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Australia’s property market is at risk of spiraling into a prolonged downward trajectory and may struggle to recover in the near future according to tech entrepreneur Matt Barrie, who said on Thursday that the economy has now entered a full on “crisis” phase as conditions become ever more challenging.

The freelancer believes the weakened housing market would be a drag on the economy in isolation, but a myriad of other global market trends are creating a perfect storm that spells danger for the economy during the next twelve months. Mr Barrie said Australia is now in a “new realm” and the economic consequences could be severe. 

“The banking royal commission has been the catalyst that pulled the rug out of residential mortgages,” Mr. Barrie told news.com.au this week.  “Now applications are being knocked back tenfold, banks are becoming withdrawn and the easy credit that was available is gone. I don’t think lending will ever go back the way it was before, and it will change the housing landscape quite dramatically.”

Economic headwinds have been circling for some time now with the United States and China’s trade war among the factors that have weighed heavily on the global outlook since last summer. Mr Barrie said the recent crackdown on the number of home buyers from China had also affected the domestic economy.

He added that Australia is currently the single most mid- to high-income nation dependent on China and that being its most prominent trading partner, the impact of a slowdown in China and other related factors are likely to have a “permanent impact” on Australia.

Various reports and leading figures have highlighted the weak rate of wage growth this year and Mr Barrie noted that both wages and construction are currently in an “anemic” static. RBA governor Philip Lowe has also expressed frustration at the ongoing slump in housing prices and Mr Barrie said the property market is now in “free fall” due to weaknesses in other areas of the economy.

The fact that Chinese buyers have left and lending “has gone” means the conditions that supported steady economic growth in previous years are not going to be the same again moving forward. Mr Barrie added: “Whoever wins the federal election will inherit an economy that is not in good shape at all.”

The entrepreneur also highlighted the fragility of the economy compared to other nations around the world as Australia has been reliant on exports of coal and iron ore, robust new building rates and looking to overseas buyers to purchase properties. The recent developments have exposed this crutch according to Barrie, who believes the country’s economic diversity is even worse than in developing nations in Asia.

While the outlook is uncertain, Mr Barrie believes Australia can make positive changes and that a commitment to building new industries and developing them must be made a national priority. He pointed to the burgeoning tech industry as an example of an innovative outlet for new policy. 

Mr Barrie’s pessimistic reading is not fully supported by Deloitte Access Economics. The company’s director Chris Richardson believes there is no need for overreactions or panic-driven decision making as “true booms” and “true crashes” do not occur very often. He added that while China is struggling due to its debt pile, global growth is not a lost cause just yet.

Mr Richardson concluded: “Here at home, house price falls have accelerated from late October onwards, and although the banks are being more careful with loans, that’s … not actually as important now because it’s not so much that banks aren’t supplying loans, it’s that punters are not demanding them. They’ve seen price falls and it’s making them more cautious now, and the speed of shopping is dropping a bit.”