It’s Official: This is the End of Australia

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It has been a dream run.

But as the saying goes, ‘All good things must end’.

For Australia, the end is near.

In fact, it’s not a stretch to say this could be the end of Australia as you know it.

What does that mean?

And why should you care?

Because it will affect the life of every Aussie in the years to come. Here, we’ll explain more below…

A recession is when an economy shrinks.

An ‘official’ or ‘technical’ recession is when an economy shrinks for two straight quarters.

Australia hasn’t shrunk this way since 1991. But it has come close. In 2000, 2008 and 2011.

But each time it was only one quarter where the economy shrunk.

That means Australia is overdue…long overdue…for a slowdown.

A 25-year ‘drought’

Here’s the proof of Australia’s near 25 years of growth:


Source: Bloomberg

You can see the three recent times where the economy has slipped below the white line. That’s the zero growth line.

On the left of the chart, we’ve circled Australia’s last recession. The Aussie economy shrunk by 0.6% and then 0.3% over two straight quarters.

To go so long without a repeat of that is an amazing feat.

Over the same timeframe, the US economy has gone through two major recessions. The most recent was in 2008–2009. You can see these on the chart below in the red shaded areas:


Source: Bloomberg

So why has this happened? The answer should be obvious. In 2001, the US tech boom was much bigger than the Aussie tech boom.

The US economy had grown more. It averaged a 2.5% growth rate during the 1990s. That’s compared to the Aussie economy, which had averaged a 0.8% growth rate.

It was the same story during the 2000s. Even though the Aussie economy had grown due to China’s huge demand for resources, credit-fuelled consumer growth in the US meant the US economy grew much bigger.

But now the Aussie economy is in trouble. The mining boom is over. Commodity prices are going down to multi-year lows. And aside from resources and agriculture, what else can the Aussie economy export?

We wish we could tell you.

Taking advance orders now

The troubles facing the Aussie economy today are why our colleague, Vern Gowdie, has written a book titled The End of Australia.

There’s no doubt it will cause a stir.

We expect to take delivery of the first print run next Monday. But you can put in an advance order now.

In the book, Vern makes some key points on the great Aussie debt binge. For instance, today the government is in debt to the tune of $382 billion.

That’s almost equal to the government’s annual budget.

Put another way, since 2008, Aussie government debt to GDP has risen from 14.7% to 34.5%.

How can the government and taxpayers repay this debt when the country’s main income source, resources exports, has taken such a big hit?

And you only have to take last week’s numbers on domestic business investment to see that things are getting worse.

As the Sydney Morning Herald reported at the time:

‘The ABS said on Thursday that private sector June-quarter investment in building, equipment, plant and machinery dropped 4 per cent, seasonally adjusted, from the previous three months, and 10.5 per cent from a year earlier.

‘Resource-related investment, which underpinned Australia’s most recent economic boom, plunged 11.3 per cent in the quarter. Manufacturing, too, remained weak, down 3.4 per cent.’

There are plenty of warning signs. These are just a couple of them. Vern lays it out in detail in The End of Australia. Frankly, we couldn’t do justice to everything Vern has written about the problems facing Australia’s economy.

The only thing we suggest is to check out what Vern has to say here. He’ll tell you everything, in his own words. Go here now.

Cheers,

Kris

About Money Morning Editorial

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the…

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