With growth at the slowest pace in Australia since the recession of the early 1990s, we are now faced with an ongoing economic crisis in China — our biggest trading partner — and the prospect of a global economic slowdown.
Australia is faced with an ongoing economic crisis in China — our biggest trading partner — and the prospect of a global economic slowdown.Until just a few weeks ago, it seemed as though the developed world had pulled off what once was thought to be the impossible.
And yet, despite this mounting evidence of a critical economic slump, there remains a rump of high-profile economists openly criticising the Reserve Bank of Australia's reluctance to push interest rates above 5 per cent. The miracle, if you still have faith in them, is that we've managed to avoid a recession. Unfortunately, it's less a miracle and more a statistical sleight of hand.
During the past year alone, our GDP per capita has declined by 1 per cent, representing a substantial fall in living standards for Australian households. Rate hikes force Australian households to reduce spending almost immediately, which then flows directly through to business income.For some unknown reason, many of our more famous economists completely ignore this vital transmission factor and simply look at the headline rate.
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