Tuesday, June 17, 2008

Gittins says we are heading for recession

...in Monday's SMH and Age.

I reckon we'll avoid it, this time.

One of us is wrong.

Here's Ross Gittins:

"This is where I stick my neck out.

My bet is that the economy is slowing, it will continue slowing, it will slow by at least as much as the Reserve Bank is seeking and probably more.

In short, if our luck runs out we'll slow to the point of recession.

If we do reach that point, my bet is the recession will be a severe one.

If I'm anywhere near right, concerns about inflation will soon evaporate, as will the financial markets' expectations of more interest rate rises to come.

The evidence that the economy is already slowing quite sharply is now strong. Retail turnover has shown negligible growth in the first four months of this year.

In trend terms, approvals for the construction of new private dwellings have fallen each month since November. Similarly, the number of loans approved for owner-occupied homes has fallen each month since November."
Read on...


Anonymous said...

It seems a rather dire prediction from Gittins given that our economy is growing solidly at the moment and given the increased terms of trade and resources boom.

However, there's no doubt that the economy is slowing and consumer confidence is a worry. Increased petrol and food prices are hurting.

Perhaps the tax cuts were a good thing after all.


Anonymous said...

This is the same guy said we shouldn't have the tax cuts as they would overheat the economy! No credibility left!

Anonymous said...

The problem is that positive side of the ledger is not evenly spread (mining boom). Increasing rates will eventually dampen export earnings but is having an immediate impact on consumer spending. This lag is causing disproportionate pain. Add to this increasing petrol/food prices and we have a double whammy on spending. I am not sure that monetary policy is the best lever for reigning in fuel/food driven inflation. We have the ingredients for stagflation, let's hope the Reserve does not stir the pot.

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