The Australian dollar begins to slide to its pandemic 2020 lows. Government and Corporate debt are at all time highs, while household debt declines pointing to recessionary inflation conditions. Oil price in AUD is at $150. Central Banks face a conundrum after over two decades of underwriting everything.

Once again, the above chart might seem complex, but what it highlights is the trouble that Australia economically could be facing.  Currency being the share price of a country, the AUD (Australian dollar) now at 0.69 dropping from its May 2021 high of 0.78, with the baselines that overlay the AUD are Government debt (mauve) and private/corporate debt (white).  To which private debt has been climbing since 2003, with Government debt low (green arrows) in prior to 2008 when it began its incline, as the Financial/Credit Crisis hit.  Thus was the beginning of shifting to institutionalized markets, i,e underwriting by global Central Banks (low rates, with the encouragement of asset speculation to boost, in theory, employment).  Alarmingly companies have already been taking on huge amounts of debt even before the 2020 pandemic as government debt-to-gdp began its parabolic rise, which in turn also dragged up corp debt, while interest rates globally were sitting at close to 0%.

The gray parabolic line is the oil price to which Australian is a net importer.  The WTI oil price is currently at $108US or $150AUD

Note the chart/s in the below panes, the red line represent the Australian interest rate 0.35% beneath chart is the Australian household debt to GDP, which has slightly dropped since 2020,  probably due to the year long lockdown and the paying down debt or not taking on any new debt due to the pandemic.  But, could also indicate recessionary credit conditions as households are less likely to borrow, except drawing from their own home equity.  The two green arrows represent Govt/Corp debt climbing in 2020 and public debt declining.

As a market snapshot it shows stagflation to be the main issue that Australia faces and the dilemma their central bank has increasing rates while the slowdown and inflation reign.     Particularly vulnerable will be corporate debt as rate increases will make it harder to finance expansion and acquisitions.