Blog

Mon, 03 Feb 2014  |  

It is staggering that some who should know better reckon that the building approvals data for December were weak.

OK, the number of building approvals fell 2.9% in December in seasonally adjusted terms, but this must be viewed in the context of earlier readings.

Those readings show that the number of building approvals in the December quarter as a whole was the highest since 1994 and the second highest quarterly result ever recorded. Sound weak to you?

The ABS measure of the trend series has increased every month, including December, for two years to be at the highest level since 1994.

Dwelling construction is in a boom.

Making the outlook for the construction sector all the more positive is that non-residential building is explosive with quite phenomenal double digit growth over the second half of 2013.

Fri, 07 Feb 2014  |  

OPENING REMARKS TO THE SENATE SELECT COMMITTEE INTO THE ABBOTT GOVERNMENT’S COMMISSION OF AUDIT

Australia does not have a government debt or deficit problem.

According to Treasury numbers published by Treasurer Mr Hockey in the Mid-Year Economic and Fiscal Outlook in December, over the last 43 years of budget outcomes (the full data set), there have been 19 budget surpluses and 24 budget deficits.

Up until 2007-08, just prior to the collapse of the global financial system and the onset of the deepest recession in the industrialised world since the 1930s Great Depression, surpluses were a little ahead of deficits, 19 to 18. This suggests that the recent move to budget deficit is almost certainly nothing more than the long-run business cycle impacting on government finances.

Sat, 08 Feb 2014  |  

Over the summer break, while fiddling through data bases, reading and just being interested in things, I unearthed a few quirky bits and pieces about the Australian economy, people, sport and a few other bits and pieces. 

Only item 38 is open to any discussion, perhaps. Here are the top 40.

THE LATEST FROM THE KOUK

Don’t fall for the spin - Scott Morrison’s budget surplus is no certainty

Thu, 06 Dec 2018

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/dont-fall-spin-scott-morrisons-budget-surplus-no-certainty-224422761.html 

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Don’t fall for the spin - Scott Morrison’s budget surplus is no certainty

Prime Minister Scott Morrison could yet be guilty of prematurely declaring that his government will deliver a budget surplus in 2018-19.

Sure, tax revenue is growing at a rapid pace and the government is underspending on a range of government services, but there are still seven long months to go between now and the end of the financial year that might yet blow up the surplus commitment.

PM Morrison’s ‘return to surplus’ boast is based, it appears, on hard data for the first four months of the 2018-19 financial year on revenue and spending information from the Department of Finance. These numbers do look strong, at least in terms of the budget numbers and if the trends on revenue and spending continue, the budget will probably be in surplus. Treasury will be factoring in ongoing economic growth, no increase in the unemployment rate and buoyant iron ore and coal prices over the remainder of the financial year. These forecasts and hence the budget bottom line are subject to a good deal of uncertainty, as they are every year.

If, as is distinctly possible, the economy stalls in the March and June quarters 2019, commodity prices continue to weaken and if there are some unexpected increases in government spending, the current erroneous forecasts for revenue and spending could leave the budget in deficit.

Change of view on monetary policy

Wed, 05 Dec 2018

In the wake of the September quarter national accounts, and with accumulating information on house prices, dwelling investment, the global economy and spare capacity in the labour market, I have revised my outlook for official interest rates.

For some time, I have been expecting the RBA to cut the official cash rate to 1.0 per cent, a forecast that has been wrong (clearly) given its decision to leave rates steady right through 2018.

That said, it has been a highly profitable call with the market pricing interest rate hikes when the call was made which has yielded a decent return as time has passed.

My updated profile for RBA rates is:

May 2019 – 25bp cut to 1.25%
August 2019 – 25bp cut to 1.00%
November 2019 – 25bp cut to 0.75%

The risk is for rates to 0.5% in very late 2019 or in 2020

It will be driven by:

  • Underlying inflation remaining below 2%
  • GDP growth around 0.25 to 0.5% per quarter in 2019
  • Annual wages growth stuck at 2.5% or less
  • Global growth slowing towards 3%
  • Labour market under-utilisation around 13 to 13.5%

There are likely to be other influences, but these are the main ones.

AUD, as a result, looks set to drop to 0.6000 – 0.6500 range.