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By Pete Wargent

Our economy is slowing down sharply

The household saving ratio continued to plummet in the last quarter of 2022, now down to just 4.5 per cent, from a pandemic high of 23.7 per cent in 2020.

The level will be quite close to zero by the end of this month.

Our economy is slowing down sharply
Despite this rundown, the economy actually contracted slightly in per capita terms in the last quarter 2022.
Our economy is slowing down sharply
Headline growth in the economy missed expectations, coming in slow at just 0.5 per cent for the December quarter, while nominal GDP is also peaking out.
Our economy is slowing down sharply
It's not hard to see where the savings are going: mortgage interest.
Our economy is slowing down sharply

With further rate hikes to flow through on tens of billions of dollars of fixed rate mortgages over the year ahead, it's more or less certain now that the household savings ratio will sink towards zero (and perhaps turn negative).

Inflation slows sharply

Economists had expected the monthly inflation indicator to slow from 8.4 per cent year-on-year to around 8.1 per cent in January, but in the event the result was considerably weaker at 7.4 per cent.

Excluding travel costs, the monthly inflation indicator slowed even more significantly, down to 6.7 per cent over the year.

The one component of inflation which is certain to rise from here is rents, with tight lending standards for landlords being extended for another month, and ASIC reporting a gathering surge in developer insolvencies, further slowing down new supply.

This week's economic data releases continue the theme that the interest rate hikes have already inflicted considerable wounds upon the economy, with more to come as the fixed rate cliff bites in time.

Our economy is slowing down sharply

If anything the monetary tightening may well prove to have been too effective, with Westpac and others already predicting deep interest rates cuts in 2024 and 2025.

Our economy is slowing down sharply

If they're right, then 2023 will prove to be a great time to buy property, by the way.

About Pete Wargent Pete is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog
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