Your Money: Is Australia’s economy in as bad a shape as the IMF says? Let’s talk 21



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The Australian Sharemarket absolutely tanked yesterday on comments from the IMF that warned that Australia’s economic slowdown could continue until 2017. It comes on the back of a report by the organisation that shows countries relying on income from commodities and energy will continue to struggle for the foreseeable future and are significantly dependent on the economic management of their governments.

But the fact that our nation is in a difficult economic position should be no surprise to anyone – should it? Five Prime Ministers in as many years can hardly lead to terrific economic management.    So why did it knock 3.8% off the Australian sharemarket yesterday? Is it fear, old news, or something very very real coming at us in the next nine months that we should start to be concerned about?

There’s this old adage that comes to mind that someone taught me in my old stockbroking days… “Sell in May and go away, come back in September”. It certainly seems to have been valuable advice in hindsight over the last few months. But is it more than that?

The IMF says Australians should get comfortable living in an era of slowing growth. They have pointed to the commodity price declines, and the fact that our economy has invested in little other than mining for a decade to demonstrate how tough it will be to restart our nation’s engine. And they say it could cut annual growth by 1% to 2017. At the same time, Goldman Sachs now says there’s a one in three chance of recession in Australia.

Just last month, Reserve Bank governor Glenn Stevens warned us all that growth rates of over 3% were a thing of the past. In the year just gone, Australian grew at 2%, down from 2.5% in the previous quarter. (That’s a fast shaving of 0.5%).

Clearly the stockmarket is worried about the IMF’s comments in the short term. And it is worthwhile noting that stockmarkets are often trading for today and tomorrow. Really, when day to day trading balances out, most stockmarkets are found to be are trading “ahead” on the worries of what is likely to happen in a market in 6-9 months time. They take in the likelihood of whether earnings will rise and whether growth will arrive, often well before economists can see it and people dive in and buy bottoms and sell tops on this basis – evening out the flow of funds. So was yesterday a blip, and a buying opportunity, or something far more sinister? We want to know how you are feeling.    

We saw it in the pre-GFC period, and we saw it in the post-GFC period. Economists on the other hand are usually taking post-humous data and applying it to the future to see how it will trend.  Economic signals are rarely seen in the headlights, usually in the tailights.

So who do we believe on yesterday’s market actions? Is it fear in the stockmarket misplaced around economic models that look at data we already know about? Or is it the stockmarket pricing in the chance of a more significant slowdown in our island nation than we have planned that will impact the earnings of our companies?

My crystal ball is not so clear. I’d love to see what you think.


The IMF statement said:

‘Commodity exporting economies are at a difficult juncture. A significant deceleration in growth rates is unavoidable.

Global commodity prices have declined sharply over the past three years, and output growth has slowed considerably among commodity-exporting emerging market and developing economies. Whether the decline in growth has opened up significant economic slack – that is, has increased the quantity of labour and capital that could be employed productively but is instead idle – and the degree to which it has done so are likely to vary considerably across commodity exporters.

The variation depends on the cyclical position of the economy at the start of the commodity boom, the extent to which macroeconomic policies have smoothed or amplified the commodity price cycle, the extent to which structural reforms have bolstered potential growth, and other shocks to economic activity.



Rebecca Wilson

Rebecca Wilson is the founder and publisher of Starts at Sixty. The daughter of two baby boomers, she has built the online community for over 60s by listening carefully to the issues and seeking out answers, insights and information for over 60s throughout Australia. Rebecca is an experienced marketer, a trained journalist and has a degree in politics. A mother of 3, she passionately facilitates and leads our over 60s community, bringing the community opinions, needs and interests to the fore and making Starts at Sixty a fun place to be.

  1. Poor fiscal policies have ruined the Australian economy. Australia should be one of the richest countries in the world – instead we are indebted and have allowed ourselves to become lazy and inefficient.

  2. Talk but not behind closed doors as we are experiencing in NZ at the moment with the TTP agreement.

    1 REPLY
    • It’s all secrets here too, David. They know damned well we won’t like what they’re agreeing to.

  3. And the past and present governments have All promised Us more more open Governing, They have All made decisions that have not been discussed with the people, nor in the best interests of the People. !!

  4. We sold out of the stock market 3 years ago. My husband could see what was coming. We have invested in a business and feel that at least we are the masters of our own fate not at the mercy of unseen forces.

  5. Mining has always been treated as the preferred industry. Prime farming land, sensitive environments, limitless water in some areas and government subsidies and grants have all gone to mining companies. They have done much for Australia, but if successive governments had been a little less blinkered more emphasis would have gone to other areas. Science, green energy, manufacturing cut to the bone. Hopefully changes can be made but possibly not. The government coffers will haemorrhage badly with any downturn in mining. Welfare payments will increase as self funded retirees lose their ability to support themselves as their portfolios devalue and low interest for cash investments over no alternative.

    2 REPLY
    • It wouldn’t be in the long term if more research and development was allowed. Instead of paying the Carbon Tax, which when axed was going to save $500 on our power bill and would actually have been lucky to have saved us $50, we still pay by our taxes being diverted from services we need to big business again. The LNP seems to forget big business doesn’t get to vote at election time it is us the people.

  6. The economy has been going downhill ever since the Liberals were elected, that is one reason why Turnbull made a play for the top job, The Liberals have talked the economy down for years, we all remember the budget emergency

    1 REPLY
    • hasn’t turnbull blown the country up yet? I am so bored am thinking of going back to Candy Crush LOL.

  7. The higher unemployment gets the more the economy will suffer, we have 800 thousand out of work now and more to join the Centerlink line when the car industry ends, unemployed people do not pay taxes. Where are the million jobs this Government promised to create ?

  8. Wake up Australia! Stock Market is GAMBLING! (never gamble what you cannot afford to lose.) Buy our own produce & look after our own people & their jobs! Put your money where your mouth is & invest HERE!

    4 REPLY
    • When will they learn this, even our pensions are based on this. Could easily be the road to ruin.

    • Agree, there is a risk to many of these deals. The adage if it sounds too good to be true it usually is rings true here.

    • Many of us don’t make the personal choice to invest but have to buy superannuation which does invest heavily in the stock market. It is the value of our super and the decline in allocated pensions from it that will have us on Centrelink benefits sooner rather than later.

    • Yes, Barbara, how many of our farmers struggling with drought would benefit if that money was directed to helping them. How about we could buy into infrastructure for our Country? Why sell the PO or the Rail network when we could give private loans with OUR OWN money that is tied up in Super.

  9. I always thought you should never put all your eggs in one basket. Yet that is what Australia is doing. Funding mining, an outdated commodity instead of focussing on the variety of renewables.

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