The party is over, folks. Welcome to Recession 2016.
Buckle yourself in. The so-called ‘economic headwinds’ are certainly here in a way not witnessed by anyone under the age of 25. It’s pretty clear that without any meaningful reform were are on the precipice of our first recession since September 1991.
It can’t be ignored. Looking over the last two years across three key indicators (Australian dollar, unemployment and quarterly GDP), every chart is heading in the wrong direction.
In particular, the GDP figures were horrific. Coming in at 0.2% at the end of the Government’s second year was not the look they were looking for.
Government spending was really the only thing keeping the figures in the black, and with fiscal policy ideologically opposed to large injections of capital into the economy (i.e. letting industry do ‘the heavy lifting’), there is limited capacity or appetite for this to continue.
Automaton Minister Mathias Cormann was interviewed by Leigh Sales last night, and in a typically flawless performance rolled out every one of the government lines circulated in the day’s talking points and a whole lot more.
Minister Cormann refused to acknowledge any failings of his government to address the increasingly urgent financial situation we find ourselves in, preferring instead to constantly shift blame to the previous government or external influences.
Both are large problems, however the rhetoric claims that the adults are here to make it all feel better.
The problem is that there are simply no levers left to get us out of a financial hole. Surplus? Gone. Mining boom? Gone. Structural reform? Gone. China? Well, that one is just terrifying for a resources-based economy such as ours.
We’re left with agricultural exports, tertiary education and tourism as the surviving revenue streams for Australia as the dollar plummets towards 50c.
The current government has delivered a lukewarm budget and is talking about introducing tax cuts for middle and upper-income recipients. Business confidence is falling (a rating of 10 in October 2013 - now down to 4) despite a whole bunch of policies designed to stimulate this important part of the economy. It’s not working, and the next budget – destined to lead into an election unless the extraordinary occurs – is likely to be softer than the Treasurer’s belly.
To summarise, there’s really nowhere across the domestic economy where we can look to drag us out of the current slump. As government spending comes off and income continues to slide and consumer two quarters of negative growth are on the doorstep. Meanwhile, consumers – with fresh memories of 2008 and saddled with increasingly large household debt – will respond immediately by tightening their belts.
Welcome to recession 2016, landing on your doorstep shortly.