Recent data from the Australian Industry Group shows that many sectors of the Australian economy continue to shrink and job losses will be the unavoidable result.
The majority of Australian workers are employed in sectors that are experiencing “recessionary” conditions, with rising job losses and falling volumes of work, according to the AIG.
While the booming mining sector is keeping economic growth positive, it only employs 2 per cent of the country’s workers.
But the latest data measuring the performance of economy across a range of sectors makes for depressing reading, with all either contracting or weakening according to an article on Yahoo Finance.
If the AIG’s indices show readings above 50pts, it means the sector is expanding, and below 50 indicates contraction.
It’s September surveys show that the construction sector continued to shrink for the 16th consecutive month, down by 2.1 points in September to just 30 points. It was the lowest reading on construction industry conditions since the depth of the GFC in February 2009.
The Manufacturing index was also doing it tough, down by 1 point in September, to just 42.3.
The sectors within manufacturing experiencing the deepest declines were food and beverages, wood products and furniture and transport equipment.
In fact, ten out of the 12 manufacturing sub-sectors declined in September.
Finally, it’s Services Sector Index also declined 1.8 points to 50.3, just marginally staying in positive territory but perilously close to contraction. Retail is the services sector having the hardest time at the moment but others are also continuing to suffer and shed jobs.
There’s little doubt that we’re in a 2-speed economy. A small group of sectors are doing well and other sectors are hurting, and will continue to do it tough for a while.
That’s why the RBA will have to drop interest rates to stimulate the economy.
Currently market sentiment is poor – very reminiscent of 2008 – and similar to all the recessions that came before that, even though technically we just avoided a recession then – didn’t we?
People spending money makes our economy go around.
However, poor market sentiment driven not only by local factors, but all the troubles overseas, will see more Australians stashing their cash and bunkering down for tough times ahead.
We have to be careful that this doesn’t become a self-fulfilling prophecy. The media can easily talk us into a recession.
But, like all other downturns, this too shall pass and we’ll enter another prosperous phase of the economic cycle driven by the mother of all resources booms.
Growing population and the wealth of the nation will underpin property prices and those investors with a long-term view, who hold the right type of property, will once again be smiling.
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