Is the lucky country in a funk?

May 13, 2019

As the recent round of lacklustre bank results highlight headwinds confronting the Australian economy, the challenge will be on how monetary and fiscal policy levers will be manoeuvred, writes GSFM’s Stephen Miller for Australian Banking + Finance.

Australia’s run of 28 years without a recession – defined as two consecutive quarters of negative GDP growth – is something without precedent among advanced economies.

In recent times, however, the Australian economy seems mired in somewhat of a ‘funk’. Has the “lucky country” exhausted its reserves of providence?

True, we have seen far worse economic times, but the fact remains that economic activity is soft, inflation is stuck below the RBA’s target, house prices are declining, household debt is extraordinarily high (both by our own historical standards and internationally) and wages growth remains tepid even if it has accelerated a little from the trough.

More satisfactorily is that unemployment remains low (although that perhaps reflects that tepid wages growth).

An uninspiring election campaign has done nothing to ameliorate a sense of growing melancholy about our prospective economic performance.

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