There is a lot of talk around at present of a second GFC event; this is mainly hype from the media who have no idea what caused the GFC. The key issue fueling these sorts of statements is the property market. Property has slumped over the past years, while household debt has gone through the roof (pun intended).
Australian household debt to GDP has increased 16 percentage points since the GFC. This increase has come at a time when interest rates are at an all-time low. A major rate raise could indeed see many Australian households go into debt stress and bankruptcy. However, we expect that the central banks will take a gradual approach to any interest rate increase. Therefore avoiding and sudden increase in bankruptcy.
The housing market has two major issues, interest rate increases and high under employment. Instead of a GFC type crash I expect we will instead see a long period of low growth in the property market.Recession is a real possibility for Australia. A recession is a significant decline in activity across the economy, being two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP). Although this has not technically happened, given the high under employment in Australia and high debt levels it would be fair to say we were already in recession like economy.
I expect that the Queensland State election due by May 2018 and the Federal election expected to be held in early 2019 will be the catalysis’s to pull us out of a recession or plunge us into one.