Don’t be fooled, Australia’s economy still among the best

Don’t be fooled, Australia’s economy still among the best

There has been plenty of dark muttering in the financial press over recent weeks concerning Australia’s slowing economy. Slowest growth in 1½ years, wailed CNBC at the end of the second quarter, while the IMF warned of tough times ahead down under. 

Take a step back, however, and look at Australia’s economy in the big picture context and it is hard to see it in anything other than rude health. 

Growth maintained against all expectations

CNBC’s histrionics proved mostly irrelevant as annual growth maintained a steady 2.1 percent, well clear of the 1.8 percent that some commentators were predicting. Meanwhile, GDP was slightly up in what Government Treasurer Jim Chalmers described as “steady and sturdy” performance.

Australians changing spending habits, from casino nights to home improvements

There is no dodging the fact that the cost of living is increasing. But most Australians are reacting by spending smarter, not spending less, and this is undoubtedly helping to prevent the economy from going into free fall as it has in other countries.

Take casino spending, for example. Playing the pokies is a favorite pastime in Australia like Spin Palace casino Australia, where more money is wagered per capita than in any other country. Net spending on gambling has reduced slightly from $25 billion to $22 billion over the past two years, but Australians remain the biggest gamblers in the world on a per capita basis. 

What has changed, however, is that Australians are forsaking nights out at the casino and instead choosing from a vast selection of online Australian pokies. Keep in mind that for a casino or other gambling operation, the business makes money when the gambler loses, so those revenue figures essentially mean gambling losses. The drop from $25 billion to $22 billion does not necessarily mean Australians are gambling less. It could just be that they are gambling smarter and losing less.

A different but conceptually similar example concerns home improvements. Fewer households are spending money on outside contractors like decorators and builders, but two of Australia’s best retail performers so far this year are Home Timber & Hardware and Bunnings, both DIY stores. It’s another example of Australians spending smarter to achieve the same outcomes.

Cautious optimism is justified

The Australian economy is experiencing a period of high inflation right now. It would be disingenuous to suggest this would not influence consumer spending, and Australians are tightening their belts in certain areas. However, as we have seen in the above examples, it is mostly a case of spending smarter.

Australians are not spending any less, meaning something has got to give. In this case it is that people are saving less, and in some cases even eating into their savings to maintain the same quality of life. If that was to happen for years, it could be a problem, but as a short term measure, it is helping to keep the nation’s economy afloat and staving off the recession that has hit North America and Western Europe.

Being such an open economy, exposed to international trade, it is inevitable that financial pinches experienced elsewhere in the world will have some knock on impact on Australia’s economy. The signs are good, however, that the nation will roll with the punches and emerge stronger than ever.