The trade war between United States and China is having a global warning of recession, with many countries, such as Australia and India, are on tender-hooks. Australia’s own trade, 80% of GDP, which a bulk of the export market is with China. The bilateral trade relationship between Australia and China, is worth about $175 billion [1] ([1] 2018 data, Australian foreign affairs and trade).
Recent years, Australia has become too reliant on China and India too reliant on United States. Australia has not seen a recession for now over 28 years. Young people 18-28 at this year’s federal election, did not know what the word “recession means. The warning bells starting to go off, recession or no recession?
Australia Prime Minister, Scott Morrison MP, is wasting no time, looking at countries, such as Vietnam and India, to “fill the avoid” and avoid going into recession. Westpac’s Chief Economist, Bill Evans, says “looking at current economic data, Australia does not have the current data, to trigger a recession, as it did in the early 1990s”. The bilateral trade relationship between Australia and India, is currently worth about $29 billion [1], which has the potential of matching and rivalling the bilateral trade relationship between Australia and China.
Dr Shane Oliver, Chief Economist, AMP Capital, has given nine reasons why Australia is not heading into recession –
1. Rate cuts and tax cuts should provide some growth boost.
2. The threat of crashing property prices looks to be receding.
3. Infrastructure spending is booming.
4. The low $A is helping to support the economy.
5. The business investment outlook is slowly improving.
6. Australia has a current account surplus.
7. There is scope for extra fiscal stimulus.
8. Population growth remains strong.
9. Finally, cyclical spending (consumer durables, housing and business investment) as a share of GDP remains low.
Dr Shane Oliver says “Since last year our view has been less upbeat on growth than the consensus and notably the RBA. This remains the case as the housing construction cycle turns down and weighs on consumer spending. As a result, it’s hard to see much progress in reducing high combined levels of unemployment and underemployment, and hence wages growth and inflation are likely to remain low. But there remains a bunch of positives that should help the economy avoid a recession even though growth will remain weak for a while yet.”
