Earn
Economists sceptical of RBA’s ‘gentle turning point’
Despite the RBA suggesting that the Australian economy has reached a “gentle turning point”, economists are sceptical about an optimistic forecast.
Economists sceptical of RBA’s ‘gentle turning point’
Despite the RBA suggesting that the Australian economy has reached a “gentle turning point”, economists are sceptical about an optimistic forecast.
According to AMP senior economist Diana Mousina, the Australian economy is slowing to its slowest pace in 10 years, with private sector spending collapsing.
Earlier this year, RBA governor Philip Lowe noted, “Domestically, the board today discussed how the Australian economy appears to have reached a gentle turning point. The economy has been through a soft patch recently, but we are expecting a return to around trend growth over the next year.”
However, Ms Mousina disagrees, suggesting the weak consumer spending data will continue to be a drain on Australia’s economic growth.
“Consumer spending is a vital component to the growth outlook, accounting for 60 per cent of GDP. Household spending is growing at just over 1 per cent annually, its lowest rate of growth since early 2009, and growth will remain low in 2020-21” Ms Mousina said.
The economist also noted that lower employment, wages and inflation are headwinds the Australian economy is facing.
“High labour underutilisation and low productivity growth mean that wages growth is likely to remain at just over 2 per cent annually for the next two years, which will also keep inflation low.
“Price discounting in the retail sector will also drag on inflation and underlying inflation is expected to increase slowly towards 2 per cent over the next three years, missing the RBA’s 2-3 per cent target band.”
“Price growth for essential services like health, education and transport (that are often provided by the public sector) will continue to run above the rate of inflation,” Ms Mousina explained.
Finally, Ms Mousina said more stimulus is needed to help support the Australian economy, noting that moving planned tax cuts forward could stimulate the economy.
Fidelity’s global cross-asset investment specialist, Anthony Doyle, agrees, saying: “If you think about fiscal conservative, it’s political ideology is defined by small government, a balanced budget and lower taxes.”
In order to fix the Australian economy in the longer term, Mr Doyle advocated for fixing the supply side of the economy, to improve the production capacity, and remove red tape through structural reforms.
“The difficult environment the Australian economy currently finds itself in, there’s no quick fix,” Mr Doyle said.
RELATED ARTICLES
About the author
About the author
Salary
The financial benefits of a diversified income stream
In today’s volatile economic environment, relying solely on a single source of income can be risky. Diversifying your income streams can provide financial stability, reduce the risk of financial ...Read more
Salary
Despite losing top spot, Elon Musk rakes in $400,000 hourly
Elon Musk, the entrepreneur known for his involvement in a wide range of innovative and technological businesses, has recently been dethroned as the wealthiest individual in the world, with Bernard ...Read more
Salary
Rising unemployment and skill shortages prompt Australian businesses to look globally for talent
Australia has witnessed its unemployment rate surging above 4% for the first time in two years, revealed by the latest Labour Force data. Read more
Salary
New findings link job mobility hurdles to stagnant wage growth
Recent research from the e61 Institute has unearthed significant links between slow wage growth in Australia and obstacles to job mobility, including non-compete clauses, complicated occupational ...Read more
Salary
Employers scrambling to prevent workplace brain drain
As workplace managers face a swiftly evolving employment market that’s increasingly favouring the demands of white-collar employees and jobseekers, bosses are falling under mounting pressure to ...Read more
Salary
Unions back Albanese’s pledge to close gender pay gap
An electoral promise from Labor to make gender pay equity an objective of the Fair Work Act has been hailed as a “watershed moment” from industry peak bodies who have traditionally advocated for ...Read more
Salary
Coles asked to disprove $115m in alleged wage theft
One of Australia’s biggest supermarkets faces allegations that it underpaid more than 7,500 employees a total of $115 million. Read more
Salary
Gen Z left behind in progress to gender equality
Women under 25 may emerge from the pandemic in a worse financial position than when it began, new research has shown. Read more
Salary
The financial benefits of a diversified income stream
In today’s volatile economic environment, relying solely on a single source of income can be risky. Diversifying your income streams can provide financial stability, reduce the risk of financial ...Read more
Salary
Despite losing top spot, Elon Musk rakes in $400,000 hourly
Elon Musk, the entrepreneur known for his involvement in a wide range of innovative and technological businesses, has recently been dethroned as the wealthiest individual in the world, with Bernard ...Read more
Salary
Rising unemployment and skill shortages prompt Australian businesses to look globally for talent
Australia has witnessed its unemployment rate surging above 4% for the first time in two years, revealed by the latest Labour Force data. Read more
Salary
New findings link job mobility hurdles to stagnant wage growth
Recent research from the e61 Institute has unearthed significant links between slow wage growth in Australia and obstacles to job mobility, including non-compete clauses, complicated occupational ...Read more
Salary
Employers scrambling to prevent workplace brain drain
As workplace managers face a swiftly evolving employment market that’s increasingly favouring the demands of white-collar employees and jobseekers, bosses are falling under mounting pressure to ...Read more
Salary
Unions back Albanese’s pledge to close gender pay gap
An electoral promise from Labor to make gender pay equity an objective of the Fair Work Act has been hailed as a “watershed moment” from industry peak bodies who have traditionally advocated for ...Read more
Salary
Coles asked to disprove $115m in alleged wage theft
One of Australia’s biggest supermarkets faces allegations that it underpaid more than 7,500 employees a total of $115 million. Read more
Salary
Gen Z left behind in progress to gender equality
Women under 25 may emerge from the pandemic in a worse financial position than when it began, new research has shown. Read more
