Blog

Wed, 26 Mar 2014  |  

I am not sure which part of the graph below that Treasurer Joe Hockey does not understand.

Mr Hockey's crusade against the former government and its Treasurer Wayne Swan on the issues of economic management, debt and deficit shows a disturbing lack of self-awareness. Mr Hockey doesn't realise people are laughing at him like a down-and-out soothsayer procliaming "the end is nigh" each time he raises those issues. Indeed, it is a little embarrassing to see Mr Hockey discuss economic management without even the slightest understanding of the issues that make this one of the most extraordinary charts doing the rounds. The information in this chart is likely to fuel a library of Ph D theses as the smart economists around the world work out what went right in Australia and what went wrong in the other advanced economies.

sp-ag-160314-graph2

 

 

 

Mon, 24 Mar 2014  |  

This article first appeared in the March edition of The Melbourne Review:

ANOTHER YEAR OF EXPANSION
STEPHEN KOUKOULAS

The economy has started 2014 on a strong footing, although there remain quite divergent trends within the changing composition of that growth.

Mining investment is falling away very sharply and perhaps one of the easiest things to forecast for the next few years is for further sharp declines. Many of the huge mining projects of the last decade have been completed or are close to completion. The work is finished. Given the huge capacity in mining built up over that time, there are very few new mining projects on the horizon.

Fri, 21 Mar 2014  |  

The week ends with the Abbott government borrowing a further $700 million today, which brings the total of gross borrowing since 9 September 2013 to $61.15 billion.

$61.15 billion of bond and T-Notes that have been issued in just over six months as the government funds the budget deficit, covers maturing bonds and T-Notes and prepares to fund a range of its policy expenditure items.

As I have noted at nausium on the issue of government debt over recent years, the Australian government's debt level remains trivial, chicken feed, small beer and the campaign of the Coalition Parties to suggest otherwise was factually flawed and it still is.

Wed, 19 Mar 2014  |  

Rory Robertson, my old mate and former RBA 'lumpy items'* co-conspirator, and I have a wager about the RBA meeting in May.

I quite emphatically believe the RBA needs to hike interest rates soon from the current historically low 2.5 per cent. This is because there has been a flood of information showing a move in the Australian economy to above trend growth, rising inflation, the unpleasant consequences building from a reflation of house prices and an unambiguously stronger world economy.

As has been the case over the last 15 years or so as I have made and refined my interest rate forecasts, my view must be placed in context of the market pricing for interest rates. At the moment, the market is pricing in a small chance of an interest rate cut, yes cut, in May. It may only be a basis point or two, but it is a cut nonetheless. While no one surveyed in the recent Bloomberg survey on interest rates expects the RBA to cut in May, there are still four forecasters expecting a cut by the third quarter of 2014.

Tue, 18 Mar 2014  |  

Despite more bank economists rolling over and flipping their forecasts for interest rate cuts into calls for interest rate hikes, financial markets are yet to price in those higher rates.

Indeed, for the next few months, the futures market is still pricing in the risk, albeit a low one, that he RBA could still cut interest rates.

A factual interpretation of market pricing is effectively for the RBA to be holding interest rates steady for at least the next year. If this turns out to be correct, it could be the longest period of interest rates on hold on record, noting that it is already 8 months since the last RBA interest rate adjustment.

Fri, 14 Mar 2014  |  

I smell a big, dirty, dead rat in the IMF report on Australia that the ABC Fact Checking Unit used as its source to verify the basis of Treasurer Hockey's claim that "Of the 17 top surveyed IMF countries, Labor left us with the fastest growth in spending of anyone in the world... and they left us with the third highest growth in debt of anyone in the top 17."

The IMF report has some curious inclusions and omissions in that "top 17".

Fri, 14 Mar 2014  |  

The Abbott government's cooking of the books in the Mid Year Economic and Fiscal Outlook continues to be exposed, this time by Finance Minister Matthias Cormann himself.

In the Government's Monthly Financial Statement, which details actual spending and revenue for the government up to and including January, taxation revenue is running a thumping 1.5 per cent ahead of the projections outlined in MYEFO. In just seven months, that is $2.8 billion extra tax revenue over and above the increasingly discredited numbers in MYEFO.

Fri, 14 Mar 2014  |  

Here's a simple question.

The Treasurer Mr Hockey makes a claim that "Of the 17 top surveyed IMF countries, Labor left us with the fastest growth in spending of anyone in the world... and they left us with the third highest growth in debt of anyone in the top 17".

You are asked to check this for its factual basis, not an easy job, but it is important to see whether the Treasurer is telling porkies or if he is correct.

A fair enough strating point is to go to the Treasurer's office and ask, what is the source of this claim?

Fri, 14 Mar 2014  |  

The usually excellent ABC Fact Checking Unit has made an elementary error in its assessment of Australia's debt and deficit position.

In particular it says that Treasurer Joe Hockey is "correct on Australia's debt, spending".

The link is here: https://www.abc.net.au/news/2014-03-13/joe-hockey-correct-on-australia-debt-and-spending/5310736

On 6 March, Mr Hockey said on ABC radio that "Of the 17 top surveyed IMF countries, Labor left us with the fastest growth in spending of anyone in the world... and they left us with the third highest growth in debt of anyone in the top 17".

Mr Hockey added, "the fact of the matter is they've left a whole lot of landmines in the budget. We need to carefully remove those landmines and put us back on a path that gets us away from $123 billion of deficit, and starts to pay down the logjam of $667 billion of debt."

Thu, 13 Mar 2014  |  

Since a price was put on carbon on 1 July 2012, there have been a few interesting developments in the Australian economy and markets.

Here are a few:

Employment has increased by 193,100.

The ASX has risen by 32 per cent, which has seen the market capitalisation of the Australian stock market rise by just under $400 billion in 20 months. Around $90 billion in dividends have been paid out, over and above this, over that time.

THE LATEST FROM THE KOUK

The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   

---------------------------- 

The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.