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Business apocalypse? Australian Gloom Deepens (Read 80 times)
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Business apocalypse? Australian Gloom Deepens
Sep 12th, 2019 at 12:16pm
 
As interest rates approach zero, the effect of interest rate reductions approaches zero.

Australia is not well placed to weather a deep recession with high government debt levels and a shrinking world economy.

Donald Trump has rocked the world economic boat and its listing.

...

https://www.bloomberg.com/news/articles/2019-09-10/australian-business-gloom-dee...

Quote:
Australian Business Gloom Deepens as Stimulus Fails to Fire
By Michael Heath
September 10, 2019, 8:31 AM GMT+7 Updated on September 10, 2019, 9:08 AM GMT+7

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Australian business sentiment tumbled in August, suggesting interest-rate cuts and tax relief are failing to rejuvenate the slowing economy.

A gauge of business confidence slid to 1 from 4, while the conditions index -- which measures hiring, sales and profits -- slumped to an almost five-year low of 1, the National Australia Bank Ltd. survey showed Tuesday. It was conducted from Aug. 20-31 and covered more than 570 firms.

“It looks like the tax cuts have had little impact on household consumption or have not been large enough to offset increasing weakness,” said Alan Oster, NAB’s chief economist. “The two rate cuts also may have had little impact, though this is expected with the longer and more variable lags of monetary policy.”

Sentiment has slumped across industries
Reserve Bank chief Philip Lowe cut interest rates in June and July to a record-low 1% as he tries to revive household spending. He’s urged the government to open the fiscal spigot to bolster the bank’s stimulus efforts, though Treasurer Josh Frydenberg has so far resisted, maintaining he’s already doing enough to support the economy via a tax rebate and existing infrastructure spending.

Tuesday’s survey follows GDP data last week that showed the economy expanded in the second quarter at the weakest annual pace in 10 years, with the private sector almost moribund. That trend seems to have persisted, with a weekly gauge of consumer confidence released earlier today also falling.

“This outcome suggests that momentum in the business sector continues to weaken, with both confidence and conditions well below the levels seen in 2018 -- and is in line with the weak outcome for the private sector in the second quarter national accounts,” Oster said.

Australian Economy Grows at Weakest Pace Since Financial Crisis

Indeed, the only sign of impact from the rate cuts is an upswing in house prices in Sydney and Melbourne, which may in time generate a wealth effect that encourages households to spend more. Monthly consumer confidence for September is due out Wednesday.

Economists and money markets are betting Lowe will cut twice more to 0.5%, a level close to the lower bound of policy that could open the door to unconventional measures. 
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