It is very odd that the vast bulk of economists and market participants are content forecasting ongoing moderate economic growth, a topping out in unemployment and on-going pressures on inflation that will see it remain near the upper part of the RBA target.
Very odd because it is increasingly clear that the RBA will need to cut interest rates in the not too distant future as it rides to the rescue of faltering growth, deflationary pressures and stubbornly high and possibly still rising unemployment.
The commodity price free-fall continues unabated which is crunching national income and risking deflationary pressures in the economy. Iron ore, gold, coal, to name a few, are seeing prices fall to levels that threaten the cause market ructions for local producers.
The RBA rear view mirror analysis of house prices is very confusing. Earlier in the year when it could have gotten away with an interest rate hike to cool housing (among other things), it mentioned house price growth without a hint of concern. This was when house prices were running rampant.
Now, six months later, when there are clear signs of a moderation or cooling in house prices, the Minutes of the September RBA Board meeting noted "housing prices had been rising at a rapid pace" and that "Members further observed that additional speculative demand could amplify the property price cycle".
The odd thing with the RBA about-face is that house prices are now the weakest they've been in several years.
According to the RPData house price series, in the four and half months since the end of April, house prices have risen by just 1.6 per cent, which is an average monthly pace of 0.35 per cent or an annual rate at a very comfortable 4.25 per cent.
When I was travelling on the Ghan railway between Adelaide and Alice Springs, I shared a cabin with an odd chap called Scott.
Scott was paranoid about being eaten by tigers and dragons. He had heard from some of his mates that there had been sightings of such dangerous beasts in central Australia in recent months.
It was an odd paranoia, I know, but Scott seemed adamant that on this journey, either a tiger or a dragon would somehow get on to the train and eat him.
Scott sat down, reached into his bag and pulled out a clock and a ream of blue A4 paper. The train left Adelaide on time. Scott was staring at his clock and after 5 minutes, he jumped up out of his seat, screwed up a piece of blue paper and threw it out the window.
Just how strong is the economy right now?
Well, it's a bit like the mad woman's breakfast – all over the place.
Bottom line GDP growth is pretty good – 3.1 per cent is at face value a pace that policy makers would be delighted to achieve year in, year out. But the growth momentum and composition of that growth is not generating sufficient jobs for the population increase and as a result, the unemployment rate is grinding higher and at the latest read, is at a 12 year high of 6.4 per cent.
The June quarter national accounts show that the volume of tobacco consumed in Australia rose 1.8 per cent in the June quarter. I am getting set for the shrill chorus of whackery from the tobacco extremists at The Australian tomorrow who could well use this rise as evidence or proof that the plain packaging laws which were introduced in December 2012 are not working.
If they do this, they will be miserably wrong. As every good economist knows, markets, economies and industries never move in a straight line up or down – there are always quirks and data lumps that can briefly deviate from a long run trend.
In Australia's 23 years without a recession, there have actually been three quarters where GDP has fallen – when the GST was introduced in 2000, when the GFC initially hit and when cycle Yasi closed down the coal mines for a few months. While some people were excited to call a recession, it never happened.
And so it is the case with the consumption of tobacco.
When he was Shadow Treasurer, Joe Hockey promised that "we will achieve a surplus in our first year in office and we will achieve a surplus for every year of our first term.''
Well, a couple of years on including one where Mr Hockey has been running Treasury and fiscal policy, it seems humiliation or capitulation are the order of the day for the world's most complacent Treasurer.
The week starting 1 September is a blockbuster for economic news and events.
The RBA Board meeting on Tuesday will likely leave interest rates unchanged, even though the case for an interest rate cut is strong, with a 12 year high unemployment rate, a record low pace of wages growth and inflation more than comfortably within the target range the key factors behind the case for some more monetary policy easing.
Alas, working against the case for what is an increasingly necessary rate cut is the RBA confidence that the current low level of interest rates, now in place for 13 months, will at some time kick start growth and with it, underpin a more troublesome inflation outlook.
Time will tell whether the RBA has got it right or not.
This article first appeared on my old blog in 2013.
The Howard government went to capital markets on no fewer than 400 occasions to borrow money.
Between March 1996 and November 2007, there were 135 lines of bonds that were taken to market in various bond tenders which were issued with a face value of $51 billion, while there were over 280 T-Note tenders with a face value of over $220 billion.
The strange thing about RBA Governor Glenn Stevens testimony to the Parliament today was his agnostic approach to a horribly weak labour market.
Stevens suggested an unemployment rate at around 6.25 per cent and likely to stay there for a couple of years was "kind of OK". The 789,000 people unemployed (plus another half a million underemployed) may beg to differ.
He was correct to note that the record low growth in wages that our flexibale labour market is delivering, would in time help to reverse the rise in the unemployment rate, but only when the pace of economic growth moves back above trend.
The labour market is in dreadful shape. Not only is the unemployment at a 12 year high at a rate about 1.5 percentage points above full employment, but the employment to population ratio has slipped to a 9 year low and now annual wages growth has slumped to a level never before recorded by the Australian Bureau of statistics. There are close to 800,000 people unemployed.