As reported by Bloomberg, Deutsche Bank warns that the Australian economy is poorly prepared for another global slowdown, and is significantly worse off than it was at the outset of the 2007-08 financial crisis.
Key highlights
“The U.S. Federal Reserve doesn’t typically manage to engineer a soft landing once the unemployment rate has fallen through full employment.”
“So the next global downturn is more likely to be a matter of when, not if.”
Australia’s economy is heading for an expected global recession sometime mid-2020 with almost no budget surplus, net debt at 17% of GDP, and RBA cash rate near 2.25%.
Australia before the 2008 collapse had a budget surplus of 1.8% of GDP, almost zero net debt, and rates over 7%.
Prematurely lifting interest rates could be devastating for the Australian economy, and the government also cannot push budgets into surplus faster for risk of harming growth.
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