Australian economy, housing market and recession forecast for 2020
What's in store for 2020? Housing boom or recession? Finder's panel of economic experts weighs in.
2019 was a tumultuous year for the economy, with three cuts causing the cash rate to tumble to a record low of 0.75%. With borrowing now cheaper than ever and house prices surging in Australia's eastern states, what's in store for 2020?
Finder's monthly RBA Cash Rate Survey is the largest survey of economists and property experts in Australia. Every December, we ask our panel of over 40 leading economists for their prediction for the Australian economy over the coming year. This time, we asked them about the likelihood of 12 different scenarios playing out in Australia in 2020 covering the cash rate, housing market, jobs and employment, the Australian dollar, retail, international trade and the likelihood of a recession. There are the economists' predictions for the Australian economy in 2020.
Expectations for the housing market look promising, with 52% of experts expecting house prices to fully recover to above pre-decline levels in 2020. This compares to only 12% of experts who expect house prices to fall. Mortgage defaults, often seen as an early sign of trouble in the housing market, should remain steady. 76% of experts thought it was unlikely Australia would see a rise in defaults in 2020.
The federal government finally announced the launch of one of its key election promises – a mortgage guarantee scheme for first home buyers. Economists were skeptical of its impact, with a significant 90% of respondents who weighed in on this question saying it would have no significant impact on the market.
|State/territory||Capital city/regional centre*||Rest of state|
The government's scheme limits the purchase price of Sydney properties to $700,000 which won't cover much in Australia's most expensive market. Limits for other areas are similarly low. This, combined with the fact that the scheme is limited to 10,000 applicants, means it won't have much impact on the market.
Finally, experts were asked which would be the most promising city in which to purchase a property in 2020. Brisbane and Melbourne came out on top, sharing 44% of the overall vote.
The future for the jobs market looks grim, with 64% of economists saying it is likely that employment will fall. However, the meagre wage growth we have seen recently may not worsen – 76% of experts said wage growth was unlikely to slow further in 2020.
New car sales are an oft-cited barometer of economic health. While we've seen some dramatic drops in the volume of new car and ute sales over the last couple of years, experts were divided as to whether sales will improve next year. 48% of economists said it was likely that we'd see further declining sales in 2020, while 52% said this was unlikely.
General retail sales have also been falling, with the Australian Retailers Association indicating that December could see the weakest Christmas spending in over 10 years. However, economists are feeling optimistic here – 67% of them expect retail sales to recover next year.
Hopes for a final US-China trade deal remain strong, with 64% of experts slotting that into the "likely" category.
This is significant, as the fate of the US-China trade deal was cited as economists' number one economic concern in August this year, taking 27% of the total vote – with Australia-China trade itself coming in third at 14%.
A further drop in the Australian dollar was considered very probable, with 79% of economists saying this was either likely or very likely.
Following comments from the RBA that quantitative easing (QE) could well be introduced if rates fall to 0.25%, 46% of experts said it was likely we'd see easing in 2020. It must be noted here that this is an increase from the 31% who said QE was likely in October and the 19% who said the same thing in September. This combined with the 73% of economists who think a 0% cash rate is unlikely, means that the RBA is all but certain to introduce QE in 2020 if the next rate cut doesn't do the job.
Finally, a recession looks increasingly unlikely, with 89% of experts not expecting an economic decline in 2020. This contrasts strongly with Finder's Consumer Sentiment Tracker, a simultaneous survey of the Australian public, which shows that one in two Australians expect a recession in 2020. Who will turn out to be correct, economists or the public? Watch this space.
Thanks to all of the economists and experts who took part in Finder's RBA Cash Rate survey this year, including the following who participated in the survey covered in this video: Alan Oster, NAB; Alex Joiner, IFM Investors; Andrew Wilson, Independent Economist; Christine Williams, Smarter Property Investing; Craig Emerson, Former Australian Government Minister; Geoff Kingston, Macquarie University; Jeffrey Sheen, Macquarie University; John Rolfe, Elders Real Estate; Jonathan Chancellor, Property Observer; Leanne Pilkington, Laing + Simmons; Mala Raghavan, University of Tasmania; Mark Brimble, Griffith University; Mathew Tiller, LJ Hooker; Matthew Peter, QIC; Michael Yardney, Independent Property Expert; Nerida Conisbee, REA Group; Nicholas Gruen, Lateral Economics; Noel Whittaker, Queensland University of Technology; Peter Boehm, KVB Kunlun Pty Ltd; Peter Haller, Heritage Bank; Stephen Koukoulas, Market Economics; Susan Mitchell, Mortgage Choice; Tim Nelson, Griffith University; Tony Makin, Griffith University; Trent Wiltshire, Domain; Timothy Andrew Moore, CUA; Alison Booth, Australian National University; David Robertson, Bendigo & Adelaide Bank; Julie Toth, Ai Group; Malcolm Wood, Baillieu Holst; Shane Oliver, AMP Capital.
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