So, household final consumption contributed a nearly-invisible 0.2% to Australian GDP in the June quarter? And Oz annual growth slumped to 1.4%, the worst it’s been since the GFC in 2009?

In terms of last year’s Kavanagh-Putland Index (shown in black above), the lack of good news is to be expected. The only issue now is whether the Morrison government’s tax cuts and stimulatory measures have been sufficient to allay the recession which usually ensues within 2 years of a 25% drop in the Index (shown in orange).

Put another way, will Treasurer Josh Frydenberg’s “goodies” match the more than $50 billion Wayne Swan spent in 2008-09 to successfully keep the property market “up there”, and to kick the property bubble can down along the road?

I don’t think so.

Why not?

Because a great number of Australians are already maxed out on debt, and a declining wage share doesn’t help resolve their indebtedness to banks. Rather, it applies additional financial constraint.


But hasn’t the property market shown recent improvement?

Yes, it has. But that’s the worry. It doesn’t resolve the problem of Australia’s extraordinary level of private debt. Our incredibly high land prices and mortgage debt are the main reason business, especially retail business, is so sluggish: aggregate demand is low.

Maybe curiously to some, the only hope for economic recovery is for the heat to come out of the property market, not to be shunted back into it. We and our politicians need to learn that the profitability of Oz banks does not translate to the general welfare of “hardworking Australians”.

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