Should we worry about another recession?

Greg McKenna, the Markets & Economics Correspondent for Business Insider Australia shares his thoughts on the current state of the economy with Go Go Conveyancing.

After almost 25 years of uninterrupted growth in Australia it’s inevitable that at some point the economy will slow and that a recession will occur. That’s the big risk the Reserve Bank has been managing in the wake of the collapse of the mining investment boom. So far, they have been very successful and even though economic growth in the second quarter of 2015 expanded just 0.2% pulling the year on year growth rate down to 2% the economy is still doing relatively well.

Employment data for August showed a rise in 17,400 new jobs in Australia taking the total employed population to a new all-time high of 11,775,800 and unemployment back down to 6.2%. That unemployment rate is still higher than anyone would like. But, Australia’s economy is working in all the right places.  In particular the Aussie dollar is working through the economy and providing the shock absorber it has since the float in December 1983.

Back to employment and 11,775,800 people working means that many people are earning an income and spending it in businesses around the country and the economy. It represents an increase nationally of approximately 234,000 new jobs in the past 12 months.

So things are starting to look up. Business conditions have improved so much that in the three other periods this century when they were this strong the RBA was actually tightening rates.

Certainly the risks are there. But, for the moment while the economic transition might be slow in Australia Australian business and the domestic economy is doing better than many expected. Of course if need be the RBA can cut rates again or the Aussie dollar can fall further. That will help forestall a recession for a while yet.

 

September 2015.

Greg McKenna is an economist, trader and adviser. He runs his own consultancy and writes for Business Insider Australia. You can find him on Twitter @gregorymckenna or email: info@gregmckenna.com.au

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