Really? Eyes Wide Shut?

Well apparently Dr Lowe says 'I don't see a recession on the horizon'. Whilst having a bet the other way by adding 'If the last two years has taught us anything, it's that you can't rule anything out'.. So, in other words he's saying he doesn't have a clue?

Even I can tell him on the data that a recession seems likely, not because of the data per se, but because of the sentiment that that data is likely to create.

And sentiment (or consumer and business confidence as it is measured) is heading south at a rapid rate.

And that is not surprising. The fundamentals which existed before COVID are still prevalent: low wages and low wages growth. What changed in COVID is the government dumped 1/3 of a whole years GDP onto the economy (~$400 billion), in one year (FY 2020/21), and that has been sloshing about in the economy for the past two years. It has conceivably 'flushed through the system' and is 'running out'.

And, now, the economy has added some serious 'show-stoppers' - inflation is going to hit 6-7% (and of course inflation on fuel is much higher than that) and as a consequence interests rates will rise from .1% to probably 2.5% by year end. That is a lot of burden. Higher costs to buy, higher costs to borrow, and still no wages growth. Property has peaked and will probably 'pull back', denting confidence even more. Statistics show savings which were built up during the massive government stimulus over 20/21 are declining, meaning people won't be feeling 'quite so flush'.

Fuel price impact cannot be over-stated - it touches everything from people's daily commute, cost of delivery services, cost to businesses across the board in running their vehicles etc. etc.

If all that doesn't add up to 'recession' I'm not sure what does.

Added to that is 'the markets' (and their effect on sentiment for those folks who have had themselves quite exposed to that risk) - the stock market (Australia) has pulled back circa 15%, the US stock market has probably lost 20%, and the 'really risky end of the street' aka bitcoin is down more 70% in the past six months. And once again, the actual numbers, or direct impacts here is not what's important - but these 'losses' and the incessant press noise about them also 'dent confidence'.

OK we might not get a 'technical ression' (two quarters of negative growth) but by the end of this calendar year, and probably much of 2023, it's my guess that people and 'the economy' are going to be feeling some serious pain. So I can't agree with Dr Lowe.

buggered if I know :-P