Can the Australian economy be weak, and strong at the same time? Or which is it? This is an important question because the answer will determine the future policy direction of interest rates, and the well-being of ordinary Australians. So I am going to do a deep dive on this in the light of the latest employment and wage rise data from the ABS.
While The RBA has made inroads into getting inflation under control, at 3.5 per cent, underlying inflation still remains above the central bank’s 2 per cent to 3 per cent target band. And even though the jobs market has softened, it is still far stronger than almost any time since the 1970s as data out today shows.
Yet Consumers have cut back sharply as they try to cope with 13 interest rate rises by the RBA and this decline in spending has caused economic growth to grind to a halt. On an annual basis, the economy grew by just 1 per cent in the year to June, down from an average of 2.7 per cent over the past 20 years. Excluding the pandemic, that marks the slowest rate of growth since the 1990s recession. And household financial stress based on our analysis is at peak as we discussed in my live show this week.
So we have an economy driven into overdrive by high migration and big government spending, forcing interest rates to stay higher for longer, yet with a low unemployment rate and people working till they drop. None of this helps to improve productivity the share of the economic cake continues to shrink on an individual basis. And those in the rental sector or with a large mortgage are under the pump.
My point is, bad policy over a couple of decades have got us to this point, but unless we radically change direction, this Messy And Complicated journey will continue to the detriment of many ordinary Australians and businesses. There is no Goldilocks zone here.
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