It is easy to forget that one of the biggest risks to the Australian stock market comes not from bad weather or a global slowdown but from a lack of money.
“We are a small country,” said former Labor finance minister Bill Shorten.
“So when you get into an area of uncertainty like this, when the market is in a bear market and you’re facing the prospect of an economy that is slowing down and not being able to generate the income that you need to continue to grow, it’s difficult to see the economy moving forward.”
Australia’s economy has been in a funk for some time now.
At the end of March, the Australian Bureau of Statistics (ABS) recorded a contraction of 0.4 per cent, the first contraction since December 2009.
In April, the ABS announced that the economy was contracting by 0.3 per cent.
And last month, the Reserve Bank of Australia (RBA) said that Australia’s gross domestic product was shrinking, at 0.7 per cent in the March quarter, the biggest quarterly contraction in decades.
But there’s no doubt that there’s a big difference between the current state of the economy and the one that existed in 2007.
ABS chief economist Andrew Forrest said at the time the economy had become less productive.
He said it was not clear whether the fall in growth in the quarter was a result of the weather or the economy’s lack of confidence in the Australian financial system.
While Forrest acknowledged that the “crisis” had caused the fall, he was quick to point out that the real economic damage was still to come.
When we look back at the financial crisis, we have to look at the whole history of the financial system, he said.
We have seen a number of instances of banks and other financial institutions getting wiped out.
The most recent one was in 2008 when Lehman Brothers was wiped out by the financial meltdown.
That is when the big banks were in crisis, Forrest said.
“And I don’t think we should think that because the big institutions had gone into the depths of the crisis that it was somehow because the banking system was bad.
It was because they were unable to get the capital to the bank,” he said, referring to the ability of banks to raise money and lend.
I think that what we are seeing now is that that is a systemic problem, he added.
Despite the economic crisis, the banking sector is still booming.
The ABS said the financial sector grew by 2.2 per cent during the March quarters.
However, Forrest has said the banking industry has been resilient.
“[The banks] have done a fantastic job of staying afloat in an environment where the world is very uncertain,” he told the ABC.
If there is a big drop in the growth rate in the financial industry, that is the one area where there will be a very severe impact, he continued.
So what will happen to the stock markets?
The Australian stock exchange is already trading on a very low level.
Shorten has called for the introduction of a new index that would monitor the market for “risk, uncertainty and volatility”.
In March, Shorten proposed that the stock exchange be set up to track the “real and perceived risks to our economy”.
But in his latest budget speech, Shortens suggested the market be set free to reflect the economic and financial conditions in Australia.
This is not an easy thing to do, he acknowledged.
One thing that we need to do is to stop the obsession with measuring the market.
Instead, we should measure it for what it is: a tool that helps us understand what the market actually is and what it can do.
As long as we do that, we can get a handle on where the market goes, Shortons comments read.
What is the outlook for the Australian economy in the months ahead?
Despite a sluggish economy, there is reason to believe the economy will rebound.
Analysts are predicting that growth in Australia will pick up in the second half of this year, while a recovery in manufacturing is forecast to take longer to achieve.
During the March period, the economy expanded at a 4.9 per cent rate.
Businesses are still expected to see a boost from the global economic recovery, which will see the number of people with jobs rise to its highest level since 2009.
However, the report from the Reserve has warned that the outlook is still very uncertain and growth will slow.
According to the Reserve, growth is expected to be 0.9 to 1 per cent for the first half of 2019, while the unemployment rate will increase to 4.5 per cent from 4.2 in 2018.
How will the economic outlook change in 2019?
It will be very difficult for the economy to pick up, as the downturn has had a severe impact on demand.
Australia has a very weak labour