There has been a profound change in main economic indicators within the Australian economy over recent months. On the positive side, GDP remains strong on the back of high commodity prices/export income. Unemployment is low and consumer consumption solid, on the back of rising wages and activity as the coronavirus impacts subside. However, in recent months some significant negative factors have started to impact. Inflation far higher than forecast, has forced the Reserve Bank to start an aggressive run of cash rate increases.
This flows through to higher mortgage repayments, which together with increases in fuel and utility costs, are starting to have a significant impact on consumer spending. In addition asset prices, particularly the housing and equities markets have also started to fall. The resultant impacts on the small business marketplace are yet to reveal themselves. However, past economic cycles can provide a degree of guidance.
SUMMARY OF AUSTRALIAN ECONOMY
- Unemployment is now in the range of 3.75% to 4% compared to around 5.5%, 12 months ago. Unemployment is now genuinely low given that the participation rate and hours worked per employee are at historic highs.
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