Keep your eyes peeled for confirmation of economic stagnation on Wednesday. Growth in the June quarter will be negative and won’t be saved by the one-off boost from surging iron ore prices. In fact, it now looks as though growth will be negative for the quarter because of a sharp fall in business inventories -- especially stocks held by retailers who have been unable to shift unsold products now for six months.
Sounds nerdy, and it is, but it reflects the central problem in the economy: weak demand from consumers and householders who are struggling with low wages growth. Retail is struggling. The National Australia Bank has twice described the sector this year as being in a "recession". That has driven the cuts in interest rates from 1.50% to 1% by the RBA and the attempted stimulation of the economy by the tax refund from the federal government. Australians have hauled back on discretionary spending in the past 18 months to two years. Falling house prices, political instability, the bad publicity about China and Trump’s trade war have all seen business conditions and confidence fall -- and consumer hopes follow.