Wages stagnating, house prices falling and maybe even a recession: The VERY grim outlook for Australia's economy in 2019

Daily Mail Australia16:01 AEDT, 30 January 2019

Alex Chapman

Plummeting house prices, inactive wages and a slowdown in market growth has a panel of economists concerned that Australia is heading towards a recession.

The forecast from the 19 economists gathered from universities across Australia is bleak, with the consensus being a 25 per cent chance of a recession within two years of the upcoming May federal election.

One expert in particular, Steve Keen, formerly of the University of Western Sydney and now of University College in London, has almost guaranteed a recession, saying it's 95 per cent likely.

The panel, gathered by The Conversation, forecast bleak times following the federal election.

No recovery in wage growth, an abysmal unemployment rate, nosediving housing market and budget deficit are all major points of concern for the group.

Recent annual growth in the Australian economy has hovered around 3 per cent.

But the economists are expecting that to be the peak, with none of the 19 predicting the figure to top 3.0 per cent.

In fact, the average projected growth is a meager 2.6 per cent, with the lowest projection being 1.0 per cent.

Unemployment rates are currently around 5 per cent, with the expert's report citing weakening iron ore prices as a cause of job cuts.

Mr Keen says the unemployment rate will skyrocket to as high as 6.8 per cent, while others forecast a more hopeful 4.7 per cent - leaving an average of 5.1 per cent.

Unemployment and a lack of wage growth go hand-in-hand, according to the panel, who only expect a 2.3 per cent growth.

The most recent budget promised a 3 per cent increase in wages by 2020, though the economists think this is unlikely.

Victoria University economic modeller Janine Dixon says that even if productivity growth did pick up, a saturation of market power in some industries combined with weakness in labour markets means profits might not be passed on to workers.

Mr Keen also says the only thing that has kept Australia afloat has been the housing bubble, which the banking royal commission has discovered was made on unsteady foundations.

In fact, house prices in Melbourne and Sydney - the two most populous cities in Australia - are projected to continue to plummet by as much as 10 per cent each in the next calendar year.

The trio of grim predictions appear to point to the likelihood of an approaching recession.

On average, the panel believes there's a 25 per cent chance of the country entering a recession.

The outlier of the group is, again, Mr Keen, who says there's a 95 per cent chance.

If you omit his projection, however, there is still a 22 per cent average among the remaining 18.