Living like it’s 1990…

Living like it’s 1990…

Well, wasn’t yesterday just a tad exciting?

The gross domestic product figure for December 2018 hit my inbox yesterday… Oh wait, that’s probably not as exciting to you as it is to me.

But I bet it rattled our central bankers a smidge.

Why? The growth figure wasn’t what the Reserve Bank of Australia (RBA) thought it was going to be. As recently as February, the RBA forecast an annual growth rate of 2.8%.

Yet the December GDP quarterly data shows us growth was just 2.3%. That puts our economic growth ‘below trend’.

Yikes.

That’s a substantial difference from what our professional bean counters were predicting.

What did they get wrong?

To be honest, they’re central bankers.

They are still stuck using 20th-century economic models to explain 21st-century economic problems.

What worked then isn’t working now.

What you may have noticed late yesterday afternoon, though, was the media getting into a bit of a tizz over the data.

Most mainstream content has used the data to argue that Australia has entered a ‘per capita’ recession.

In other words, growth per person in Australia is shrinking.

Now, a lot of the headlines sound ominous. However, the point is that this isn’t new information.

Australia’s increasing population and government spending kept the Aussie economy out of a recession for the second half of last year.

More to the point, as I explain in this video, the end-of-year GDP data confirms my theory that consumers are acting like they’re in a recession, even when the statistics don’t back it.

A technical recession — which is two consecutive quarters of negative GDP data — may still be some months away.

The Australian economy is slowing.

Remember, people feel a recession first and governments acknowledge it last.

We aren’t the only ones with economic growth taking a backward step.

China has been a key contributor to the Aussie economy for nearly two decades. And China’s astounding growth means that 51% of the Chinese population is now considered to be ‘middle income’.

The thing is, if China wants its economy to get bigger from here, it needs to become a ‘high-income’ country.

As Jim Rickards explains here, that might not happen.

China may permanently be stuck as a middle-income country.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia