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| Look, it's 2008 all over again I wonder what house prices will do? |
If Australia's numbers look so good, why doesn't the economy feel good? Here's why.
Australia's Hidden Economic Indicator
If you look at the chart below, you'll see that real net disposable income surged in 2010 on the back of China's stimulus. During this time RBA Governor Glenn Stevens raised interest rates consecutively despite complaints of a struggling economy.
Now the situation has reversed. During the March quarter, seasonally adjusted real net national disposable income was flat...as in zero growth. The terms of trade fell 4.8% in the March quarter. That's why Stevens has cut interest rates.
So while the headline number shows the Australian economy humming along, this hidden measure tells you the real story of what's going on. And that is a story of a sharply slowing economy driven by a credit bust in China.
Given the market's neutral to negative reaction to China's finally dropping interest rates, things don't look to be improving soon for Australia.
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