Bob Cunneen, Senior Economist and Portfolio Specialist
Sources: Opening Statement to the House of Representatives Standing Committee on Economics RBA Governor Philip Lowe, 9 August 2019, and Datastream.
The Australian economy is still dawdling along in the slow lane. Australia’s real economic growth was only 1.4% for the year to June 2019 (red line). Consumer spending growth has been subdued given the challenges of high debt and falling house prices. Housing construction has skidded into the ditch as the brakes of tighter lending standards and concerns over the quality and oversupply of apartments have weighed.
Compared to the global economy, Australia’s growth performance is particularly disappointing. The global economy is also slowing (blue line). Various factors have been the catalysts for this global slowdown, including the escalating trade war between US and China, European political risks with ‘BREXIT’ and emerging market turmoil as evidenced by Argentina’s and Turkey’s woes. These global concerns have been significant headwinds. Yet our own mechanical problems have been the key reasons for Australia’s slow growth speed.
However, there are some hopeful signs of a better road ahead. The Reserve Bank of Australia (RBA) Governor Dr Philip Lowe noted that the Australian economy should gradually pick up speed given the benefit of “lower interest rates, the recent tax cuts, a depreciation of the Australian dollar, a brighter outlook for investment in the resources sector, some stabilisation of the housing market and ongoing high levels of investment in infrastructure”. Given this battery recharge, we just need to take off the handbrake and point the car in the right direction.
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