Australian economy “going into a hole”
7 October 2017
Concerns are mounting that the Australian economy is about to end its record-breaking run of 26 years without a recession and that such an occurrence could trigger financial turbulence because of the rise of debt.
On Thursday, Australian Bureau of Statistics (ABS) retail sales data recorded their largest two-month decline for seven years, in a sign families are cutting back spending in conditions of stagnant or falling real wages.
Sales fell by 0.6 percent in August, following a 0.2 percent decline in July, after predictions they would show a 0.3 gain. The August fall was the largest since March 2013. The two-month decline was the most severe since late 2010 and the first two-month back-to-back fall in almost five years.
With consumer spending accounting for around 60 percent of Australian gross domestic product (GDP), there are fears over what the fall signifies for the broader economy. Since the end of the mining boom, growth has been sustained to a considerable extent by the inflation of house prices.
Commenting on the sales data, former chief economist at the ANX bank Warren Hogan said: “We’ve got this declining trend accelerating. If this is not ‘statistical,’ if this is not a sampling error, then this is the sort of dynamic you’d see in an economy that is going into a hole.”
Reporting on the latest Morgan Stanley AlphaWise survey findings, Business Insider Australia noted: “Australian households are in a vulnerable financial position, especially those who have taken out a mortgage. And in an era of weak incomes growth, soaring energy prices and high levels of indebtedness, with the prospect of higher interest rates on the way, many intend to cut discretionary spending in…