Why the stock market crash matters to YOU: How turmoil in the markets is sparking fears of a GLOBAL recession – which could see 1.3MILLION Australians out of work
- Australian share market has lost more than $40billion over US recession fears
- ANZ economist David Plank said global fears could stop Australian bosses hiring
- Ahead of 1991 recession, jobless rate rose from 5.8 to 9.9 per cent in 18 months
- Should that happen again, more than 1.3million Australians would be out of work
Even if Australians don’t directly own shares, a stock market crash still affects their material standard of living and raises the risk of a recession.
Fears of a major global downturn have spooked financial markets, with the Australian Securities Exchange losing more than $40billion on Thursday.
The benchmark S&P/ASX200 has dived by 2.6 per cent, after a key predictor of the past five American recessions rocked Wall Street.
Plummeting share prices directly affects the superannuation balances of Australia’s 13.6million workers, jeopardising $2.9trillion worth of retirement savings.
Even if Australians don’t directly own shares, a stock market crash still affects their material standard of living and raises the risk of a recession. Fears of a major global downturn have spooked financial markets, with the Australian Securities Exchange losing more than $40billion on Thursday
If history repeated itself and Australia fell into a recession, more than 1.3million people could be out of work as unemployment surged – as was the case almost three decades ago.
ANZ head of economics David Plank said the U.S.-led trade war with China, Australia’s biggest trading partner, had the potential to leave many Australians out of work.
‘The real issue is whether Australian firms get spooked by what’s happening globally and so decide not to invest and employ,’ he told Daily Mail Australia.
‘If firms retreat into their shell, given the uncertainties, then that will be a very negative development.’
A dramatic plunge in business confidence has the potential to cause a recession, where the economy shrinks for two consecutive quarters.
While Australia’s unemployment rate remained steady at 5.2 per cent in July, for the fourth straight month, there are no guarantees it won’t rise, with ANZ predicting it will hit 5.4 per cent by the end of 2019.
If history repeated itself and Australia fell into a recession, more than 1.3million people could be out of work as unemployment surged – as was the case almost three decades ago (pictured is a Centrelink office in Adelaide)
The Australian economy is already growing at the slowest pace since the global financial crisis a decade ago.
Mr Plank said leading indicators of business confidence, like surveys of hiring and investment intentions, pointed to a slowdown in employment growth.
‘The unemployment rate will push higher over the next six months,’ he said.
‘We need to be alert to that possibility.’
In the lead-up to the last recession, almost three decades ago, Australia’s unemployment rate surged from 5.8 per cent in November 1989 to 9.9 per cent by April 1991, albeit during an era of double-digit interest rates.
ANZ head of economics David Plank said leading indicators of business confidence, like surveys of hiring and investment intentions, pointed to a slowdown in employment growth
Should that happen again, 1.3million people would out of work, compared with 712,900 now out of a population of 25.4million people.
Fears of a global recession intensified on Wednesday night, Australian time, after yields on 10-year US Treasury government bonds briefly fell below those of equivalent two-year bonds.
This phenomenon, known as an inverted yield curve, occurred ahead of the 1980, 1981, 1990, 2001 and 2009 recessions in the United States.
It caused Wall Street’s benchmark Dow Jones Industrial Average to plunge by more than three per cent for its worst performance of 2019, in turn infecting the Australian equities market.