Shareswatch Australia

Back in April last year I suggested that the Australian economy was not quite as robust as most market commentators appeared to think and that it was quite possible for economic conditions to deteriorate quite markedly over the next few years.  So now one year later after I wrote about a possible economic slump in Australia let’s have a look at how events have unfolded since then.

As the year has progressed I have noticed that my view of the Australian stock market and economy has become increasingly at odds with most of the mainstream market commentators back in Australia.  Whereas they see reasons to be optimistic and feel the economy is robust, I feel the situation is quite different and believe the Australian economy is dangerously unbalanced and possibly primed for a nasty correction.

Have you noticed of late how the Australian stock market is just not listening to the Reserve Bank’s Glenn Stevens? No matter how optimistic the RBA Governor sounds the ASX All Ords refuses to surge past 5000, so what is happening? Are investors wrong about the state of the Australian economy and simply not picking up on the positive economic indicators the RBA is apparently seeing?

A lot of attention has been focused on consumer prices recently as economists try to determine if deflation or inflation is going to be the next challenge for the OECD economies to deal with. On the surface it would seem that due to falling asset prices, unemployment and the decline in personal wealth that this would push many of these economies into a significant period of deflation. But is that really likely to happen?

Without a doubt there are a lot of scary economic numbers out there and as far as the Australian economy goes, things seem to be heading downhill fast. But as strange as it seems, the bad news recently has not been all that bad and actually there has even been some good news. So is it possible that at long last that the bear is back in its cage?

One of the worrying trends that has emerged in Australia during 2008 is the way the government has created an atmosphere that is conducive to groupthink (group think) behaviour. Views that are not aligned with “Rudd’s World” are attacked as reckless or irresponsible by the government, and the mainstream media appear willing to slap down any dissenting opinions.