How is Australia’s economy really performing?

How is Australia’s economy really performing?

There are lots of negative sentiments doing the rounds at present about Australia’s economy. We asked a prominent economist for his views about whether they are all justified.

Speculation about Australia losing its AAA credit rating; interest rate cuts during 2016; stagnating wage growth; high-profile retailers such as Masters Home Improvement, Dick Smith Electronics and more collapsing… it’s easy to think Australia’s economy is in the doldrums.

Yet according to economist Christopher Joye, an alumnus of the RBA and Goldman Sachs and now a contributing editor for The Australian Financial Review, our economy is doing much better than many people realise.

“I think the Aussie economy is in rude health,” he says on the My Business Podcast.

“[But] you don’t feel it everywhere.”

Christopher points to the continued boom in property prices in Sydney and Melbourne, which is making residents of those cities feel prosperous, but says other places such as Perth are feeling the exact opposite as house prices show no end to their decline.

“So if you're living in Perth you don't feel much benefit from the housing boom,” he says.Capital squeeze with money in a clamp

According to Christopher, business owners can look forward to 2017 in the political sphere too, as he sees a shift away from business regulation, which has become the norm since the GFC.

“I think generally we're coming to the end of an aggressive re-regulation cycle,” he explains.

“Since 2008 – for almost 10 years now – we've just had massive re-regulation of Western economies, including here in Australia. Huge increases in regulation. So I think this is outcast, all the atmospherics are going to change quite noticeably.

“You'll see more pro-business rhetoric coming out of the Liberal Party in the Coalition, because ultimately we're competing in global markets. And if the US is implementing measures to support small business, and to support entrepreneurs, they're creating an unfair playing field, so to speak. [So] I think you'll see other countries [including Australia] respond as well.”

Business owners with outstanding loans, or those looking to borrow additional funds, should consider that this growth will likely see interest rates increase in the foreseeable future.

“On borrowing rates, I think the interesting [factor] for Aussie businesses is if you can lock in any attractive fixed rates over three to five years. Personally that's what I would be doing,” says Christopher.

“[If] you need to refinance it, you may be refinancing that debt in three to five years’ time at a much higher interest rates – current home loan rates and current business rates are still incredibly attractive.”

How is Australia’s economy really performing?
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