Most read
Pros and cons: Working in the gig economy...
Pros and cons: Working in the gig economy...
Latest Podcast
Is the market overheating; should ETFs take your fancy, and what’s happening t...
Is the market overheating; should ETFs take your fancy, and what’s happening t...
Resources
There is $17.5 billion in lost and unclaimed super across ...
There is $17.5 billion in lost and unclaimed super across ...
Borrow
Are we headed for a recession? Experts speak on the latest GDP figures
The latest GDP data from the Australian Bureau of Statistics show Australia's economic growth falls short of the RBA's expectations. With a looming election, what does this sluggish period mean for investors?
Are we headed for a recession? Experts speak on the latest GDP figures
The latest GDP data from the Australian Bureau of Statistics show Australia's economic growth falls short of the RBA's expectations. With a looming election, what does this sluggish period mean for investors?
The Australian economy grew by 0.2 of a percentage point over the December quarter, below the Reserve Bank of Australia’s (RBA) expectation of 0.5 of a percentage point growth.
What does this mean for Australia?
GDP growth has now slowed below target for two consecutive quarters, prompting analysts to declare that the economy has fallen into a “per-capita (per person) recession”.
For AMP Capital's chief economist Shane Oliver, these latest figures are not good news for Australia, and will only get worst as the housing market's downturn continues.
“Coming on the back of just 0.3 [of a percentage point] growth in the September quarter, this is not good news," he said in a market update.
“It means growth has slowed to 2.3 per cent over the year to December and, even worse, annualised growth over the last six months has slumped to just 1 per cent," he said.
Should I be worried about the housing market?
Property values are cyclical, and typically, the higher the climb, the bigger the fall. Capital cities like Melbourne and Sydney are coming off their biggest price gains in history, and are currently experience GFC-type drops in value.
Mr Oliver noted that GDP growth would be placed under additional pressure as the housing market downturn intensifies.
According to the latest CoreLogic figures, national dwelling values fell by 6.3 per cent in the 12 months to February 2019, largely spurred by a 7.6 per cent decline across Australia’s capital cities, particularly in Sydney and Melbourne where home prices declined by 10.4 per cent and 9.1 per cent, respectively.
Housing approvals data from the ABS has also revealed that, while increasing by 2.5 per cent in January, approvals are down by 29 per cent year-on-year.
The latest Financial Aggregates data RBA has also shown that in the year to January 2019, housing credit grew by 4.4 per cent, slowing by 1.9 per cent when compared to growth of 6.3 per cent reported in the 12 months to 31 January 2018.
Government hits back
Treasurer Josh Frydenberg cooled suggestions that the economy is heading towards broader recession.
“[In] the calendar year, GDP growth is 2.7 per cent and actually indicates that the Australian economy is growing faster than any G7 nation except the United States,” he said.
“When it comes to the health of the Australian economy, the fundamentals are sound.”
Mr Frydenberg went on to note that the unemployment rate has fallen over the years to approximately 5 per cent, adding that the real net disposable income has increased by 2.1 per cent over the year.
The Treasurer added: “[Talk] of recession really is inaccurate because what is the best indicator of a recession is what happens to GDP growth and that has been consistently positive.”
"Housing tax" talk
Mr Frydenberg warned that Labor’s proposed housing policy, which would limit negative gearing to new housing and halve the capital gains tax discount to 25 per cent, would exacerbate the slowdown in the property market.
Making reference to analysis from Treasury, Mr Frydenberg said: “[Treasury] said that Labor’s policy could put downward pressure on housing prices, and also that it could create real problems in a cyclical downturn in the housing market.
“[When] Labor came up with this policy [a] few years ago, [we] were in a different housing market. We’ve seen housing prices come down around 10 per cent in the key markets in Sydney [and] in Melbourne over the last year or so.
“The Labor Party’s policy is designed — in the words of [Shadow Treasurer] Chris Bowen himself — ‘to put downward pressure on prices’.”
Further, new modelling from the Property Investment Professionals of Australia (PIPA) has reported that by limiting negative gearing and reducing the CGT discount, the government would lose $32 billion in revenue over 10 years.
PIPA chairman Peter Koulizos said that the research found that Labor’s assertion that their policy would save $32 billion over a decade was a “flight of fancy”, claiming that the reverse would be true if investors are driven out of the market.
“Investors already pay almost four times in capital gains tax what they receive in negative gearing benefits over a 10-year period, so the government is already ahead financially,” he said.
The PIPA modelling found that an investor who bought a $675,000 property in today’s market would receive approximately $23,583 in negative gearing benefits over a decade but would pay $104,703 in capital gains tax if they sold the asset — leaving the federal government with an $81,118 net gain.
Moreover, according to the research, a Labor government could lose between $10 billion and $32 billion over 10 years, with PIPA adding that fewer investment properties would drive rents higher and further hinder first home buyers from entering the market.
Banking
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now
Banking
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
