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Reliance on household debt and a lazy corporate sector – a recipe for disaster

In yesterday’s blog post – Australian national accounts – growth continues but deep uncertainty looms (September 5, 2018), my theme was that the current period of economic growth in Australia was being built on what we might consider to be quicksand – increasing household debt and a run-down in household saving. Australia’s household saving ratio is now down to 1 per cent and falling, which is taking us back to the madness of pre-GFC. By any stretch this is an unsustainable growth path. Last Monday (September 3, 2018), the Australian Bureau of Statistics published their data series – Business Indicators, Australia, June 2018 and – Retail Trade, Australia, July 2018. The latter gives a more recent estimate of what the economy is doing, given the national accounts data that came out yesterday covers the period from April to June. Things are definitely not going in the right direction. The data shows that the benefits of growth are being disproportionately captured by profits and wages are lagging well behind. Overall, this is a recipe for disaster.

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