Blog

Fri, 28 Jul 2017  |  

The big data points of the past week or so have confirmed the following economic facts.

The annual increase in underlying inflation is tracking at 1.8 per cent, locking in seven quarters where the inflation rate has been outside the RBA target range, and the unemployment rate remains high, at 5.6 per cent, which will inevitably lock in low inflaiton in future,

These two issues alone would suggest the need for monetary policy easing from the RBA. If the economic checklist is expanded to include below trend GDP growth, a surging Australian dollar and respective, but not great, performance from the global economy and the rate cut would be a slam dunk. Alas, the RBA is worried about financial stability, house prices in Sydney and Melbourne and is supremely confident about the outlook for the economy into 2018.

This means the RBA is not going to cut interest rates any time soon, even though a more progressive RBA would. 

The economy is at an inflection point and which was it goes over the next six months will determine whether the next move in official interest rates is up or down. For the hike scenrio to move to centre stage, the following events must unfold. 

Mon, 24 Jul 2017  |  

 I am thrilled to be one of the speakers at The Money for Life event in Sydney on Saturday 7 October.

Book tickets via this link: https://www.quadrant2.net/

As the link suggests, it’s a seminar that is straight-talking, no nonsense financial information. It is great to see that there is no pushy marketing or get rich quick schemes, just a range of broad but in depth look at the things that have proven to be wealth enhancing strategies over many years. What is the best way to maximise your wealth both in the short term, but also, to have in place a framework of ideas to maximise the chances of building a decent financial nest egg over the longer run. 

Book now.

Wed, 19 Jul 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/downside-aussie-dollar-going-040628723.html 

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

The downside of the Aussie dollar going up again

The Australian dollar has powered to a two year high above 78 US cents with the rise mainly driven by a sharp fall in the US dollar, amid signs of weaker economic growth in the US.

For some Australian economists, this rise of the Australian dollar, if sustained, is reckoned to be a restrictive force for the Australian economy which risks snuffing out some of the recent economic news pointing to a moderate pick-up in activity.

While a higher value for the Australian dollar does generally trim the rate of economic growth as lower priced imports take business away from local producers and exporters find it a little harder to compete in the international trade market, there are some good reasons to think the current Australian dollar rise will not be a major problem.

Think of it this way.

If the Australia dollar was in fact ‘over-valued’, how would this show up in the real world or the real economy?

In an environment of a floating exchange rate for the Australian dollar, the answer is rather simple.

Wed, 19 Jul 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/downside-aussie-dollar-going-040628723.html 

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

The downside of the Aussie dollar going up again

The Australian dollar has powered to a two year high above 78 US cents with the rise mainly driven by a sharp fall in the US dollar, amid signs of weaker economic growth in the US.

For some Australian economists, this rise of the Australian dollar, if sustained, is reckoned to be a restrictive force for the Australian economy which risks snuffing out some of the recent economic news pointing to a moderate pick-up in activity.

While a higher value for the Australian dollar does generally trim the rate of economic growth as lower priced imports take business away from local producers and exporters find it a little harder to compete in the international trade market, there are some good reasons to think the current Australian dollar rise will not be a major problem.

Think of it this way.

If the Australia dollar was in fact ‘over-valued’, how would this show up in the real world or the real economy?

In an environment of a floating exchange rate for the Australian dollar, the answer is rather simple.

Sat, 15 Jul 2017  |  

Despite the turmoil within the Liberal Party and the unrelenting information in the polls showing Labor with a 6 or 8 point lead, the betting markets show Labor to be only luke warm favourites to win the next Federal election.

The current odds for the election, which is likely to be held in the latter part of 2018, but could be held in the first half of 2019are:

Labor  $1.60

Coalition $2.30

Allowing for the bookies margin, the odds show that Labor are a 60 per cent chance to win, with the Coalition 40 per cent. 

Tue, 04 Jul 2017  |  

Click on the link below to see an interview I did with Bloomberg TV - discussing RBA interest rates, the RBA, consumer spending household debt and other things.

Cheers, Stephen

https://www.bloomberg.com/news/videos/2017-07-03/market-economics-crosscurrents-in-aussie-economy-video  

 

 

Thu, 29 Jun 2017  |  

This article first appeared on The Adelaide Review website at this link: https://adelaidereview.com.au/opinion/politics/honourable-loss-still-loss/ 

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

An honorable loss is still a loss

There has been a significant misreading of the UK election and Labour’s achievement under Jeremy Corbyn, much like there was for Australian Labor’s election defeat under Bill Shorten.

Political parties need to win government to implement their policy agenda. This obvious statement seems to have been forgotten or ignored in the wake of the British election result where a significant Labour loss was heralded as “a win for Corbyn”, “the death of neo-liberalism” and had a lesson in that politicians “need to start listening” to the people.

This is a significant misreading of winning and losing an election.

UK Labour lost.

The Conservatives won and have formed government. Specifically, the Conservatives won 318 seats, Labour have 262 seats, some 56 fewer than its main opponent. To be sure, there are a range of smaller parties holding the rest of the seats and a coalition is needed for a government to be formed, given that 326 seats are needed for an absolute majority. It is clear that the Conservatives have easily cobbled together such a coalition that will see it remain in government, able to pursue its agenda with very little in the way of compromise.

