Australia’s economy is on the brink of collapse for the first time in almost 20 years, according to global banking giant Citi.
Citi’s Bubble Meter measures the strength of the economy by analyzing five factors — including home prices, housing permits, trade, mining investment and bond yields, The Age reported.
The last time the gauge entered the bust zone was in 2000.
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Australia’s economy is on the brink of collapse for the first time in almost 20 years, according to global banking giant Citi
Even as the global financial crisis unfolded, the strength of the economy weakened, but not to today’s levels.
“The current deflationary episode is of a similar scale to 2000. But it’s different than it was then, global factors are more important this time,” the Bank of Australia economists said, according to ABC.
“In addition to the correction in mining investment, there is a deflationary income shock as trading conditions have reversed from record levels and partially offsetting this, housing construction is also booming [Reserve Bank of Australia] has cut interest rates to record lows.’
But Citi’s lead economist Paul Brennan allayed investor fears, saying the economy is “remarkably resilient” despite the outlook.
According to The Age, he attributed the breakthrough in 2000 to “a tightening cycle in the RBA that, coupled with the introduction of a goods and services tax, saw a cyclical decline in housing activity and falling mining investment.”
The latest real estate data has shown that Australian house prices have risen by 51 per cent over the past decade, based on average prices.
Citi’s Bubble Meter measures the strength of the economy by analyzing five factors – including home prices, housing permits, trade, mining investment and bond yields
Meanwhile, according to CoreLogic, unit prices have skyrocketed by 44 percent.
But in most areas of the country, average prices haven’t risen to such epic proportions.
“Results vary significantly across capital cities, but in no capital city has the citywide median house or unit price doubled over the past decade,” said CoreLogic’s Cameron Kusher.
“Sydney, Melbourne and Darwin are the countries most likely to have seen prices double over the decade, while Perth and Hobart saw the overall change for homes and units well under 50 percent.”