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In many ways, Australia has shone as a shining beacon in the global economy for more than 25 years.

After all, the nation has managed to avoid a technical recession for more than 26 years.

The recent figures suggest that the economy is growing at a faster than expected rate in 2018. In essence, Australia has continued to outperform larger and better-resourced countries.

Finance companies such as Likely Loans, which is one of the bad credit lenders, has survived the fall-out from the Great Recession in most developed economies.

Phillip Street skyscraper, Sydney, Australia

However, the fact remains that Australia is not without its economic issues in the current climate. It also endured a challenging 2017, with the economy growing by just 0.36% in the final quarter of last year and household living standards continued to stagnate.

In this post, we’ll ask how the Australian economy is really performing. Also, we know whether or not Australia is actually experiencing a subtle and understated decline.

The Portents of Growth for the Australian Economy

The headline figures surrounding the Australian economy certainly make for positive reading. Australia has exceeded expert forecast and it now has a strong annual growth rate of 3.4%.

This was driven by better-than-expected growth during the second fiscal quarter when the economy expanded by 0.9% between April and June. The forecasted growth for this period was just 0.7% in seasonally adjusted terms, increasing the annual rate up from 3.1% and laying the foundations for a strong finish to the year.

Meanwhile, this does not only represents the strongest level of growth since the mining boom of 2012. However, it also delivered a significant boost to both the Reserve Bank and the Treasury after a challenging period.

This performance also betrays the robust growth of the labour market, with the employment rate in Australia remaining unchanged in September at 62.20%. This is well above the average of 58.95% recorded during the last 40 years, while it’s only slightly below the all-time high of 62.90% in April 2008.

Why the Australian Economy is Not Without its Issues

While the economy may have largely recovered from its 2017 slump, however, the issues that triggered this decline will continue to undermine future growth. The value of construction work fell noticeably in September. For example, declining by 2.8% to $53.144 billion in seasonally adjusted terms for the quarter.

This disappointed pundits who were expecting quarterly gains in the region of 0.9%. It also created significant risks for the nation’s upcoming third-quarter GDP report. While this may hint at a marginal decline in the construction sector, it’s fair to say that confidence in Australia’s housing market is also collapsing in the nation’s biggest states.

Prices have already fallen by around 2.7% in Sydney and Melbourne, while the downward trend for property values is also expected to continue for another two years.

The Last Word

Ultimately, avoiding a technical recession means little unless the Australian economy is able to grow at a viable and sustainable rate. So while the nation’s economy has performed well throughout 2018, there remain a number of challenges that could considerably hinder long-term growth.

Also, the potential fall-out from a U.S. – China trade war has encouraged the IMF to downgrade its forecasts for the Australian economy – (the reduced demand for thermal coal is already expected to be 50 million tonnes lower due to a warmer winter in Asia). However, there’s no doubt that the immediate outlook for the nation is gloomy.

This, combined with a declining property market, could yet send the economy into free-fall and trigger its first technical recession in more than 25 years.

 


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