More parents are buying the latest products on the market as fears mount that the world’s economic recovery is slowing.
The trend has been fueled by the government’s $US100 billion National Productivity Commission, which is set to release a report in March on what it calls Australia’s “momentum” in productivity growth.
Its report is expected to be the first comprehensive look at productivity growth in the world since the 2008 global financial crisis.
But the report has sparked fears among economists and consumers that Australia is heading towards a recession.
It’s a concern that has pushed the price of the average Australian home from more than $US3,000 to just over $US800 a month in some areas, such as the outer north-west.
That’s more than double the national average of $US600.
A look at recent data suggests the fears are justified.
According to data from real estate website DomainMarket, prices have risen by nearly $US5,000 since the beginning of March.
Last week, DomainMarket reported that the average Sydney house sold for just under $US1.2 million, a level that has nearly doubled since last year.
And DomainMarket said that price growth for Sydney suburbs is the highest since September.
In Victoria, prices are up nearly 40 per cent in the past three months.
Australia’s productivity growth rate was 0.9 per cent last year, according to the National Institute of Economic and Social Research.
Analysts say the growth in Australia’s productivity is likely to be even lower, due to a lack of manufacturing activity.
“The slowdown in productivity is not going to be sustained, even if the economy recovers and wages rebound,” Andrew Tkaczyk, an economist at Capital Economics, told The Australian Financial Company.
There’s no evidence that the slowdown will be sustained in the short term, he said.
Tkaczky also said the slowdown would hurt productivity growth and growth in jobs.
“[There is] no sign of a return to a normalisation of output growth in manufacturing, which has been the driver of Australia’s economic growth,” he said, adding that Australia’s current weak growth model is unsustainable.
One key factor behind the slow productivity growth is the collapse in prices, Tkacszyk said.
The price of basic goods such as food and clothing has plummeted in recent months, leading to increased consumer spending.
Since the start of last year the Australian dollar has appreciated by almost 50 per cent against the U.S. dollar, according the Australian Bureau of Statistics.
While the economy is recovering and unemployment is low, productivity growth remains below the national rate, according a survey released by the Reserve Bank.
Despite the slowdown in growth, some economists still believe Australia’s economy is stronger than it was a year ago.
However, economist Jason Furman, chairman of the Federal Reserve Bank, said he would be surprised if Australia’s growth was “much stronger” than it has been.
Economists believe productivity growth will recover in the coming years, but it’s likely to take a while.
They expect to see some improvement in the next few years, as more Australians are drawn into the labour market.
Professor of economics and director of the Centre for Economic Performance at the University of Sydney, Dr Stephen Millar, said while productivity growth has been sluggish, it is not necessarily slowing down.
Millar said the economy was not yet back to pre-crisis levels, but the Australian economy is not “frozen” in time.
He said while the Australian recovery will not be as robust as that seen in the United States, the country has shown significant resilience.
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