No end in sight for Australia's nominal recession

No end in sight for Australia's nominal recession. The media and economists have started to describe the Australian economy as having recently entered an income recession. The fact is that the September quarter National Accounts confirm that Australia has been stuck in a nominal recession for three years now. During that time, nominal GDP has grown at a weaker rate than during the balance sheet recession of the early 1990s, which has undermined the ability for companies to achieve top-line growth. Companies continue to trim costs aggressively, defer capex, undertake restructuring and are becoming more focused in order to boost profitability and cater to investors' insatiable appetite for income. At a time when the economy is suffering from a shortfall in aggregate demand, the RBA's timid approach to monetary policy continues to consign Australia to subdued nominal conditions. Against this backdrop, investors will need to rely on stock-picking to add alpha amongst domestic cyclicals, while the market will continue to reward companies that return capital to shareholders. (VIEW LINK)