Economic recession: Debt collectors to boom as Australia’s growth slows

One bank has already declared the retail sector is in recession, but  a new report says what will boom as the economy fails.

 

The Australian economy has slowed to its weakest level since the tail end of the Global Financial Crisis as the Reserve Bank lunged to assist the struggling housing market by slashing rates to its lowest in history.

Employment numbers are flailing and a recent leading business survey from NAB declared the retail sector was “clearly in recession”.

But a new report from industry research firm IBISWorld said there will be a handful of sectors which could boom during a looming recession.

Senior analyst Tom Youl said households will see little benefit over the next 12 months as both wages and household consumption are expected to experience modest gains.

He said the recently approved income tax cuts as well as lower interest rates will offer some relief to incomes but both financial policies are unlikely to provide meaningful economic growth.

“Under investment in productivity-boosting policy and packages, and chasing budget surplus when fiscal stimulus is needed, are anticipated to drag on the economy over the coming year,” Mr Youl said.

“In addition, signs of slowdown in the global economy, which has been reporting strong growth, pose a threat to export-oriented firms.”

Household consumption, which accounts for 55.8 per cent of the Australian economy, is the primary driver of GDP growth but that has fallen by nearly 3 per cent since 2015/16 as wage growth stagnated.

“Although Australian GDP has been growing, the corporate profit share of GDP has been rising strongly,” Mr Youl said.

“In other words, most of Australia’s economic growth over the past five years has been reported on corporate income statements rather than employee pay slips. This trend is expected to continue in 2019-20, limiting household consumption and economic growth.”

So, that’s what’s wrong with the economy. But which segments will benefit during a recession?

 

DEBT COLLECTION

Depressingly, IBISWorld senior analyst Jason Aravanis told news.com. au this industry will perform strongly when, well, there’s debt to collect.

“When the economy starts to slow down you’re likely to see more households defaulting on their debt and businesses hire more debt collectors,” he said.

“It’s certainly not a good sign.

“Australia might be particularly exposed to this trend because our household debt is very high compared to disposable income — it’s at a record high of about 190 per cent right now.

“The problem with having really high household debt is it becomes very difficult when you’ve got low wage growth like we do right now.”

Add a Comment

Your email address will not be published. Required fields are marked *