Australia’s GDP growth may be slightly below trend but it’s still expected to be reasonably robust at around 2.25% for the year.
But the continued low levels of consumer confidence have surprised as interest rates have sunk to record lows. The job market, too, has been patchy, and the export sector has been struggling against the sustained high dollar.
There are many theories around about why confidence among consumers and business has been flagging while the data have been showing decent growth.
Yesterday BlueScope Steel CEO Paul O’Malley shared his theory: strip out the big banks and miners, and Australia’s been in recession for three years.
It’s a startling assessment, but O’Malley points to an environment of ever-increasing business costs, and as a domestic steel supplier BlueScope has a pretty good bead on domestic activity.
Here’s what he said:
“If you back out two big mining companies and four big banks, my view is Australia has been in recession for three years and I think we need to have a bit of a confidence boost to turn that one around.”
“I think over the past few years there’s been a view that it’s ‘just ignore this little cost increase, it’s just another cappuccino, or just ignore this second cost increase it’s a second cappuccino’ – there’s only so many cappuccinos you can drink in a day and there has been significant cost increases,” he said.
“I have been very concerned . . . I am hoping in the next six months we can have a different dialogue which is one of how we reduce the cumulative cost of doing business in Australia to give small and medium enterprises a boost and then that will help larger enterprises.”
BlueScope took a hammering on the share market yesterday after O’Malley’s downbeat assessment, which came as the company reported a net loss of $84 million for the year.
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