Under the hood, the Aussie economy is struggling.
We’re possibly already in recession.
Maybe not in absolute levels, but in per capita terms.
This is a distinction that doesn’t get as much air-time as it deserves.
GDP is the amount of stuff we produce. GDP per capita is the amount of stuff per person. In that sense, it’s a much better gauge of actual living standards.
And what are living standards doing?
They’re going backwards.
Last week, we learnt that March quarter GDP was softer than expected, growing at just 0.2%.
That’s not impressive.
But in per capita terms, GDP actually fell 0.2%. And that followed just 0.1% in the December quarter – a number not statistically different from f-all.
And CBA now reckon you can lock in another fall for the June quarter.
And so we have a per capita recession. Living standards are falling.
That’s not good.
And it gets worse when you look under the hood. Household consumption – one of the primary drivers of the economy is fading fast. It grew at just 0.2% in the March quarter.
But pull that apart and consumption of essentials was actually up strongly – up thumping 1.1%.
But all that was off-set by a huge fall in discretionary spending, down 1.0%
This is an inflation story.
Households are feeling the pinch. They’re cutting back on discretionary spending to try and make ends meet.
But at the same time, the cost of essentials – particularly energy – is soaring, pulling more of their household budgets away from discretionary to essentials.
Households are also saving less. After a big run up during the pandemic, saving rates are down. It was just 3.7% in the March quarter, down from 11.3% a year ago.
That’s a further sign that household budgets are under stress.
And with savings rates falling, the war chest of savings that households built up during Covid now seems completely run down. Net savings levels have returned to normal.
That savings buffer has probably made recent consumption and GDP numbers look better than they actually are.
Looking through it all, it’s clear that the Aussie consumer is struggling, household budgets are under massive stress, and the Aussie economy is teetering on recession, if it’s not there already.
So with all that going on, tell me why we’re hiking rates again?
In fact, tell me why we’re not cutting rates.
But nope, the RBA maintains a bias to higher rates. They’re latest memo suggests there’s at least one more in the barrel.
They seem determined to break something.
Better make sure it isn’t you.
JG.
RUTH KASSULKE says
It’s because our nation has never had to issue bonds since WWII. Now we have; the reason being is we are in WWIII. We are being challenged. I am pleased to say the Greek economy has woken up. Most of the money coming into real estate and our important natural resources is from China via Hong Kong and Macau. That’s because they are rejecting their current government under Xi. In addition our strongest ally, USA has massive debt problems as do all of our allies. I do have more faith in the average home owner here though; they will pay their mortgages; they are much more likely to do so than state or federal governments, who keep setting up enquiries and continually raising taxes. I think a turning point has been reached. We are now in an inflationary environment probably for the rest of our lives. In addition the USA, our strongest ally has a government widely regarded as a joke (Biden/Harris). The war against Russia is idiotic and should be stopped now; all they wanted was a bufffer zone between them and NATO. Meantime, the EU cannot defend itself as its borders are not controllable, so they need NATO, an organisation from a failing empire.. I see more globalists trying to seek control of the world. It is worse than 1984. It is time to fight back. The last effort at globalisation ended in WWI and we know what happened after that. Inflation cannot be controlled from the demand side. The RBA is stuck between a rock and a hard place. The problem is from the supply side, as this is broken; can probably be fixed if you want Xi to gain even more power here. Mortgage rates are not unreasonable. The problem is that accomodation i.e. housing, is being bought by foreigners with no interest in the future of this country. I recall as a student sharing a place with 7 others to pay our way through Uni, yet Chinese show up with a bid of, in one case, $5 million to send their kid to Uni. You have another choice: defend the border and make our own way. Unfortunately, armchair warriors are not contributing to any productivity in the economy. The Green New Scam is one example of how people are being manipulated into one world order, where you will ‘own nothing and be happy’.. Do you think CBDC and removal of cash is a good idea? They can charge negative interest rates on your savings, making it impossible for you to save for your own home, or your retirement, wiping out the middle class and aspiring midde class. It is a recipe for communism. No, it is not a conspiracy theory. It’s on the WEF website. The UN and recently, the WHO have failed us spectacularly yet still lead very comfortable lives at our expense. It will be difficult to find a place to hide, as these elites who meet at Davos annuall.y are after world control. Your millions will not stack up against their billions. I stress I still support our local businesses that are made up of Chinese-descended Australians.
Linda says
Jon – keep up the great columns! Really enjoy reading them and appreciate you sharing your expertise.