Falling house prices, inactive wages and a slowdown in market growth have a group of economists fearing Australia is heading for a recession.
The forecast from 19 university economists across Australia is bleak, with the consensus calling for a 25 per cent chance of a recession within two years of the forthcoming general election.
One expert in particular, Steve Keen, formerly of the University of Western Sydney and now of University College London, has almost guaranteed a recession, saying it’s 95 percent likely.
Collapsing house prices could contribute to recession, a panel of 19 experts warns. Pictured is a relatively new housing development in Sydney’s western suburb of Cecil Hills
The panel put together by The Conversation predicted grim times after the federal election.
No recovery in wage growth, a miserable unemployment rate, a nosedive in the housing market and a budget deficit are all major concerns for the group.
The most recent annual growth of the Australian economy is around 3 percent.
But economists expect that to be the peak, with none of the 19 forecasting the number above 3.0 percent.
In fact, the projected average growth is a meager 2.6 percent, with the lowest forecast being 1.0 percent.
The unemployment rate is currently around 5 percent, with the expert report citing flagging iron ore prices as the cause of the job cuts.
Mr Keen says the unemployment rate will rise to as high as 6.8 per cent, while others are forecasting a more hopeful 4.7 per cent – against an average of 5.1 per cent.
Economist and professor Steve Keen (pictured) is the most gloomy, saying there’s a 95 per cent chance Australia will go into recession
Unemployment and a lack of wage growth go hand in hand, according to the panel, which only expects growth of 2.3 percent.
The most recent budget promised a 3 percent wage increase by 2020, although economists say this is unlikely.
Victoria University economic modeler Janine Dixon says that even if productivity growth picks up, saturation of market power in some sectors combined with weakness in labor markets means gains may not be passed on to workers.
Mr Keen also says that the only thing that has kept Australia afloat was the housing bubble, which the Royal Banking Commission has discovered built on shaky foundations.
In fact, house prices in Melbourne and Sydney – Australia’s two most populous cities – are projected to fall further by up to 10 percent each over the next calendar year.
The trio of bleak predictions seem to point to the likelihood of an approaching recession.
Chris Edmond of Melbourne University (pictured), on the other hand, believes there is a 5 percent chance
On average, the panel estimates that the country has a 25 percent chance of falling into recession.
The breakaway of the group is again Mr. Keen, who says there is a 95 percent chance.
If you omit his extrapolation, the remaining 18 still have an average of 22 percent.
