By Adele Ferguson
After today’s negative GDP figure for the March quarter, and the recent spate of bad news and economic statistics pouring out, it isn’t a big leap for Australia’s so-called miracle economy to be staring down the barrel of a technical recession in the June quarter.
While the March quarter GDP figures were heavily influenced by the Queensland floods and the disruptions to business that caused, the brutal reality is 8 of the 19 industry sectors contracted in the March quarter.
The Australian economy fell by 1.2 per cent in the March quarter and while it has been well flagged that the Australian GDP figures would be negative this time around, if they are put into the context of the past year, and the fact that home prices and building approvals are falling, manufacturing continues to contract and consumer and business spending is weak, it isn’t looking too flash.
For instance, the September GDP quarterly figures were flat, in the December quarter – which is usually the strongest quarter - the economy grew less than 1 per cent, and the March quarter has gone backwards.
Today’s figures will almost certainly keep interest rates on hold, particularly given the poor state of manufacturing driven mainly by the high Australian dollar. The upshot is it won't matter what the June inflation figures come in at, the RBA will be under pressure to keep its hands off interest rates.
But with so much negative statistics dripping out each day, it will do nothing for consumer and business confidence, which has a multiplier effect on any slowdown.
It was only last week that figures were released showing that company gross operating profits fell for the third straight quarter, dropping by 2 per cent in the March quarter. While profits are up 9.5 per cent over the year, if mining is stripped out, they are flat.
With housing finance falling, retail struggling as consumers reduce their spending and move more towards foreign online retail for their purchases, and business credit 1.1 per cent lower than a year ago, it won’t be an easy ride. It will also make Wayne Swan's budget estimates look increasingly rubbery.
aferguson@fairfaxmedia.com