Deutsche Bank on Australia, this might be of interest to AUD traders (or not). It comes via Bloomberg,

A global slowdown probably not too far off given the duration of the U.S. economic upswing

  • "The U.S. Federal Reserve doesn't typically manage to engineer a soft landing once the unemployment rate has fallen through full employment
  • So the next global downturn is more likely to be a matter of when, not if."

Deutsche estimates that a global recession in mid-2020

  • Australia would have a budget barely in surplus,
  • With net debt around 17% of GDP
  • RBA cash rate around 2.25%

DB compare this with where Australia was at for the onset of the 2008 financial crisis

  • the budget surplus was 1.8% of GDP
  • net debt was zero
  • rates around 7.25%

DB highlight potential actions that could be taken now to 'buffer' the economy, which are not without their own downsides:

  • But lifting rates prematurely would slow the economy, could spark a sharp housing correction
  • government could push the budget back into surplus earlier - but would weaken growth, offset tax cuts that should lend support to household consumption
  • DB estimate the neutral interest rate (at which monetary policy neither stimulates or cools the economy) at 3.25%

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A bleak picture from DB. They didn't mention the AUD - it'd fall sharply and would provide somewhat of a 'buffer'. Whether its enough, who knows. Maybe the billion year (or whatever it is. OK then ... 25+ year) economic expansion in Australia would come to an end ....