Exclusively from Gerard Minack at Minack Associates:
Australia remains stuck with the macro blahs: tepid growth in aggregate and stagnation per person. The risks are skewed to the downside. The key to the downside unfolding is not whether there’s a fluky one quarter GDP decline, but whether the labour market weakens. Falling employment would trigger powerful adverse feedback loops that likely cause a major recession. Expect the RBA to ease again to reduce this risk – unless fiscal policy is quickly deployed – and the A$ to continue to soften.
Australia’s domestic expansion remains sub-par, despite record-low interest rates, a below-average A$, and recent tax cuts. It’s easy to see why: labour pay and household disposable income have stagnated in real terms since late 2011 (Exhibit 1).
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