Blog

Sun, 08 Jun 2014  |  

When Prime Minister Tony Abbott meets with US President Barack Obama and senior officials from the US administration, the economy is likely to be front and centre of their discussions.

With this being the case, Mr Abbott has a wonderful chance to show off just how wonderful Australian economic conditions have been, how adroitly economic policy has been implemented in the last few years and how that is showing up in an economic expansion and fiscal settings that people in the US could only dream about.

Recent data confirm the Australian economy into its 23rd year of unbroken economic growth. This is in stark contrast to the US which endured recessions in 2001 and of course in the period from 2007 to 2009. "Australian's have forgotten how to spell 'recession'", Mr Abbott could quip, such is our economic success. The fiscal stimulus measures taken in during the global economic crisis, Mr Abbott could highlight, were a critical factor stopping Australia diving into a nasty recession with hundreds of thousands of jobs saved, new jobs created and financial stability maintained during these troubled times.

Fri, 06 Jun 2014  |  

The Australian is at it again. It is running another fact-less story with the express intent of undermining a key policy of the previous Labor government and what is disconcerting this time, is that it is pushing the line of the tobacco industry.

Today there is a Page One story by Christian Kerr which makes the sensational claim that "Labor's nanny state push to kill off the country's addiction to cigarettes with plain packaging has backfired, with new sales figures showing tobacco consumption growing during the first full year of the new laws".

The "exclusive" story based on "new data obtained by The Australian" claims that "tobacco sales volumes increased by 59 million 'sticks' ... last year". The source of this shock finding is "industry monitor" InfoView which is "backed up by retailers, consumer marketers and the industry". Only Philip Morris and the Australasian Associates of Convenience Stores are cited.

Fortunately, the story is wrong.

Thu, 05 Jun 2014  |  

The increase in the minimum wage has sparked the usual hand-wringing about Australia being a high wage country. Those demoaning the modest 3 per cent increase in the minimum wage and wage levels more generally, suggest wage rates should be lower.

Here is a look at some minimum wage levels in other countries. I for one would never want Australia to aspire for lower wages and view the high income levels in Australia as a sign of our massive prosperity and now 23 years without a recession.

Here we go - average hourly wages rates, US$. 

Afghanistan  US$0.57

Angola US$0.71

Argentina US$4.31

Australia US$16.88

Bangladesh US$0.09

Belgium US$11.69

Benin US$0.36

Brasil US$2.11

Canada US$9.95

China US$1.19

Estonia US$2.73

France US$12.22

Gambia US$0.12

Greece US$5.06

Haiti US$0.37

India US$0.28

Indonesia US$0.52

Japan US$8.32

South Korea US$4.63

Luxembourg US$14.24

Malawi US$0.16

Mongolia US$0.82

Niger US$0.34

Poland US$2.97

Russia US$1.04

Slovenia US$5.84

Taiwan US$3.88

UK US$10.02

US US$7.25

Vietnam US$0.30

So Australian wages are high, which is a great thing. We should hope wages here stay high as it is a sign of our economic strength and prosperity.

Source: World Bank

Wed, 04 Jun 2014  |  

The March quarter national accounts confirmed the economy accelerating to an above trend growth pace in the first quarter of 2014. GDP rising 3.5 per cent is a sign of the robustness of the economy in the past six months in particular (annualised GDP in last two quarters was 4.0 per cent) and it is clear that, in normal circumstances, the RBA would be looking to normalise (hike) interest rates from the current record low 2.5 per cent.

Things are not normal.

Almost half of the 3.5 per cent GDP growth in the past year has been due to China buying the raw materials that are rolling off conveyor belts 24 hours a day, 7 days a week.

Tue, 03 Jun 2014  |  

The European Central Bank contemplating negative interest rates as one of its policy tools to kick start the moribund Eurozone economies. 

I've had a number of questions about the concept of negative interest rates and thought it best if I reproduce an article I wrote for Business Spectator in 2012 on the topic.

The link is here https://www.businessspectator.com.au/article/2012/8/9/australian-news/zeroing-negative-rates 

The full story is below.

Mon, 02 Jun 2014  |  

This article first appeared on The Guardian website on 28 May 2014:  https://www.theguardian.com/commentisfree/2014/may/28/will-abbotts-economic-negativity-become-a-self-fulfilling-prophesy 

Will Abbott's economic negativity become a self-fulfilling prophecy?

Some two weeks after the budget and more than eight months after being sworn in to office, the Abbott government continues to trash talk the economy, seemingly unaware of the damage it is inflicting on consumer sentiment and business conditions.

