Economy surviving commodity peak

The Australian economy typically underperforms in the aftermath of commodity price peaks, but that's not the reason for the latest rise in unemployment.

The tough times typically arrive after the price peaks, when prices are still relatively high.

There have been four major rises in Australia's export prices in the past 50 years (using the price measure for goods exports from the national accounts, converted into foreign currency values using the RBA's trade-weighted index of the Australian dollar).

The smallest of the four was in the second half of the 1980s and plateaued until mid-1990.

The gain on that occasion, a bounce back from a mid-decade slump, was still hefty a 44 per cent in just under four years.

There was a bigger gain of 56 per cent in the three year boom ending in late 1981.

Another two-and-a-half year boom in the early 1970s ended in mid-1974 with export prices up by 108 per cent.

But the big one was an eight-year surge peaking in mid-2011.

It pushed prices up by 156 per cent, despite a short-lived dip after the global crisis in 2008.

Gross domestic product, the broadest measure of economic activity, began declining in trend terms just as the 1971-74 boom peaked, one quarter after the 1978-1981 boom topped out and two quarters after the 1986-1990 surged ended.

But the latest episode has not followed the script.

In a speech in Brisbane in April this year, RBA governor Glenn Stevens admitted there could be a slump now the upward phase of the current boom was over.

If the economy made it through the "downward phase without a slump, that would be a major achievement", he said.

But it was not until a speech in Hobart in July that he acknowledged that commodity price booms had always - not occasionally, but always - ended in tears.

"What is being attempted now is to negotiate the downswing phase without the slump that characterised the aftermath of all the other booms," he said.

Since the latest peak, the economy has not been generating enough jobs to stop unemployment rate from rising.

Figures from the ABS on Thursday putting the unemployment rate at a 12-year high of 6.4 per cent were a reminder of that.

But that's not because the economy is in a slump.

In the 11 quarters since the peak, the economy had not repeated history and gone into recession.

Far from it.

GDP growth over that time has average 3.2 per cent annually, right in line with the long-run average - a dramatic and very welcome departure from the historical pattern.

Demand for workers has been soft because we've just seen the fastest three years of labour productivity growth for over a decade.

Sure, the economy has been underperforming by some measures - including job-creation.

But it could have been a lot, lot worse.