Financial expert Alan Kohler, writing in the Business Spectator, says the key data for Australia is to be found in the investment intentions estimate for services firms. The data for 2015-16 is due to be released today and is a signpost for the Australian economy.

The figures will show us whether the services sector is picking up the slack left by the collapsed mining boom. Last year the numbers were down by 7 per cent. If that doesn’t turn around we could be heading for a recession.

Mr Kohler says that part of the problem is that the ‘hurdle rates are too high for businesses – that is the rate of return expected before capital is invested.

“The trouble is that it is circular: If firms don’t invest, the economy will stagnate and interest rates will remain low; if interest rates remain low , but firms don’t bring down their hurdle rates, they won’t invest,” he wrote.

According to AMP Capital’s chief economist, Dr Shane Oliver, the Australian economy is in better shape to weather a global downturn than other developed countries.

Net public debt to GDP is hovering around 20 per cent, our cash rate is still in the black at 2 per cent. While other countries (such as US Europe, and Japan are suffering a debt to GDP ratio of 100 per cent and cash rates at or near zero.

And while the RBA doesn’t have a lot of bullets in the economic gun they can still introduce quantitative easing.

Dr Oliver wasn’t as alarmist as HSBC’s Stephen King. “If there was a real fiscal emergency (the Australian government) could look to stimulus again – It’s not ideal, but again we’ve got a cash rate that’s still positive and we haven’t even done quantitative easing, so Australia is arguably better placed than other countries,” he said.

Mr King answered by pointing to the vicious cycle of saving: “Thanks to people’s collective savings behaviour, their individual wealth targets remain out of reach: the more they save, the more interest rates fall; the more interest rates fall, the lower the returns on their wealth; and the lower the returns on their wealth, the more they have to save.”

He suggested raising the retirement age would curb the urge to save for a retirement nest egg. Lower Consumption would increase as savings dropped; higher levels of demand would then result in higher levels of investment.

“Importantly,” he said with inescapable logic,” faster economic growth would also provide higher tax revenues and higher interest rates. The ammunition needed to repel the next recession would be replenished.”

It’s doubtful, said Mr King, any government would be prepared to bite such a bullet.

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