A few days ago, I made a video titled, Australian Living Standards Are Falling (GDP per capita Heading for Recession) ([ Ссылка ]). Well, we’re officially in that recession now. This was the graph that I showed previously showing that in the third quarter of 2018, GDP per capita was falling. Market economists predicted that there would be a GDP growth of 0.4% in the fourth quarter (equivalent to a zero per cent per capita growth). They were wrong. The actual growth was 0.2%, which results in a per capita decline of 0.2%.

Over 2018, GDP only grew 2.3%, which is well below the Reserve Bank’s forecast of 2.8% and even below the most pessimistic of the market forecasters. I don’t want to be too harsh on these forecasters. Their job is not just to predict things, but also to make sure that the public don’t go into panic mode. If professional market economists came out and said that the economy will be heading into recession next quarter, then that very action might just send the economy into recession next quarter by instilling panic.

I get it. The Australian public, and therefore the economy, are fickle. The slightest murmurings of economic decline can result in economic decline. Consequently, we should take predictions with a grain of salt — at least, one’s made by market economists. Often predictions are there not to predict the future, but to influence it.

Optimism is key in markets, and they know it. When negative sentiment starts to spread, people start to spend less, and the economy suffers because of it. It’s a negative feedback loop that will bring about the next economic downfall.

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Australia's economy just entered recession on a per capita basis
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