L-plate treasurer, Josh Recessionberg, has done the near impossible and crashed the miracle economy.
When he assumed the role of Treasuerer, Recessionberg made a critical misjudgement that if he follwed the Costello recipe of running surpluses, cutting taxes and stuffing in migrants then he’d force the RBA to ease, and rising house prices would boost household spending via the wealth effect.
What’s happened instead is that households have used every penny in their position to deleverage as they realise, quite rightly, that a housing boom generated at the monetary zero bound is completely insane since there is nowhere for it go but down when it stalls.
Doubtless this has been exacerbated because when households stare into the Recessionberg rictus they can only wonder at what kind of emptiness lies beyond, just as Kenneth Hayne did, so the fiscal surplus is also pretty worthless as a psychological stabiliser.
Thus, what was supposed to be a triumphant Scomo miracle of booming mortgage equity withdrawal has instead turned into a reverse flowing sluice gate of mortagge equity injection unseen since the 1980s. It is sucking consumption uphill into the depths of a stall, via Damien Boey at Credit Suisse:
This is where Australian savings are going and going damn fast. Just ask banks that are still seeing their mortgage stock shrink despite pouring loans out of their front books.
Moreover, the people flood has gutted income:
The direct consequence is, of course, spreading economic weakness, with the CS leading economic indicator headed into the abyss:
By running public surpluses in conjuction with private sector surpluses, Recessionberg has crashed the economy, jeopardising his property recovery and, in due course, the Government.