Are these signs that Australia is entering a recession?

Is Australia starting to enter a recession?

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Is Australia starting to enter a recession?

Australia hasn't had a recession for two and a half decades. Even in the June 2019 quarter the country's GDP showed an increase of 0.5%, or 1.4% for the 12 month period. One could argue that it has only been due to Australia's high immigration rate that we haven't had an official recession this century.

But in any case, there have been three bits of news today that could be showing the discretionary part of Australia's economy might be going into a downturn.

Southern Cross Media Group Ltd (ASX: SXL) – a radio and TV media business which relies on advertising money – said that its revenues were down 8.5% in the September 2019 quarter compared to September 2018.

Nick Scali Limited (ASX: NCK) very recently announced that its like for like same store sales were down 8% in the year to date based on monthly traffic being down 10% to 15%.

The Australian Financial Review has reported that retail spending intentions have all dropped back with travel, entertainment, retail and home buying all going backwards. Indeed, we have already heard from Flight Centre Travel Group Ltd (ASX: FLT) recently that its Australian travel segment isn't going fantastic in FY20.  

The Reserve Bank of Australia (RBA) said that it was possible that its low interest rates could be having a negative effect on the income and confidence of savers. You don't say? I think the RBA has already gone too far with the cuts. 

I don't want there to be a recession, I hope there isn't one! Recessions aren't good for anyone. These are actual statistics and facts that have come out today, not an unlikely 'prediction' that house prices will drop 30% or more. But a recession is not guaranteed either, the income tax cuts and house price recovery in Sydney & Melbourne could be enough to stave off a downturn. 

Foolish takeaway

Economies are meant to ebb and flow. Revenue and profit will go up and down for businesses, particularly ones that are meant to be somewhat cyclical. For brave investors you may find an opportunity or two if some discretionary shares are trading a lot cheaper than earlier this year. The best time to buy is when the share price is closer to its lowest price, not near the high point.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group 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.

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