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Australia’s recession-free run could be coming to an end

Saxo Bank

Saxo Bank has released its global outlook for Q3, suggesting a slashing of rates as governments worldwide try to stimulate the economy.

The report released by the bank suggests that global economic slowdown, the trade war and Brexit are having an impact on growth.

Chief economist and CIO of Saxo Bank Steen Jakobsen believes that due to this slowdown, politicians worldwide would look to add a short-term boost through monetary policy.

“Central banks’ response to the looming economic slowdown and trade war has been panic cutting interest rates and signalling new extremes of easing, while politicians are warming to the idea of modern monetary theory,” said Mr Jakobsen.

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Domestic outlook

With global economic outlook weakening and the Australian economy losing momentum, Saxo Bank predicts further cuts to the Australian market.

Eleanor Creagh, market strategist for Saxo Bank, believes Australia’s run of nearly three decades of economic growth will soon come to an end. 

“Australia’s near 30-year recession-free run, the envy of central bankers around the globe, is now at risk as economic malaise grips. The wonder down under that escaped zero interest-rate policy, negative interest-rate policy and quantitative easing has not managed to vanquish the business cycle and will not be so lucky this time around,” said Ms Creagh.

Commodities are set to benefit

In positive news for the Australian economy, a short-term commodity boom could be on the horizon, according to Saxo Bank.

The global slowdown is likely to result in an increase in government’s spending money, which has the potential to drive a boom in commodities.

Gold in particular will likely increase as the weaker US dollar could give gold and commodities the overall boost it’s been lacking, said Saxo Bank.

Boost to bonds

European bonds have rallied powerfully since the end of 2018, with issuers such as Greece benefiting the most. Saxo Bank predicted a strengthening throughout the European summer as governments issue more bonds.

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Australia’s recession-free run could be coming to an end
Saxo Bank
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