What does it mean to be in a recession?

Australia's economy has plunged into its first recession in nearly 30 years. Federal Treasurer Josh Frydenberg announced that gross domestic product (GDP) shrank 7% in the April-to-June quarter compared to the previous three months.

This is the biggest fall since records began back in 1959 and comes after a fall of 0.3% in the first quarter of 2020.

But what exactly is a recession?

THE DEFINITION

A recession is a period of 'economic decline', being two consecutive quarters (six months) of negative growth.

Other recession indicators include rising unemployment, falling retail sales, slowed manufacturing growth, and a decline in real personal income.

Australia was lucky to escape recession in the 2008 global financial crisis. In fact, the Australian economy was the only major economy to avoid a recession during that time - mainly due to demand from China for natural resources.

WHAT CAN I EXPECT DURING A RECESSION?

Even though the unemployment rate is hovering aroud 10%, we can expect that to rise in the coming months. During the last recession in 1992, the unemployment rate peaked at 11.2%. We're expected to top that this year.

We'll also experience slower wage growth than what we are used to. Whilst the JobKeeper scheme is substanially assisting employers until March 28 2021, wage growth over the next 12 months is expected to stall.