Contributed by Joe Montero

There is a consensus among economists and financial commentators. This is that the global economy and Australia are heading for a severe recession. Australia is performing economically at its worst, since the 2009 aftermath of the previous year’s Global Financial Crisis.

The Reserve Bank of Australia has just cut interest the rate to a new low record of 1.25 percent. This is bad, because it has come about because there is a real slowdown, sufficient to warrant serious concern. It is evidence that something is fundamentally wrong.

Although payers of mortgages might benefit slightly in the short run by having their payments cut by 0.25 percent, they will be subject to the negative effects on the economy like everyone else.

Just as important, is that retail sales are continuing to tumble. This is not too harsh a description, when you consider that the fall has been ongoing for some time. A major factor behind this, are the locked in stagnation in the wages share of national income and rise in casual and part-time work.

In the face of harder times and growing uncertainty, people are tightening the belt and spending less. Even online buying is going down. Businesses are being affected by this. This is why making sure your online business is thriving is important to keep it going. Using saas ecommerce software can help you with this to make sure your revenue is coming in and you are remaining efficient online.

Gross Domestic Product (GDP), or the official rate of growth of goods and services is officially slowing and forecast to e be as little as 0.5 percent over the next quarter. If financial transactions and inflation are taken out of the count, what is left is shrinking economy.

Meanwhile, Australia’s foreign debt continues to rise. This has driven the Current Account deficit. The Current Account represents the balance between payments and earnings for goods, services and financial transactions. It is now at low not been seen since 1996.

Although the Balance of Trade (goods and services) component is in surplus by $13.6 billion, the leak on the financial side leaves a deficit of $2.9 billion. This tells us that the actual debt that Australia owes the world stands at at least $16.5 billion.

It results from a combination of a fall in the value of Australian dollar, a large scale cashing in on government and private bonds, and the export of funds from Australia, due to a combination of domestic causes, a large tax evasion industry, the condition of the global economy, and the extent of Australia’s integration into the United States’ economy.

Although volumes have recently been published on how well the United States economy has been doing in recent times, the truth is much less rosy. The United States is plagued by much of what Australia is suffering from.

There is also a major difference.

For a start, there has been a better growth in GDP there. Corporate tax cuts have been the main ingredient behind this, accounting for 0.9 percent growth last year. Putting this into perspective. Total GDP growth was merely 1.1 percent.

For the first quarter of this year, the United Sates experienced a 3.1 percent GDP rise. Much of this is accounted by by the buying up of shares at home and abroad. as the cycle of tax cuts and corporate expenditure carries through. There are already signs that this is coming to an end, and buoyed up share prices will begin to fall once again. The reason is that this stimulus has done nothing to increase economic capacity.

When it comes to the relationship between the us economy and the rest of the world, the picture is even more depressing.

On the surface it looks good, because the United States has a big surplus on the Current Account. But at the same time, it has a serious deficit on the Balance of Trade, making it a net importer of goods and services.

This is the reverse to Australia’s economy relationship to the rest of the world.

The position of the United States underlines a serious dependence on the export of investment to drive the economy and to generate profits for the corporate world. In conditions of weak domestic and global economies ongoing stability and profit are threatened.

A significant part of recent economic activity has involved accessing cheap funds and acquiring assets overseas. This expenditure has been accompanied by a growing debt, because reliance on financial transactions, without generating sufficient growth in terms of goods and services, does not provide the means to pay for expenditure. When this happens, there is little possibility for an end to this upward spiral.

Growth in net assets has been accompanied by a parallel growth in foreign debt.

In the short-term this has enabled major American financial institutions to do relatively well, but the absence of real growth and rising debt threatens catastrophe.

Trump’s corporate tax cuts were in large measure designed to convert some of the corporate debt into public debt. The result is that government debt has ballooned out to an incredible $US22 trillion. It is unsustainable and will unavoidably bring about a new round of large-scale spending cuts.

The profitability of these financial institutions will most likely be protected, by seeking to push their debt onto other nations, through new trade arrangements.

This is an important factor behind the developing trade war with China, efforts to penetrate Europe and further opening up of countries like Australia. The aim is to improve both the United States Terms of Trade and Current Account positions, and through this, the profitability of corporate America.

American financial institutions are protecting themselves by selling off both domestic and foreign bonds. Selling domestic bonds provides further funds from the state. Selling foreign bonds does the same, and it has the additional effect of depriving other nations of investment funds, and operating as a mechanism to export American economic difficulties.

This is exactly what is happening to Australia.

The global economy is also being weakened.