The Australian Federal Government reported on December 9th that the economy during the September quarter declined, shrinking down to 1.8 per cent from 3.1 per cent as of June 2016, representing an Australian GDP catastrophe, the greatest economic decline since the global financial crisis.
Treasurer, Scott Morrison in a press conference announced the truth about the Australian GDP catastrophe with a touch of political spin, “there’s nothing much to worry about even though the economy has suddenly stalled”, it was stated that Australia might be in an economic recession with a negative quarter of economic growth. Economists and doom sayers are in full swing over the Australian GDP catastrophe and potential economic recession in 2017.
IF YOU believe the Federal Government (and some commentators), there’s nothing much to worry about even though the economy has suddenly stalled, and is going backwards by 0.5 per cent per year. They say there is plenty to be pleased with in the latest figures. If you look at the national income figures, it’s rosy days. And that’s true. The national income surged last quarter. But the surge had nothing to do with good economic management. It was simply because our dollar dropped during that period. National income measures the money earned by Australians, whether that comes from overseas or at home. This surged mainly because the price of iron ore and coal has started to pick up. Which, if you’re a mining company is great news. However, most of us aren’t mining companies.
It happened once under Peter Costello, twice on Wayne Swan's watch, but for all his gaffe-prone time as treasurer, never to Joe Hockey. Nor did it happen during Chris Bowen's 83-day tenure. But Scott Morrison has joined an elusive club of treasurers who have presided over a negative quarter of economic growth. The shock 0.5 per cent growth contraction in the September quarter national accounts, released this week, was the first decline since March 2011. Back then the economy was buffeted by a series of natural disasters - Cyclone Yasi and the Queensland floods, along with the trade disruption from earthquakes in neighbouring New Zealand and Japan, which is Australia's second-largest trading partner. The September quarter decline, which shrank the annual rate to 1.8 per cent from 3.1 per cent as of June, was the largest since the 2008-09 global financial crisis.
Policymakers face an increasingly difficult task of lowering the budget deficit and boosting employment after disappointing trade numbers increased the risk of a recession. A day after GDP data showed that Australia’s economic growth rate fell 0.5 per cent in the September quarter — the first quarterly decline in five years — the Bureau of Statistics said the monthly international trade deficit swelled to $1.5 billion in October. The deficit was more than twice market expectations, amid a jump in transportation goods imports and a smaller-than-expected pick-up in resource exports despite booming iron ore and coal prices. It suggested net exports could make another big detraction from growth in the December quarter. While economists are hopeful that Australia will avoid a recession this year, other parts of the economy will have to be much stronger in the December quarter to prevent another fall in GDP. “The unexpected widening in the trade deficit in October is worrying as it implies net exports may be a big drag on GDP growth in the fourth quarter,” said Paul Dales, chief economist at Capital Economics. “After the news that GDP contracted in the third quarter, this means the chances of a recession — two consecutive quarters of falling GDP — have increased.”
An unexpected widening of the trade deficit has increased the chances of a recession, economists warn. Imports rose two per cent while exports rose just one per cent in October, blowing the deficit out to $1.54 billion, according to the Australian Bureau of Statistics. The deficit is significantly larger than the $700 million the market had forecast for the month, and comes after weak export volumes contributed to a slump of 0.5 per cent in September quarter gross domestic product (GDP). Capital Economics chief economist Paul Dales said it is now more likely that net exports will be a drag on economic growth in the December quarter as well. "After yesterday's news that GDP contracted in the third quarter, this means the chances of a recession (two consecutive quarters of falling GDP) have just increased," he said in a note. St George senior economist Hans Kunnen said another big contributor to the deficit was a 9.5 per cent increase in imports of capital goods, which are used in the manufacture of other goods. "Given that major resource projects have been or are close to completion, this surge came as a surprise," he said. "A silver lining in this figure is that, over time, the capital goods should lead to increases in output and potentially, exports."
Professor Steve Keen has stated to ABC news that there will be an Australian Recession in 2017 and real estate prices will decline by 40% up to 70%. Not just for the 'Doomsday' supporters, I highly recommend reading the ABC News article linked below. Australian Recession 2017. Steve Keen has stated that Australia’s debt level according to the Bank of International Settlements, private debt level, has jumped from 150% of GDP to 210% of GDP and will trigger the Australian Recession in 2017. Professor Keen believes that the Australian Reserve Bank (RBA) has “Unintentionally” lead the Australian economy towards a recession by facilitating and encouraging an unprecedented increase in household debt in the form of low interest property loans, which has led to asset bubbles. Professor Keen "We have borrowed ourselves so much to the hilt that we are now dependent on that continuing to rise over time (capital growth) and it simply won't," he told the ABC’s, The Business. In February 2016, the Man behind the 'big Aussie short', Jonathan Tepper founder of research house Variant Perception, also declared in a controversial report that "Australia now has one of the biggest housing bubbles in history” that sparked a fierce debate about mortgage underwriting practices.
Threatening the first recession in a quarter of a century. Australia’s economy shrank last quarter as businesses, consumers and government all cut back on spending, a shock result that threatens both the first recession in a quarter of a century and the country’s vaunted triple-A credit rating. The sharpest contraction since 2008 was a big embarrassment to the conservative government of Malcolm Turnbull which won an election in July on a pledge to deliver growth and jobs. It was also a chastening outcome for the Reserve Bank of Australia (RBA) which has recently been beating the drum of economic optimism for the future. The bank conceded growth would slow when it held rates at 1.5% this week, but also predicted an eventual pick up.