During 2019 we have seen multiple interest rate cuts bringing the cash rate to a record low 0.75%. We have low unemployment and the government is spending massively on infrastructure projects nationwide, yet the economy refuses to grow.
This is not normal.
Under normal circumstances, these factors combine to spur on growth in our economy. But this isn’t happening.
To combat this a growing number of Australians are turning to side hustles such as driving an UBER or food delivery. Experts warn this is dangerous. When lower income individuals are forced to take second jobs, it takes away from their leisure time and ability to be with their families. In essence, creating a working under-class trapped in work to make ends meet.
America has seen a similar rise of working class forced to take on second jobs to make ends meet.
When UBER was first introduced in Australia, drivers could make a few hundred dollars easily, according to anecdotal evidence from drivers. However, now, even UBER has become more competitive. With more and more drivers joining, making It harder to make extra cash using the car-for-hire service.
Have tax cuts made a difference?
According to the Australian Bureau of Statistics (ABS), data shows the tax cuts of up to $1080 have had little affect on consumer spending.
Retail sales fell by 0.1% in the quarter following the cuts.
This conflicts with Commonwealth Bank data, which CEO Matt Comyn says have supporter consumer spending to the tune of a 28% increase in July and August.
Mr. Comyn believes further planned cuts should be brought forward. Debate is ongoing.
Income is stagnant
Normally around 3-4%, wage growth has been stuck between 2-3% in recent times.
Household spending has become weighed down, which has lagged on the economy.
Very few experts expect this situation to change any time soon.
The lack of success in efforts to spur on the economy have led to speculation of further interest rate reduction and the potential adoption of unconventional stimulus policies.
Unconventional methods could include the purchase of government bonds and provision of cheap funding to banks for lending.
Reserve Bank Governor Phillip Lowe has flagged the use of unconventional stimulus efforts.
Rate cuts, along with new first home buyer incentives have seen the proportion of first home buyers overall increase in past months.
Correspondingly, in house prices have returned to growth. In October, the Melbourne average property price grew by 2.3% according to CoreLogic.
This is the 4th consecutive month of growth since and the largest month-on-month growth since 2009.
Prices have now risen 6% from the bottom of the decline in May 2019.
Melbourne prices are now recovering faster than in Sydney. With Core Logic, pointing also pointing to higher population growth, as well as higher investment growth.
Experts point toward the 3 rate cuts, strong population growth, the lowest home loan rates in recent times and a slight loosening of tight lending standards improving access to credit for borrowers.
It was only 6 months ago that housing prices were falling across most of the country, now many are experiencing the highest growth in many years.
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