Episode Details

Many commentators are worried that the current crisis in consumer confidence will impact economic growth.

They suggest that the negative wealth effect of falling house values could lead to a cut in consumer spending and that this plus the collapse in construction activity (one of our biggest employers) at a time of overseas economic headwinds could combine to create the perfect storm which could lead to Australia into recession.

In his first public speech for 2019 Reserve Bank Governor Philip Lowe highlighted the issues that are likely to shape the future.

Lowe also believes the current slump in our property markets is "manageable" but conceded that now it's just as likely that the next move in interest rates is down as it is likely that we'll have a rise in rates.

For what it's worth I think interest rates will be cut twice this year bringing the rate down to one percent.

6 Reasons we're not going into recession

Here are 6 reasons given by Governor Lowe as to why we're not going to have a recession:

1. Despite the various political issues and the trade wars creating some downside risks, the world economy and the economies of our trading partners are performing well.
2. Australia's economic growth is forecast by the RBA to be around 3% over 2019 and 2.75% over 2020.

This should be enough to see further gradual progress in lowering unemployment.

3. We're creating more jobs.

Last year:

• 212,000 full-time jobs created last year
• 51,000 part-time jobs created last year

4. Unemployment is falling - at 5% it is now the lowest it has been since 2011

• In NSW and Victoria (our two economic powerhouses) unemployment is around 4.25%
• With the number of job vacancies at a record high, unemployment is forecast to drop further to 4.75% over the next few years.

5. There are finally signs of wages growth ahead
6. A gradual pickup in underlying inflation is forecast as spare capacity in the economy diminishes.

• Underlying inflation is now expected to increase to about 2 percent later this year and to reach 2¼ percent by the end of 2020.

Now I'm not an economist but I see plenty of other positive signs amongst all the pessimism in the media.

These include:

• The next Federal Budget is likely to deliver a surplus for the first time in years.
• Our population is growing strongly – albeit a little slower than before
• Australia's population grew by 390,500 people or 1.6% during the year ended 30 June 2018.
• Natural increase and Net Overseas Migration contributed 39.4% and 60.6% respectively to total population growth for the year ended 30 June 2018
• Infrastructure boost - We have a very strong infrastructure investment pipeline mainly coming from State Governments.
• The next Federal Budget is likely to deliver a surplus for the first time in years.
• Australia's population grew by 390,500 people or 1.6% during the year ended 30 June 2018.
• Natural increase and Net Overseas Migration contributed 39.4% and 60.6% respectively to total population growth for the year ended 30 June 2018.
• The Australia dollar is likely to stay low for some time yet and this is good for our export industries.
• Our Mining Sector is on the improve assisted by our falling Australian Dollar and increasing mineral prices. This means the big economic drag we have seen from the downturn of the mining sector over the last five years or so from falling mining investment is starting to fade.
• The Agricultural Sector on the improve – and if we play our cards right we could become the Asian food bowl.
• Tourism is booming
• International student education is continuing to be a huge "export industry" for us - up 17% last year.

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