Top 3 Forecasts For The Australian Housing Market & Economy in 2020

Reserve Bank of Australia Sign

Nugget’s News founder Alex Saunders and Digital Finance Analytics founding principal Martin North recently discussed how they expect 2020 to play out with respect to the performance of Australia’s housing market and economy. Below are three main takeaways from their overarching discussion.

#1 — Consumer Demand the ‘Only Lever Left’

Saunders and North agreed that it is becoming increasingly apparent that Treasury and the Reserve Bank of Australia are manufacturing an environment that’s conducive to housing appreciation. The reason for doing so, according to North, is to stimulate the wealth effect. “It’s a really narrow hypothesis to drive an economy, I have to say.”

North later conceded that it may be the Federal government’s only viable option to drive short-term economic growth. “Basically, the only lever we’ve got in terms of the economic momentum is if consumers start spending again.”

#2 — Australian Government to Cut Spending for First-Ever Time

At a time when many are calling for increased public spending, the Coalition government remains hell-bent on achieving the economy’s first budget surplus in decades. So much so, that the recent Mid-Year Economic and Fiscal Outlook showed that government spending is slated to decrease over the coming years for the first time ever.

“In real terms per capita, the government is going to spend less over the next four years than this year,” said North. “That’s the first time ever that has happened. Standard growth rate is about 1.8 per cent. But they’re actually going to spend less.”

“The government is really screwing down the taps. In the current environment, I think that’s a real mistake. They’re myopically wedded to a surplus.”

#3 — Net Overseas Migration Propping Up Economic Growth

Net overseas migration continues to be much stronger than the natural growth in Australia. This figure artificially inflates nominal gross domestic product (GDP), because an increase in an economy’s labour force equates to greater output.

With such a relatively high net overseas migration level, ever more downward pressure is placed on wages growth. This is “one of the reasons I think that wages will stay so low,” said North.

As for the effect of net overseas migration on Australia’s property market, he reminded viewers that inbound migrants typically arrive with family members. Relative to net overseas migration, “it is a much smaller number of people looking to either through renting or buying,” North explained.

This interview—the full version of which can be watched below—was a special edition for Saunders and North; a break from their popular monthly updates on Australia’s property market and economy. Want to listen instead of watch? Find the interview on your favourite podcast streaming platform by subscribing to ‘Nugget’s News Crypto Podcast’.

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