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Watch out Australia: There's a flood of dismal economic news on the horizon
The Australian economy is in trouble and Scott Morrison and the Liberal Party government need to come clean and acknowledge this and outline a framework how this period of economic funk is to be addressed if they win the 18 May election.
The Liberal Party is campaigning in the election on a “strong economy” and being “good economic managers”, bold claims that fly in the face of the latest score card for the economy.
That scorecard shows a flood of what is, frankly, disappointing or even dismal economic news. Australia is going through a very rare recession in per capita GDP terms and last week saw data showing zero inflation in the March quarter. Contribution to these indictors of economic funk is the fact that well over half a trillion dollars of householder wealth has been destroyed as house prices have tumbled.
Add to that the fact reported by the Australian Office of Financial management last week that gross government debt is $543 billion, almost double the level that the Coalition government inherited in September 2013, and the scorecard is looking very ratty indeed.
As the ad man used to say, “but wait, there’s more”.
Another hit and miss: The RBA has an inflation problem
This is getting embarrassing for the RBA.
It has yet again missed its target for inflation. The March quarter consumer price index confirmed annual headline inflation at 1.3 per cent, while the underlying inflation measure saw inflation running at an equal record low of just 1.4 per cent. Recall, the RBA has as an explicit goal “to keep consumer price inflation between 2 and 3 per cent, on average, over time. The 2 to 3 per cent medium-term goal provides a clearly identifiable performance benchmark over time.”
This target and the approach to setting interest rates has served the Australian economy very well in the 25 years it has been operating. It is probably no coincidence that since the RBA adopted this inflation targeting approach to setting interest rates, Australia has avoided recession.
Alas for the RBA, inflation is falling from a level that is already too low.