Slow wage growth. Weak inflation. Anaemic consumer spending. A property market in free-fall.
Australia’s economy over the past 18 months has been a tale of woe, with many pundits predicting more pain to come, and no significant pick-up in sight until – in some cases – 2021.
The minutes of the Reserve Bank’s July 2 meeting, released on Tuesday, are also a restrained assessment of the prospects for the economy.
But one leading economist believes the picture might not be as bad as most are painting, with the worst of the storm possibly over.
Independent economist Stephen Koukoulas has argued the economy may have hit its low point and was “poised to enjoy some sunshine”.
“For now, the economy is negotiating the low point in the current cycle and there are growing reasons to be optimistic that by year end, the gloom will have passed and the economy will be on track to return to what will be truly strong growth,” he said.
It’s a remarkable turnaround for Mr Koukoulas who on June 20 wrote that things were “so bad in the economy right now that forecasters are rushing to out-do each other on how low interest rates will go in this cycle”.
But Mr Koukoulas told The New Daily that the end of political uncertainty surrounding the election and a flurry of events since the federal poll have made him far more buoyant about the prospects for the economy.
“I think there are reasons -perhaps, perhaps – that we might see some better news by the end of the year,” he said. “We’ve got tax cuts, interest rate cuts, credit growth, no changes to negative gearing, capital gains or franking credits.
“Negative gearing – which would’ve dampened house prices – is off the table, so are franking credits which would’ve taken cash out of the system and the RBA has cut a couple of times, most of which has been passed on.
“It’s looking, well, not great, but certainly a bit better than I would’ve thought a few months ago.”
Mr Koukoulas conceded while the economy was “in trouble” in the first half of 2019, the second half of 2019 and 2020 should see a turnaround in activity, predicting GDP growth to hit 3 per cent by the June quarter of 2020.
“While it is still early to say the economy has turned the corner and growth is poised to accelerate significantly into 2020, the run of recent news has been encouraging,” he wrote in a blog on his website.
Mr Koukoulas said his contacts in the banking and property sectors were reporting a pick-up in enquiries and activity over recent weeks.
“People have, it seems, come out of the woodwork and are looking to buy. It’s still a trickle, not a flood, but the sentiment is definitely more optimistic.
Mr Koukoulas’ sanguine outlook comes as forecaster Deloitte Access Economics also issued a more positive outlook, citing tax cuts, record low interest rates, strong resources exports to China and a lower Australian dollar providing some cheer.
“The drought and the downturn in housing prices are hurting the Australian economy, but the global slowdown has so far been good news for Oz,” Deloitte partner Chris Richardson says.
“This is the first-ever global slowdown in which the world has actually given Australia a pay rise instead of a pay cut,” he said.
While the markets have already priced in another cut to the official cash rate (to 0.75 per cent) by the end of 2019, Mr Koukoulas believed there will be no further cuts in 2019 – a change from his earlier prediction of cuts going as low as 0.5 per cent.
Much of that decision will depend on the employment market. The RBA has set an unemployment target of 4.5 per cent – well down from the May figure of 5.2 per cent – and has said it will “continue to monitor developments in the labour market closely and adjust monetary policy if needed”.