Australia falls into per-capita recession

https://www.theage.com.au/business/...ession-as-growth-tumbles-20190306-p5122r.html

Politicians trick of importing growth by fuelling large migration increases can be seen through with a more meaningful per-capita measure of growth. If migration starts to fall then this could be followed by a very real recession.

Sydney + Melbourne housing downturn really starting to crash the Australian economy. Interesting times...

 

But that would reduce downward pressure on wages (especially the young one) which is quite an issue currently

 

Well may we say " God save the Queen" because nothing will save Australia from recession

 

This is the trigger for lower rates - it's in. My guess is 0.25% in June and another in September.

2-3 months out from a federal election, politicians will be panicking, and pointing fingers.

For us property investors: it's really good for existing investors (lower rates), and for new investors - I think lending standards will still be a barrier. For those with finance sitting their hands, this is an opportunity to think bigger and perhaps buy a few strategic properties while this plays out.

 

yeah Recession we have to have to remove fat/ reduce rent seeking behaviors/ increase productivity/reduce immigration ponzi.But politicians will stop a nothing to save their mates

 

Is the serviceability rat eof 7.x% pegged to current rate or is it a hard number.

What im saying if rates drop does the serviceability rate drop as well?

 

What is rent seeking behavior?

 

Completely objectively, the real problem in the global economy is that interest rates are too low.

It is discouraging the savings, and more importantly, it is discouraging the behaviours that lead to savings, for a meaningful recovery to occur. Low interest rates, and the bias towards the present that this creates, has removed the virtues we once had.

Von Mises (the Austrian economist who predicted the great depression) used to say that "capital is a process". By this he meant that it matters where capital comes from: if capital just runs off the central bank printing press, that is inflation and unhelpful. If capital comes from real under-consumption and saving, that is real capital. And this is the sort of capital that leads to investment and productivity.

No one understands this because all of the mainstream economists are Keynesians, but artificially low interest rates is the reason why incomes haven't gone up in the last decade.

And while Keynesians with their pump priming and stimulus and other such nonsense run the levers of power, real estate comes with a central bank guarantee. Buy buy buy.

Deep.

 

You are right to point this out, and it's hard to say. That is why I said that servicing will still be a problem for new investors. Existing investors are winners though.

 

I was under the impression that a recession is when the GDP growth rate is negative for two consecutive quarters or more.

I take it that the media & possibly the Opposition desperately want to have recession headlines so have now come up with the term "per-capita" recession? I've never heard the term used until now or have I been living under a rock?

 

I agree with this.

I also think that if we see bad start of year numbers it will totally ignored and the following will happen -

1. The government will step in with spending. I mean - its an election year, so a slowdown prior to the election followed by a boost afterwards due to promises is common anyway. We will probably just see a more extreme version of this.
2. The reserve bank will either jawbone rate cuts or actually do it.

Considering GDP is basically Consumer Spending, Business Investment and Government Spending/Investment (lets ignore trade) - that would in theory boost Consumer and Government parts of the equation.

However, as with the above poster - i think current debt levels are the drag on the economy and the printing of money does not help.

The other understated thing is the transition from material objects into experiences and investment we are seeing with gen y. These things might be good for them individually, but hard hit sectors like retail wish they would waste more cash. I honestly think our economy is going to go through a major transition over the next 10 years as the way people choose to spend their money really changes.

 

But how much will be passed on?

 

Good question. I'm just not that good. We'll find out.

 

open the flood gates, turn australian economy into a "open" market, dont do anything that australia is "good" at or 2nd best, aim to be the best in 2 -3 industry is better than mediocre in 10 different industry.

no protection.. boom economy multiplies, but many people will hurt because suddenly the big fish in small pond become small fish in small lake and the middle lower to lower class people will move up or down accordingly.

but this will lose u the election why do it ?

 

Well to put in perspective.


The average in the Eurozone in 2018 for new mortgages was 1.78%.

Republic has highest average mortgage rate in euro zone

Of course, that would mean going to ZIRP or close enough to it which I don’t think is going to happen as it would be self-defeating.

The AUD would crash and we would be importing inflation left and right.

Then again, even with more modest cuts the AUD is in for a hammering.

Should see a sizable increase in people cycling to work; silver linings.

 

The only way they don't let property crash is by a huge currency devaluation. That will rip the value of salaries etc to shreds. And so property will be a safe haven if/when they go down this path.

 

how so?

Won't 7x total D2I cap put a max borrowing on their new loans irrespective of LVRs?

 

Not sure I follow.

I think what you are saying is that they will cut rates to stop property crashing even though it will torch the AUD.

Maybe; but no sign of it so far. The RBA’s remit is inflation and employment.

No inflation scare and no unemployment trouble (yet) means that they have been quite happy to sit on the sidelines as Melbourne and Sydney follow Perth don’t the correction route.

So if they stick to the program, there will be no bail out for property investors unless unemployment rises to a level they are not comfortable with.

Which brings us to great unknown: Just how many people in this economy depend on a buoyant property market to pay the bills?

 

you mean Robert Mugabe strategy will bail us out?

 

Ha. yes cut rates to put a floor under property, and yes torch the dollar.

We can already see this happening.

The only caveat, is that we coordinate a currency devaluation with the other major currencies. In which case, instead of seeing a devaluation against the USD, we would see all currencies devalue against gold.