With an Australian recession now locked in let’s explore how bad it’s going to get. Our starting point is yesterday’s capex figures:
That’s pretty scary stuff! And it will be almost as bad the year after, taking capex back to 2004/5 levels. It’s enough I’d guess to push the unemployment rate to 7.5% by the end of next year and higher still in 2017. Especially since income will remain under intense pressure as the terms of trade plunge on with iron ore at $30, thermal coal at $40 and coking coal at $70 by the end of 2016:
The Budget will again miss its economic forecasts badly and the AAA rating will be stripped. Another major factor could be the 2016 Federal election. As the economy weighs very heavily on the Abbott Government’s prospects all sorts of craziness could result. There is still an even chance of regime change with Turnbull and Morrison rising. Or, simply a long and bloody year of negative politics, and we saw what that did to the economy is 2013, hammering the consumer:
