Is Australia facing the first recession in 20 years?

[CHam]

When the story broke on the TV news I immediately turned to my wife and said, "That managing director is acting strange. The trucking company has just been ripped out from under him by it's lender. His logical options are to be either furious - because he didn't see it coming and thinks he could have stopped it - or crestfallen - because he did see it coming and knew he couldn't stop it. But this bloke isn't either. Instead, he's hanging out with the staff in front of the TV cameras saying he is just bewildered and doesn't know why the lender has done this. That tells me he's the one who has just ripped out all the available cash and so forced the lender to act, and what he's doing now is trying to cover his trail by acting all innocent in plain sight." I swear. That's what I said.

I work in the logistics industry and there were rumours floating around 10+ years ago about 1st Fleet and possible issues with their ability to remain afloat.

It would seem that they have been trading close to the edge for a long time (albeit this is not uncommon in the Transport industry), but from my experiences with them a fair while back they quoted cheap and promised a lot.

 

[Belbo]

quoted cheap and promised a lot.

Similar to poker machines then?

 

[Aaron Sice]

We sort of sailed through the GFC, thanks to a war chest the previous Lib government built up.

With the amount of room the RBA (3.75% and down) has to move and the range they want to keep inflation in (2 to 3%, currently 1.6%) there is still plenty of wriggle room.

Some serious **** would need to go down for Oz to go into recession.

dont bet on it.

that "surplus" just means we were overtaxed and undercapitalised.

there is only plenty of "wriggle room" as long as the status quo is maintained. when the excrement hits the rotating air assembly, the status quo drops accordingly and your "wriggle room" becomes "rock and a hard place".

 

[Aaron Sice]

It sounds like banking and retail are having a hard time there.

....and they (the banks) have no one to blame but themselves.

 

[HotRod]

dont bet on it.

that "surplus" just means we were overtaxed and undercapitalised.

there is only plenty of "wriggle room" as long as the status quo is maintained. when the excrement hits the rotating air assembly, the status quo drops accordingly and your "wriggle room" becomes "rock and a hard place".

Agreed, but at least we have wriggle room.

Japan, the US, UK and the Euro will be knackered with the next dip.

We can still pump cash into the economy to try and stimulate things with reduced rates.

Not sure what these other economies do. They can pump in more cash from their reserves but that will only lead to possible hyerinflation which would make things worse.

The world economy is probably on the verge of a complete meltdown and reboot back to hard assets.

 

[Aaron Sice]

Agreed, but at least we have wriggle room.

.....until the bottom comes up to meet the top!

then we have nothing.

 

[hobo-jo]

Overall, Australia recorded a trade deficit of $3,184 million over the first quarter of 2012, which fully reverses the $3,115m million surplus recorded over the December quarter of 2011. Accordingly, the shift from surplus to deficit over the first quarter should shave around 0.9% from the upcoming March quarter GDP print.

http://www.macrobusiness.com.au/2012/05/trade-balance-shocker-to-hit-gdp/

 

[Aaron Sice]

there's the bottom encroaching on the "wriggle room"....!

 

[Indifference]

http://www.macrobusiness.com.au/2012/05/trade-balance-shocker-to-hit-gdp/

mmmmmm...... this definitely points towards a downturn. It will be very interesting to see the final GDP print for Q1 and whether it is still in the black. If not, our economic timeline may be further advanced than I first thought....

 

[Aaron_C]

mmmmmm...... this definitely points towards a downturn. It will be very interesting to see the final GDP print for Q1 and whether it is still in the black. If not, our economic timeline may be further advanced than I first thought....

Too much emphasis on a number that may or may not be negative. Simple fact is that life in the Eastern suburbs isn't good right now and with the Tax-On-Everything coming in July it will get even worse.

 

[Belbo]

Too much emphasis on a number that may or may not be negative. Simple fact is that life in the Eastern suburbs isn't good right now and with the Tax-On-Everything coming in July it will get even worse.

It is genuinely amusing to see such a thoroughly-debunked line being publicly deployed by someone not in Abbott's own team of politicians. So try-hard.

 

[willair]

http://www.macrobusiness.com.au/2012/05/trade-balance-shocker-to-hit-gdp/

Just about tells the whole story,all you would need now is a few weeks of massive euro based equities 20%falls, follow up by another Wall Street bloodbath and it would be time to buy back into the ASX..

 

[buzzlightyear]

In the context of a relatively strong labour market, reduced interest rates, stronger than anticipated retail spending and now a "school kids" bonus and the inevitable spending, this economy whilst challenged, will not go into recession or even one negative GDP quarter result

 

[tcocaro]

I cannot fathom we are having this survey. The world would truly look to us and ask what depressant drugs we are on to whine so much, fear so much and complain so much given we have so much...

 

[Belbo]

I cannot fathom we are having this survey. The world would truly look to us and ask what depressant drugs we are on to whine so much, fear so much and complain so much given we have so much...

Well, this poll thread was started by Hobo Jo (assuming this is the survey you find unfathomable). Did you need to know more, Tim?

 

[hobo-jo]

I cannot fathom we are having this survey. The world would truly look to us and ask what depressant drugs we are on to whine so much, fear so much and complain so much given we have so much...

We are not bullet proof as many would have you believe.

I am not whining, complaining or fearing, simply expecting.

IMO this quote from a user on MacroBusiness yesterday says it all:

"Not having a recession in Oz since 1991 is not a sign of strength, but a massive sign of danger."

 

[BayView]

The anecdotal information has been supported by recent profit results of some publicly listed companies. Harvey Norman, JB Hifi, Woolworths included.
Obviously people are still spending but some retailers are being squeezed by price deflation of the goods they sell, rising costs and competition from overseas stores.
Anyhow there are a lot of vacant B&M shops in my area and they are staying vacant for a long time. That must mean something.

One of my mechanic's brother works for a company that owns several shopping centres.

The word is that they are seeing a shift towards more "service" based businesses in them; Medicare Centres and such like, doctor's rooms, accountant's firms etc.

Retail is floundering somewhat he reckons.

My interpretation of a recession is not how the Gubbmint measure it; mine is based on the overall feel and mood of the economy; job security, business confidence, consumer confidence, housing market movements, building game activity, retail sales etc.

At the moment all of the above are bad. Have been slowing down for more than a year from my observation and things I hear "on the ground".

Yeah; mining might be going great, but that's not yer everyday walk of life stuff. You can chuck it into the mix to make the picture better, but it's spin.

No; things are definitely on the slow-down generally.

 

[Belbo]

One of my mechanic's brother works for a company that owns several shopping centres.

The word is that they are seeing a shift towards more "service" based businesses in them; Medicare Centres and such like, doctor's rooms, accountant's firms etc.

Retail is floundering somewhat he reckons.

My interpretation of a recession is not how the Gubbmint measure it; mine is based on the overall feel and mood of the economy; job security, business confidence, consumer confidence, housing market movements, building game activity, retail sales etc.

At the moment all of the above are bad. Have been slowing down for more than a year from my observation and things I hear "on the ground".

Yeah; mining might be going great, but that's not yer everyday walk of life stuff. You can chuck it into the mix to make the picture better, but it's spin.

No; things are definitely on the slow-down generally.

Hi Bayview,

I'd suggest you are basically wrong, and just suffering from Vic-shock. Your Victorian economy was screaming along on a principally Melb residential construction boom up until 12-18 mths ago, but it hit oversupply/underfunding constraints, and just stopped. With construction representing something like 20% of Vic state gross product (as much as manufacturing), a slowdown in that sector feels like a general anasthetic affecting the whole. But if you'd lived in NSW with its dead construction sector for the last 5 yrs, you'd just say, "Mehhh! So what's new?". Meanwhile, the WA and Qld construction sectors are roaring along, admittedly with a focus on non-residential work. This is all going to the Treasury-RBA plan: With the mining sector growing at 9%, they really don't want to see anything more than arounf 1% growth in any other sector (which means any southern state) of the economy.

That shift in spending from retail to services you also note is no great shakes either: People are choosing to spend more on 'experiences' than on 'stuff' basically because the former are a better value proposition for most people these days. On the one hand the high Aussie dollar has made O/S travel a bargain, and on the other our local service suppliers have had to drop their prices to compete with O/S rivals. Bumrungrad hospital in Bangkok offers both damn good dental and boob work, I hear. A woman friend of mine left on Sunday to get her nose done in Bangkok, actually. A fraction of the cost of having it done here, even after flights and hotels apparently. It's only a matter of time before similar service prices drop here (or our plastic surgeons start doing something socially useful for a living).

And in retail, you might be surprised to know that the volume of 'stuff' being sold hasn't dropped; it's just the prices that have dropped. You can buy a pair of perfectly good jeans at Big W for $8.50 today, or pay $185 at a high street boutique. Guess where a million mums are shopping today? And your own customers, they haven't stopped driving cars. They're just taking them to K Mart Auto-Service and Ultra-tune, i.e. the cut-price McDonalds of your industry.

It's not a recession: It's an economy undergoing structural change. Hobo Jo is just pulling your chains to push his anti-PI barrow right under your windows. Sell out for your own good now, and make housing affordable along the way!

 

[hobo-jo]

That shift in spending from retail to services you also note is no great shakes either: People are choosing to spend more on 'experiences' than on 'stuff' basically because the former are a better value proposition for most people these days.

The AIG Services index suggests otherwise (not exactly sure how this index is calculated, so Belbo if you have evidence to support your theory that consumers are moving from products to services in Australia I would love to see it):

http://www.macrobusiness.com.au/2012/05/aigs-black-hat-trick/


But hey... take my input with a grain of salt because according to Belbo I have a secret agenda to crash the property market via manipulating opinions on Somersoft Property Forums!!

 

[Belbo]

The AIG Services index suggests otherwise (not exactly sure how this index is calculated, so Belbo if you have evidence to support your theory that consumers are moving from products to services in Australia I would love to see it):

Not my theory, Hobo. It's just what is being reported all over the economic pages of every national newspaper every day. Retail spending's down, services spending's up. It ain't contentious: It is known.