Chinese trade took a hammering over the past year, leading to more concerns about its economy. It’s yet another sign that Australia is helplessly edging towards recession. But that hasn’t stopped the denialists from coming out in full voice.
Exports fell 5.5% year on year, to US$169 billion. Imports, meanwhile, tanked 14% to US$137 billion. In Australia’s case, the news was even worse. Our two biggest exports had a torrid time of late.
Iron ore imports fell 14% between July and August. Coal imports dropped even lower, down 18%. And that came just a month after coal imports rose to an eight month high.
That’s worrying for an economy so reliant on mining revenues.
And yet…the Reserve Bank says there’s nothing wrong.
Here’s what the head of financial stability Luci Ellis had to say:
‘The Australian economy is running below trend. We’ve been, what, 23 years without a recession? One will happen in my lifetime but I really don’t want to put money on exactly when. I don’t put a lot of score in the idea that it will happen imminently’.
That doesn’t instil anyone with much confidence.
We’ve been 23 years without a recession. But the RBA doesn’t want to put money on when that might happen? Here we are thinking the RBA has a pulse on the national economy. Sounds more like a gambling operation judging by those comments.
The RBA is being purposely misleading. It not only knows that a recession is possible, but likely. But the RBA isn’t alone in its outlook. National Australia Bank CEO Alan Oster also dismissed the idea.
‘People have now been talking about recession in Australia which we think is pretty far off the mark’.
His reason? Oster says that non-mining sectors of the economy are improving.
NAB surveys for August showed business conditions rising to a 10 month high. However, consumer and industry confidence dipped.
‘To me the bottom line in a lot of this survey is that the non-mining sector is actually turning’.
Except that’s not the bottom line. The bottom line is that non-mining is insufficient in propping up the economy. Yes, the services sector saw investments rise 4.4% in the June quarter. But business spending as a whole fell 4% during the quarter.
The services sector would have to double its output over the next quarter. And that’s assuming that mining investments don’t tank further. Otherwise, business spending won’t improve over Q2.
What about this 0.2% growth in the second quarter then? Well, that was driven entirely by government spending on defence. Without it, the economy wouldn’t have grown at all.
Let’s not write off the importance of confidence either. Business conditions mean nothing if confidence is falling. After all, if you think things are getting worse, you won’t spend as much. That applies to businesses as much as it does to consumers.
The GDP figures for Q3 are due in October. We’ll have evidence showing just how the economy fared in the quarter to September.
The recession denialists are confident that the economy will beat 0.2% growth. In that event Australia would avoid a recession. Perhaps the number crunchers will cook up just enough growth to beat that target. The growing list of problems suggests otherwise.
Either way, one thing’s for certain. With or without a recession, your standards of living are heading for decline.
Contributor, The Daily Reckoning
According to The Daily Reckoning’s Greg Canavan, a recession is unavoidable in 2015.
Greg is one of Australia’s leading investment analysts. He says that we’re on course for our first recession in 23 years.
In a free report, ‘Australian Recession 2015: Unavoidable’, Greg reveals how we’ve found ourselves in this position.
Like China, Australia’s trade imbalance has been worsening for a while. Government revenues are down, and household debt is up. It all adds up to a recession that’s coming sooner than you think.
But there is a silver lining in all this.
There are actions you can take now to lessen the blows of the recession. Download your free copy today to learn how to protect your wealth from the coming crash. To find out how to download his free report right now, click here.