It’s embarrassing. Australians are actually having to work harder just to drive below-average economic growth that’s still too hot.
The sharemarket is not the economy, or so the well-worn market saying goes. But right now, Australian financial markets are sending some pretty clear signals about where they think the nation goes next.
The 10-year Australian government bond yield hit a fresh 15-year high of 5.22 per cent on Wednesday, after a better-than-expected GDP growth print added to expectations of a fourth interest rate hike from the Reserve Bank of Australia.
The GDP numbers weighed on equities, too. The ASX 200 closed 1 per cent lower on Wednesday and has now fallen for 14 of the past 19 trading sessions, since the local market hit a record high on August 6.
There are global factors at play, of course. A global meltdown on bond markets has taken yields to levels not seen since 2008, and fresh fighting in the war in Iran has sent crude oil prices sharply higher, adding to inflationary pressures that are building across the entire commodity complex. The artificial intelligence boom’s insatiable appetite for debt funding is also pushing the global cost of capital higher.
But none of that gets away from the fact that the GDP numbers tell a sad story about what lies ahead for Australia’s economy. HSBC economist and former RBA official, Paul Bloxham, says the central bank will effectively have to choose from a stagflationary environment of low growth and sticky inflation (albeit without high unemployment, thankfully) or a recession that drives inflation sustainably back to the central bank’s 2.5 per cent target.
Source: https://www.afr.com/chanticleer/the-great-australian-quagmire-will-only-get-deeper-from-here-20260902-p60tvr