The September quarter national accounts released last Wednesday have been interpreted by some commentators as heralding the end of the recession. If only that were true. Those commentators are confusing the change in economic activity with its level.

It is true that real GDP rose by 3.3% in the quarter — one of the largest quarterly increases on record — but it is also true that this followed the largest quarterly contraction on record, of 7% in the June quarter.

Assessments of where the economy stands in the business cycle require more than one quarter’s GDP —and indeed not just GDP, but a range of other indicators such as employment.

The fact is that despite the latest quarter’s surge in GDP, the level of GDP remained 4.2% below what it was in the pre-pandemic days of late 2019.

Aggregate hours worked have recovered much of their loss from March to May but still stand 4% below the March peak.

At other times in the past if the economy had shrunk by 4%, it would be considered a severe recession. In fact, no other recession since 1959 has seen a contraction as large as 4%.

It may be that on this occasion conditions are more uneven, with some sectors booming and some in a state more like depression than recession.

It may also be that people are more conscious of the improvement from the dismal mood of April/May (and until October in Victoria) than the fact that some sectors remain in the doldrums.

Certainly, the bounce-back has been stronger than generally expected — and that has been true of many other countries too. Knowing that, or thinking the recession is over whether it is or not, will be positive for consumer and business confidence and therefore to an extent self-fulfilling.

The economy, however, is nowhere near back to normal, and will not be until the rest of the world returns to normal; fear of the coronavirus subsides with widespread distribution of an effective vaccine or for other reasons, and the spectre of renewed lockdowns and border restrictions goes away.

Robert Carling is a Senior Fellow at the Centre for Independent Studies.