‘Warning signs’ recession is looming

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‘Warning signs’ recession is looming
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OPINION: 'It is fair to ask what will happen in 2020.'

. The housing market started the year amid unusual gloom, then did a big U-turn. It ended up in a much more familiar place for Australians – a frenzy of bidding driving house prices up at a record rate.We all learned something in 2019 – some Aussies were shocked to discover house prices can actually fall. We also learned house prices will bounce back if the RBA cuts interest rates.

But in the longer run the link from housing prices to interest rates raises big questions. With interest rates at record lows, surely they must eventually rise again. After all, the last two decades of rising house prices happened as rates fell from 5 per cent in 2000 to 4 per cent in 2010, then to 0.75 per cent in 2020.

Interest rates are already at record lows and seemingly having little effect. If a recession does come in 2020, it’s frightening to contemplate how little the RBA might be able to do to reverse it.2019 was not a terrible year for jobs, but as the next graph shows, it was not impressive. Underemployment and unemployment both rose, taking us nearly back to where we were at the start of 2018.Rising underemployment is usually a bad sign for wages. The backbone of the economy is our paycheques.

2019 was the year of the WeWork saga. A hot American real estate start-up funded with way too much venture capital money, it was going to float on the stock market for billions of dollars. Instead it suddenly stumbled and fell. The float was cancelled. The CEO was sacked. A whole lot of dodgy dealing was exposed. The company is now slashing staff and trying to avoid bankruptcy..

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