz., income, sales and employment. As such, our perspective would seem to be at odds with the apparent position taken by other recent Australian commentators on this issue who argue that GDP is all that is needed to represent Australia’s business cycle. We will also argue strongly against using the currently popular ‘two negative quarterly growth rate’ rule in dating the onset of a recession