While unrelenting negativity on the economy and budget was an election-winning strategy from opposition, it is a self-defeating tactic for a government. People want the government to govern, not to tell them how bad things are, even if they are and certainly when they are not.

Sun, 01 Jun 2014  |  

Tomorrow morning, RPData will release its house price data for May which will show a substantial fall of about 1.9 per cent in house prices in the month. This fall is based on the already published data in the five main Australian cities - the data from other cities may add or subtract a tenth or two from this result.

As noted here previously and elsewhere, it is not clear whether this price fall is just a seasonal blip, some noise in the data or some other influence and that the general uptrend in prices of the past two years is being sustained.

Be that as it may, get set for some alarmist news reports on house prices falling sharply. Nothing sells like bad news and a near 2 per cent monthly drop in house prices ("a record fall!") will likely get the attention of the media.

Thu, 29 May 2014  |  

Let's get a little perspective on the Capex data, which has been welcomed by a range of people saying it is "not so bad when you look at the details".

Well, I am looking at the details and note the following.

Capex (business investment) has fallen 8.5 per cent over the last two quarters – this is the largest six-month fall since Australia was climbing out of its last recession in 1993. Sounds pretty grim to me, acknowledging that it is from a high base.

Between June 2012 and March 2014, Capex has fallen a meaty 10.1 per cent.

Thu, 29 May 2014  |  

Here is a little scenario to consider when it comes to HECS debt and the idea flagged by Education Minister Christopher Pyne that when a person dies, the accumulated HECS debt would be repaid to the government from that person's estate.

Think of someone who goes to university, studies hard and when they turn 21, have a degree and a $30,000 HECS debt.

If, for example, the person lives to 81, when they die and if they have never had paid employment that required them to cover their HECS debt, they will leave a massive debt which will need to be paid from their estate.

Here is some basic and non-controversial maths.

Wed, 28 May 2014  |  

The price of gold has fallen to US$1,265 an ounce this morning, for reasons that no one knows. In Australian dollar terms, gold is around $1,365 an ounce which is back to the level first reached in January 2009.

Think of it - that is more than five years of zero capital growth, no interest or yield and a considerable cost of holding the shiny dirt in the form of security such as a safe or safe deposit boxes at a bank.

What a dog of an "investment".

THE LATEST FROM THE KOUK

Is the Aussie economy slowdown good or bad news for you?

Mon, 04 Mar 2019

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/aussie-economy-slowdown-good-bad-news-015353581.html 

---------------------------------------------------------

Is the Aussie economy slowdown good or bad news for you?

Your economic well-being is undergoing some significant changes at the moment. Whether that is good or bad news depends on your home ownership status and intentions to buy, and the amount of money you have in invested in shares either directly or indirectly in your superannuation fund.

To the stock market first

Having been beaten down late last year, the Australian stock market has staged a powerful pick up. Compared with the low point in December, the ASX200 has risen over 12 per cent in two months. This is, quite clearly, great news for your superannuation balance and for your wealth if you own any shares directly.

The change in sentiment about interest rates and a solid profit reporting season has underpinned this jump in share prices and with US and local interest rates set to remain low or be lowered in the months ahead, share prices should continue to do well.

Falling house prices met with dismay and joy

From the perspective of personal finances, the news on falling house prices has been greeted with both dismay and joy. Home owners in Sydney Melbourne, Perth and Darwin and reeling under the weight of wealth destruction with prices down by between 10 and 25 per cent.

In Sydney, for example, that house that was valued at $1 million back in the middle of 2017 is now worth around $870,000, a drop of $130,000 in less than two years.

Ouch!

2019-20 budget will be 'problematic': here's why

Wed, 20 Feb 2019

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/2019-20-budget-will-problematic-heres-194957605.html 

------------------------------------------------------------

2019-20 budget will be 'problematic': here's why

Word has it that the framing of the budget, due to be handed down by Treasurer Josh Frydenberg the day after April fools day (and around 6 weeks before the election), is more problematic than usual.

Problematic because there is some mixed news on the economy that will threaten the current forecast of a return to budget surplus in 2019-20.

Housing has gone into near free-fall, both in terms of prices and new dwelling approvals. This is bad news for GDP growth.  The unexpected severity of the housing slump is the key point that will see Treasury revise its forecasts for GDP growth, inflation and wages lower when the budget is handed down.

It will be impossible for Treasury to ignore the recent run of hard data, including the weakness in consumer spending and a generally downbeat tone in the recent economic news when it sets the economic parameters that will underpin its estimates of tax revenue and government spending and therefore whether the budget is in surplus or deficit.