The Australian economic outlook remains somewhat murky. Despite all the recent fanfare about jobs data and Q2 GDP.
Today’s mood indicators from both businesses and consumers were nothing at all to celebrate. Yes, there was an improvement in the month, but business confidence remained mid-range at best and a little languishing.
While consumer confidence, something few economists seem keen to highlight, remains at the worst of the levels seen during Covid lockdowns and is near the lows seen over a decade ago during the Global Financial Crisis.
In other words, the Australian consumer has rarely in history been as depressed as they are today.
Yet, they are simultaneously confronted with high inflation across all sectors and the continued prospect of aggressive interest rate hikes by the Reserve Bank of Australia. Only due to their having got it all wrong in the previous 1-2 years, and not for the first time either.
Australian businesses may be willing to remain a little optimistic believing in the high job numbers as some form of indicator of the health of the Australian economy, but consumers have a decidedly disastrous outlook on things.
The high employment rate is only representative of an ongoing immigration and travellers’ shock. An indicator of vastly changed circumstances and indeed some dysfunction in the economy as employers search and pay up for workers.
The reasonable Q2 GDP numbers were as good as it gets. Expect a fast-cooling economy in Q3 and Q4 as high inflation, higher interest rates and falling property prices all begin to squeeze investors and consumers alike.
The key point of today’s Australian data is that business is for the moment sanguine while the consumer is about to suddenly retrench spending on non-essential items in a big way.
A rosy economic picture the data does not make. The consumer confidence data alone points to a coming ‘surprise recession’.
My view, on both the Australian stock market and the Australian dollar, along with the economy, remains one of extreme caution.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
