Oh no!
Lads, the economy is going down the dunny.
If you've been watching any of the news in Australia recently, you cannot avoid all of
the stories about financial Armageddon coming around the corner.
All the stories about potential recession here, I'm going to make it worse by rounding up the main seven reasons
why we're almost certain you're going to get a recession in Australia in 2020.
So in no particular order
Number one on our list is wage growth.
Now wage growth is the indication of a healthy
growing economy because people get paid more, they can spend more, that creates more jobs,
which means people get paid more, it's a bit of a cycle
Wage growth in Australia has slowed down recently. The last quarter was reported to be only 0.6%
with the last 12 months adding up to 2.3, which is below forecasts and worse, it's been going down for the last
10 years. So that's definitely the first one to watch.
So number two is new car sales in Australia
New car sales tend to be a really good early barometer of the potential recession
around the corner because in a family budget, when the belts get tightened, usually a new
car is the first thing to be struck off the list of potential purchases amd new car sales
in Australia have been declining for a year and a half straight. Now, that's definitely
a concern. Before the global financial crisis in the US, we saw a big dip in car sales.
We've seen that here. So watch this space.
The third indicator on our list is the volume
of housing on the Australian housing market, if you look at the prices properties are being
sold for, they're starting to go up slightly, especially in Sydney and Melbourne
If you look at clearance rates as the percentage of properties that are selling of the ones
that are put up for auction, and they're also looking, all right, but if you delve below
the surface and look at the actual number of properties up for sale, they're going down
the last Saturday's auction clearance rates I looked at there was only 320 properties
on the market. If you look at the same day, the year before that was 380. And the same day
before that, it was near to 500 properties. So we've seen the volume go down. And that's
an indication that people are still wary of selling. A lot of people who wants to sell
dont during the price that they desire. So they're holding back, eventually they will
have to sell we really need to see the volume and the price of houses go up in order to
show that the housing market is properly starting to recover. So if you're in the market or
thinking about getting into the market, keep an eye on those numbers in the months to come
Number four on our list is that more homeowners are defaulting on their home loans. A default
means that you borrow for home loan, if you can't pay it back within 30 days that gets marked
as a default with your bank. We've seen the percentage of homeowners in Australia who
are defaulting go up slightly. It's not big overall, it's about one and a half percent.
So it's not too much of a worry, but it's definitely going in the wrong direction. Number
five is that retail spending in Australia is spectacularly low. In fact reports
of saying it's as low as it's been since 1991. Both NAB and Westpac economists have gone
by and referenced recessionary levels of spending, that's definitely not good.
Six is that Aussies are looking to book shorter and shorter holidays.
If we look at the average number of days,
people are trying to search for quotes for travel insurance for travel insurance engine
where they can search from a couple of days, up to a year, we've seen the average of that
go down 40 days in 2015, to only 27 days. Now, that's a concern.
Number seven is that we have seen an inverted yield curve in both Canada and the US
Now the yield curve basically shows the returns on investments for government bonds
When the economy is not healthy, people who want to invest often invest more money in government bonds,
which are safe than they do in the stock market and riskier options.
And when you invest money with the government,
the longer you leave it invested, the higher returns, the higher the yield. So when the
yield curve is inverted, it means that the returns on short term investments are higher
than the returns on long term investments. In other words, investors don't have faith
in the long term health of those investments. And the reason this is important is because
if you track the yield curve over time, every time it's become inverted, we've had a recession.
And that's just happed now.
So there's seven reasons why we're definitely facing financial doom. There's more reasons on top of this
in a longer insights blog piece, which you can see via the link in the description.
So what do you need to do? Well, basically, you need to be careful with your savings. Be cautious with your investments, if you're gonna make
any investments and keep an eye on these numbers in the weeks to come. There is the other side
of this argument. There's a lot of economists saying we're okay, we're probably not going
to face the recession. We'll look at those arguments in the video next week. But in the
meantime, you can keep an eye on all financial news at finder.com.au