Low wages and a cooling housing market will curb consumer enthusiasm next year, while business spending will remain weak as resource-related investment continues to wind down, global bond fund manager PIMCO says.
The executive vice-president and fixed income portfolio manager in Australia, Adam Bowe, says all this adds up to another year of sluggish growth and warns against complacency as the country notches up "100 quarters without a recession". 
"With the extent of the macro headwinds Australia faces and the scope of the structural change in the economy as a consequence, we should be alert to the risk of a recession," he said. 
"When you are riding a bike very slowly, it is much easier to topple off."
His comments added to the chorus of warnings about the delicate state of the Australian economy, after almost 25 years without recession.
Despite steady employment growth and a recent pick-up in business and consumer confidence, they said weak commodity prices, the slowdown in China, market unease and patchy domestic demand and investment would keep Australian growth below trend next year and maybe force the Reserve Bank to cut the cash rate again, from the present 2 per cent.
Mr Bowe said recent jobs growth, which had driven the official unemployment rate down from 6 per cent to 5.8 per cent, "clearly isn't suggestive of a recession".

Labour market 'rebalancing'
While broadening the universe of wage earners, improvements in the labour market would not translate into more robust consumer spending, he said.
"In the two years through to the third quarter of 2015, healthcare and education were the industries experiencing the fastest employment growth, and workers in those sectors were earning average weekly wages of $1051," he said.
"The mining and wholesale trade sectors have been suffering the worst contraction in employment over the same period, and those industries have been paying an average weekly wage of $1750.
"So, clearly, the labour market is rebalancing, which is a good thing, and aggregate employment is growing.
"However, the structural shift into lower paid jobs will continue to weigh on wages and, through that, on household consumption, which remains the largest component of gross domestic product."
Similarly, resource-related investment, which, at its peak in 2012, accounted for 7 per cent of GDP, would continue to shrink next year, after having fallen back to 5 per cent by the end of the third quarter this year.
"To put this in context, its long-run average prior to the boom was a bit above 1 per cent," Mr Bowe said.
"So the headwinds from lower mining investment, slower growth in China and lower commodity prices will continue to blow in 2016 and likely beyond," he said. 

Property close to peak
Meanwhile, Australian property prices were close to peaking in the current boom cycle, PIMCO's head of Australian portfolio management, Robert Mead, said, as household indebtedness, more expensive mortgages and new controls on investor lending limited the remaining upside.
"The Australian consumer is already the most [leveraged] in the world, housing prices have increased significantly across the major Australian cities, macro-prudential controls are limiting the capacity of banks to lend to the investor segment of the market and mortgage rates have risen from their lows," Mr Mead said. 
"This doesn't necessarily imply a significant correction to property prices, but it does limit the ability of the housing sector to contribute to growth in the coming years." 

Advice for investors
And the advice to investors from one of the world's largest bond fund managers?
Bank capital raising linked to new rules on how much lenders had to hold against their loan portfolios had been "an attractive source of returns for a while now", Mr Bowe said, although securities issued by Australian banks were reaching "fair value territory".
Apart from that, he recommended so-called "carry trade".
That involves borrowing in one currency with low interest rates and using the money to buy bonds or hold in money markets in a stronger currency.
The type of investment capitalises on the sharp divergence in global monetary policy, which, in turn, is driving currency movements around the world.