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How deep the recession?

This note looks at the global economic slump that is now unfolding. The key points are as follows:

- Global recession is now a given. Australia is also headed for at least a mild recession.

- The key issue is the depth and duration of the slump. At the moment leading indicators for global and Australian growth are still in free fall.

- Rapid policy action should help drive a recovery from the second half of next year, but given the de-leveraging now underway the risk of a longer recession is high.

Much of the bad news has already been factored into share markets, but as the news remains bleak shares are still under pressure. In fact shares are now making new bear market lows with the Australian share market having fallen 50.8% (as at 3pm today) from last year’s high making it the second worst bear market since 1900. Worst than the 1987 top to bottom fall of 50.1% but not as bad as the 1973-74 bear market where shares fell 59.3%.

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