Steen Jakobsen, chief economist at Denmark’s Saxo Bank, has given a stinging critique of the Australian economy, claiming that it is afflicted by a housing bubble and has a 50% chance of falling into recession. From Yahoo Finance:
The mining boom had inspired laziness and arrogance…
There’s dangerous levels of investment in the banking sector and housing market, and not enough investment in technology, infrastructure and education…
“What is booming in Australia is housing and banks, the two sectors that provide zero productivity and no new jobs”…
“You’re shooting yourselves in the foot as long as you continue to pile money into this mindless game of dividend yield chasing instead of believing in productivity and the future Australia”…
“You are over-unionised, you have a political system that is more concerned about rhetoric than action, you have a political inability to be accountable for anything and of course, you have a huge amount of corruption going on and I think you need to clean it up.”
Hard to disagree, except for the bit about being over-unionised, which I believe is a non-issue.
However, as I have noted previously, it is actually quite difficult for Australia to experience a “technical recession” – i.e. two consecutive quarters of negative real GDP growth.
Strong population growth of 1.5% a year means that economic activity per capita must go backwards by more than 1.5% for headline GDP growth to fall. Then there is the strong boost to export volumes that will support real GDP, even if the prices they are selling for are crashing (shrinking national income).
Nevertheless, technical recession or not, the upcoming adjustment will feel like a recession, with all important per capita incomes likely to fall and maybe per capita GDP growth as well.
