Hello, I’m Sage and thanks for joining me on Kalkine TV for SMART MARKET INSIGHTS.
Australia's top economists and experts have been especially vocal about their concerns
over a recession in the US.
Just talks of a potential recession hitting the US have triggered massive volatility in
the Australian share market recently.
Undoubtedly, an economic slowdown in the world's largest economy is bound to affect the movements
in all other economies, including Australia.
The large dependency of countries on the US economy has cemented the US's hold on the
global economy.
Any potential changes to the US economy quickly send shockwaves across the globe.
The first and foremost response is received from the equity markets, as visible in Australia.
Despite these fears, Australian authorities are hopeful that the country will be able
to manage the current crisis.
Australia has developed the image of being one of the few nations that narrowly escapes
global economic slowdowns.
Though some part of the slowdown could inevitably seep into the Australian economy, the overall
effect is expected to be much less than that of other nations.
Based on this trend, Australian experts are hopeful that fears of a US recession may not
dent the economy by a high degree.
.
The annual inflation rate in the US rose to an alarming level of 8.6 percent in May.
On the contrary, the annual inflation rate in Australia surged to 5.1 percent in the
March quarter.
The high inflation rate across the US suggests that the problem is much more severe across
the Western nation.
The US inflation rate has been so alarming that the Federal Reserve had to increase interest
rates by 75 basis points, the biggest rate hike since 1994.
This large uptick in the interest rate suggests that the inflation problem across the US has
been keeping policymakers concerned.
The worrying mix of rising prices and soaring interest rates has fuelled fears of a recession
hitting the country.
In technical terms, a recession occurs when a country's GDP declines over two consecutive
quarters.
Big banks across Australia have also suggested that a recession is underway in the US economy.
The Commonwealth Bank of Australia and National Australia Bank Limited have both forecasted
a US recession.
Surprisingly, Australian authorities have not been shaken much by the recessionary talks.
The Reserve Bank of Australia and even some of the nation's big banks expect the country
to survive this incoming crisis without taking much of an impact.
While slow economic growth could certainly affect expectations for the Australian economy,
many positive factors could keep the economy going.
Australia's unemployment rate stands at a record-low, and the recent bump to minimum
wages has further strengthened the labour market.
Economic growth has also surpassed expectations, rising 0.8 percent over the first three months
of 2022.
This was much higher than expected.
Alternatively, worries have stemmed from the fact that a fall in Australian Gross Domestic
Product forecasts could halt business activity.
As recession talks take the spotlight, GDP forecasts in Australia could start to decline,
potentially weighing on consumer and business confidence.
If this decline in confidence is large enough to impact national demand, then the economic
growth may stall.
To put things into perspective, high consumer demand has kept the Australian economy bustling
during the post-pandemic era and has brought back much of the lost momentum.
Thus, reduced demand could snatch away much of the country's economic revival.
ALRIGHT that’s all for this edition of SMART MARKET INSIGHTS, another episode coming your
way until than make sure to keep it locked on Kalkine TV for the latest market insights
and business news.
I’m Sage, signing off for now.