The Australian housing price downturn had moved into household consumption spending in September, with a mixed result in October. In macroeconomics, when wealth rises, household spending growth picks up; when wealth falls, household spending growth slows. Household wealth is falling. What this means is the RBA optimistic view of the economy is possibly eroding.

Inflation in September was 1.7%, not the forecast 2.5%. This may be an early indicator of deflationary pressure. GDP growth is showing early signs of stalling. If the unemployment rate ticks up from 4.75% in combination with an overall global economic downturn, the RBA will have been wrong. They will then be forced lower interest rates to prevent a recession.

The price of oil and the Baltic Dry Index (BDI) are reliable gauges of the strength of the global economy. Right now they are within normal ranges. That is good news despite the trade war between America and China.

Australians need to continue to spend money on household consumption. Downturns occur because of fear. The power is not in the hands of the RBA, but in the decision to spend or not to spend money on your home and consumer goods and services.

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