MENU

CEO says Australia’s economy is a “house of cards”

Everyone is having their say on where the Australian economy, with one CEO saying that Australia’s economy is a “house of cards”.

Many believe Australia is already in a recession on a per-person basis. Total GDP is influenced by Australia’s rising population, which has risen quite fast compared to most western countries due to the higher level of immigration.

However, on a per capita/per person basis the GDP figures released today may show that Australian households are in a recession due to two consecutive quarters of GDP per capita declines.

Many of Australia’s biggest blue chips benefit from total GDP growth like Wesfarmers Ltd (ASX: WES) and Commonwealth Bank of Australia (ASX: CBA), but the average Australian is seeing very limited wage growth.

Freelancer Ltd (ASX: FLN) CEO Matt Barrie recently said to the AFR that “In Australia every indicator is blinking red. It’s a house of cards. We’re highly dependent on China (we’re on par with the Congo for how reliant we are) and they are in a trade war. We have the housing market falling off a cliff, and this is happening from Vancouver to Auckland too.”

Australia’s dependence on China is not new. During the GFC it was Australia’s link with China that kept us going where other regions like North America and Europe particularly struggled. But this time, a Chinese slowdown could be a factor in an Australian recession.

Mr Barrie wasn’t finished, he said “The royal commission will be a catalyst for the collapse of the Australian housing market, with the other catalyst being China coming off the boil and regulations to stop the flow of capital out of China. We should never have let the property bubble get this big. People can’t afford the homes and wages haven’t kept up. I worry the next government will launch populist policies and we’ll be on the way to being the next Argentina.”

Clearly not a fan of Labor’s election pledges, it seems. Did he see any silver lining? “The bright spark is iron ore … but if that comes off the boil we’re in a world of hurt.”

Foolish takeaway

As Motley Fool Chief Investment Officer Scott Phillips likes to regularly point out, the worst case scenario seldom eventuates. So perhaps Mr Barrie is feeling a bit too pessimistic about the situation.

Even so, in times like these I’d want to own quality ASX shares like these that can easily ride out any economic problems.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked...

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2019."

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Freelancer Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!