Invest
No reason to fear recession, say economists
Australian investors shouldn’t be afraid of a recession in the near future as there’s “no risk” of a recession “while ever we remember the last one”, according to a global advisory firm.
No reason to fear recession, say economists
Australian investors shouldn’t be afraid of a recession in the near future as there’s “no risk” of a recession “while ever we remember the last one”, according to a global advisory firm.
Dr Frank Gelber, the chief economist at BIS Oxford Economics, said in the company’s Long-Term Forecasts 2017–2032 report that a fall in residential building will see gross domestic product (GDP) growth average at 2.6 per cent over the coming three years.
The agency pointed out that the figure is “only marginally better” than the five-year average of 2.4 per cent, however despite this slow growth there is “no risk of recession”.
“Some commentators are petrified of another financial crisis — forget that,” Mr Gelber said, together with senior economist at BIS Oxford Economics Richard Robinson.
“We will not have one while ever we remember the last one. Certainly, there will be cyclical swings with financial impacts. But investment markets are not out of control. We will have to wait a long time for the buoyant conditions that would cause another financial crisis.”
The economists said that “solid but unspectacular” household consumption, weak wage, employment growth and reduced savings ratios were examples of the “mainstays of growth” which “remain in place”.
“Low inflation, weak wages growth and a soft labour market means there will be no rate rises for the next two to three years,” Mr Robinson said.
“As US rates rise and narrow the rate differential, there will be downward pressure on the Australian dollar, offsetting the modest recovery in commodity prices over the medium term. We expect the dollar to fall back from current high levels and average around US 74 cents over the next four years.”
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