Australia will see a significant global economic downturn in 2019, according to Barefoot Investor Scott Pape.
Mr. Pape raised the alarm, warning that further suffering was imminent for those already suffering from an energy crisis, pressures from growing living costs, and rising mortgage rates.
His estimate follows doomsday predictions by investment giant Deutsche Bank that the nation would enter a recession in 2023.
Some financial analysts have said that a recession can be averted as long as the GDP keeps growing and because Australia’s workforce is still robust relative to the rest of the globe.
You believe the last few years were absurd? Watch out for what 2023 has in store for us, wrote Mr. Pape.
The global economy is about to slow down, and central banks are hiking interest rates.
“That’s like giving a marathon runner two grocery-filled shopping bags to carry for the last 5 kilometers.”
“The typical $500,000 mortgage now costs $900 more per month due to this year’s increases.” And there will be more,’ he said.
Deutsche Bank issued a warning in November stating that it anticipated the nation will enter a recession with rising unemployment in 2019.
According to chief economist Phil O’Donoghoe, “We predict Australia’s unemployment rate to conclude 2023 at 4.5 percent, which is one percentage point higher than the current unemployment rate of 3.5 percent.”
Even if the gross domestic product (GDP) avoids two consecutive quarters of negative growth, as our predictions expect, if our prediction comes to pass, it would meet our definition of a recession, he said.
Adding fuel to recession predictions, Treasurer Jim Chalmers said that tough economic times were “ahead of us.”
“We are aware that the challenging economic circumstances, especially those related to the global economy, are not yet over.” They are in front of us, he said.
On December 6, the central bank increased the cash rate by 0.25 percentage points to a 10-year high of 3.1%.
The cash rate increased for the eighth time in a row, which is the most consecutive increases since the RBA started releasing target cash rates in 1990.
The increases occur as the Reserve Bank of Australia keeps working to reduce consumer spending and control Australia’s inflation, which is at a 30-year high.
According to RBA Governor Philip Lowe, the bank’s board anticipates that interest rates will continue to climb in 2019.
The average inhabitant is being affected by the increase in the yearly inflation rate, which has reached 7.3%.
The biggest wholesale food distributor in Australia, Metcash, issued a warning that food prices increased by 8.8% in November alone.
The future degree of inflation and how the influence on cost of living may affect consumer behavior are yet unknown, according to Metcash.
Alan Kohler, an ABC business analyst, said that the nation’s high property values and their ripple effect may prevent a recession.
The average price of a home in Sydney is $1,243,126, while the typical home in Melbourne is $915,005. Median home prices are still rising throughout the nation.
Mr. Pape said that the typical mortgage for a $500,000 loan had increased by around $900 more per month as a result of the cash rate increases.
In an effort to make ends meet, more individuals, particularly women, have entered the workforce as a result of the raise, Mr. Kohler remarked.
The level of employment has reverted to what it was before to the outbreak.
According to Roy Morgan Employment Series statistics, the unemployment rate fell by 0.2% in November to 9.0%.
13,580,000 people are employed in Australia, up 112,000, with full-time work up 296,000 and part-time employment down 184,000.
The change in trend has been seen as a sign that the labor market is improving rather than contracting as predicted by Deutsche Bank.
Leonora Risse, an economist specializing in the labor market, said that as long as GDP remained robust, the nation could avoid entering a recession.
Technically, she said, two consecutive quarters of negative GDP growth are required before the economy can be considered to be in a recession.
According to data from the Australian Bureau of Statistics, the country’s gross domestic product increased for a fourth consecutive quarter in the third quarter of this year, rising by 0.6%, which was somewhat less than what experts had predicted.
The economy expanded by 5.9% in the year ending in September after hitting a low in the third quarter of 2021 due to Covid-19 lockdowns, which caused the economy to decline.
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