It would seem that the expert economic view is that 2013 is going to be a little worse than 2012 has turned out to be; and 2012 turned out to be somewhat bleaker than 2011. In 2013 Australia’s growth is forecast to drop a little lower and there are serious concerns about the impact of the drop in income for the government due to the massive, and totally unexpected, downturn in mining and manufacturing tax revenue in 2012.
Although the government continues to insist that it will still bring the budget into surplus by 30th June 2013 my reading of the situation is that practically none of the economic forecasters believe this is likely to happen. For the government to achieve a surplus by mid-2013 there would either need to be dire cuts to government funded services or they would need to increase either, or both, company tax or personal tax, indirectly or directly, and do it almost immediately.
The budget surplus ‘trick’ is going to be an interesting one to watch in 2013. Maybe Treasurer Swan has some sneaky little bookkeeping slight-of-hand planned that nobody knows about.
For 2013 unemployment is predicted to increase slightly although this increase is expected to be less than half a percent; but any increase in unemployment means more people out of work.
People losing their jobs or being out of work worries banks—especially if these people have mortgages. If people lose their jobs or suffer significant income cuts then they tend to default on their mortgages. This then puts banks in a horrid position. How long do they wait before calling in the mortgage. Also on top of that many properties bought around 2007 through to 2009 are not worth the money borrowed to buy them. Not a good situation at all.
On top of this all the big-end of town businesses, such as Harvey Norman, Retrovision, Dick Smith stores, and Myer (and many others) have had a very disturbing 2012. Retrovision is on the edge of either folding up and going home or, if they can, selling out to a buyer—if they can find one. Harvey Norman have closed down a number of stores (mainly in the east) and are looking at others. Woolworths is trying to sell off the Dick Smith business before it becomes unsalable. Sadly 2013 is likely to be even worse for big retail business.
On top of all this is the American ‘fiscal cliff’. Many of the financial support mechanisms put into place by the America government during the Global Financial Crisis in 2007/2008 are about to start turning off. They will start turning off in mid-January 2013. This includes support funding, interest rate relief, and huge tax concessions. As these devices start to be shut down the impact on American business and the economy in general is expected to be significant. The question for us in Australia is: How much will this impact us? Or can the new Obama government work out some magic trick to soften the impact of the fiscal cliff?
As is so often said, we are living in interesting times, and 2013 is shaping up to be a little more interesting than most of us would like.