Jeremy Corbyn and Labour, on the other hand, will remain in opposition and will implement none of its agenda. Zero. Not one part of Labour’s socially progressive platform on health, welfare, tax or anything else will become law despite Corbyn’s mythical “win” and the “death of neo-liberalism”.

Wed, 28 Jun 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/1395593-072653325.html 

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

Yes, we’re rich! Well, sort of

In 2017, Australia’s annual GDP will top $1.8 trillion.

This is $1.8 trillion of goods and services consumed, exported, invested in or otherwise spent in the economy in a 12 month period.

This is an impressive figure for a country of around 24.5 million people, which means annual per capita GDP is approximately $73,500.

When converted into US dollar terms, Australia’s GDP is bigger than Spain (over 46 million people), Mexico (129 million people) and Indonesia (261 million). Australia’s GDP will be little below Russia (144 million people), South Korea (51 million) and then there is a bit of a gap up to Canada (36 million). Of course, after that are the mega-economies that dominate world trade and markets.

But the data goes to show that in per capita terms, Australians are on average, very well off. Rich, in other words.

Sat, 24 Jun 2017  |  

This article first appeared on the Yahoo7 web page at this link: https://au.finance.yahoo.com/news/1381246-234254873.html 

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

The Australian stock market is a global dog.

At a time when stock markets in the big, industrialised countries are zooming to record high after record high, the ASX200 index is going no where. So poor has the performance been that the ASX is around 20 per cent below the level prevailing in 2008.

It is a picture most evident in the last few years. Since the middle of 2013, the ASX 200 has risen by just 10 per cent. The US stock market, by contrast, has risen by 50 per cent, in Germany the rise has been 55 per cent, in Canada the rise has been 20 per cent, in Japan the rise has been 45 per cent while in the UK, with all its troubles, the rise has been 15 per cent.

So what has gone wrong?

Fri, 16 Jun 2017  |  

With Tony Abbott and governemnt debt hot news topics at the moment, I thought I would repost this artricle which I wrote in April 2013:

Enjoy, SK

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

Here’s a true story. It’s about a man called Tony.

Tony is a hard working Aussie, doing his best to provide for his family. He has a good job, but such is the nature of his work that his income is subject to unpredictable, sharp and sudden changes.

Tony’s much loved and wonderful children go to a private school and wow, those fees that he choses to pay are high. He used to have a moderate mortgage, especially given he was doing well with an income well over $200,000 per annum.

Then things on the income side turned sour.

Tony had a change in work status that resulted in his annual income dropping by around $90,000 – a big loss in anyone’s language.

How did Tony respond to this 40 per cent drop in income?

Well, rather than selling the house and moving into smaller, more affordable premises, or taking his children out of the private school system and saving tens of thousands of after tax dollars, Tony called up his friendly mortgage provider and refinanced his mortgage.

In other words, Tony took on a huge chunk of extra debt so that he could maintain his family’s lifestyle. No belt tightening, no attempt to live within his means, just more debt.

THE LATEST FROM THE KOUK

Why don’t governments deliver policies that are good for the electorate?

Mon, 21 Aug 2017

This article first appeared on The Adelaide Review site at this link: https://adelaidereview.com.au/opinion/politics/paying-fair-share/ 

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

Paying Their Fair Share

It’s the age-old question: why don’t governments deliver policies that are good for the electorate? Well, the answers are numerous.

Politics and policymaking should be simple. After all, being in government and delivering what voters want — making them happy in other words — and increasing the chances of re-election seems to be the proverbial win-win scenario.

Which begs the question, why don’t political parties do it?

Why don’t they deliver policies that are good for the electorate and good for their re-election chances?

Let’s cut to what the voters, in general, want.

A policy framework where each person who wants a job gets a job is key. In addition, access to quality and affordable health care and education, from kindergarten to university to trades training is fundamental. There are other issues that are basic, simple and fair.

Voters want the government to provide aged-care services that treat the older members of society with dignity. We want decent infrastructure, especially pubic transport and roads. We want people who are doing it tough to be supported by a welfare safety net — a decent rate of pension, unemployment benefits and disability support.

So far, so good.

Australia has given up on solving unemployment

Sun, 20 Aug 2017

This article first appeared on The New Daily website at this link: https://thenewdaily.com.au/money/finance-news/2017/08/16/stephen-koukoulas-unemployment/ 

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

Australia has given up on solving unemployment

 It is a sad state of affairs to realise that the current crop of Australian policy-makers have effectively given up on reducing unemployment.

Treasury reckons that the lowest the unemployment rate can go without there being a wages and inflation breakout is around 5.25 per cent.

The Reserve Bank of Australia notes something similar, forecasting that even when the economy is growing strongly at an above-trend pace, the unemployment rate will hover between 5 and 6 per cent.
The current unemployment rate is 5.6 per cent or some 728,100 people – enough to fill the Melbourne Cricket Ground about seven times.

Given the Treasury and RBA estimates, it looks like Australia will never see fewer than about 700,000 people unemployed – no matter what kind of improvement we see in the latest jobless figures on Thursday.
It seems to be a peculiarly Australian issue. In the US, the unemployment rate is 4.3 per cent, in the UK it is 4.5 per cent, in Japan it is 2.8 per cent while in Germany, the unemployment rate is 3.9 per cent. And none of these countries is experiencing a wage/inflation problem. Indeed, even with the very low unemployment rate in Japan, wages are actually falling.