Blog

Tue, 01 Aug 2017  |  

 The Dun & Bradstreet Business Expectations survey has just been released.

The full survey results are at this link https://dnb.com.au/article-bex-q4-2017-preliminary02.html#.WX_GvTOB24k 

In terms of the key findings:

Uplift in business sentiment

Australian businesses are looking ahead to the final quarter of 2017 with renewed optimism, suggesting businesses are becoming more confident in navigating a challenging economic landscape. In Dun & Bradstreet’s July Business Expectations Survey, companies forecast a lift in sales, profits, employment, investment and selling prices in the December quarter, and reported improved business conditions in the June quarter.

Business expectations across the key aspects of the economic outlook have bounced back solidly, pointing to a lift in economic activity into the latter part of 2017. Also encouraging was a rise in the actual performance of the economy in the June quarter, a result that bodes well for the official GDP figures which are released in early September.

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 

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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 

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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/ 

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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 

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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 

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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?

THE LATEST FROM THE KOUK

Employment - the odd one out or is the economy booming?

Thu, 19 Oct 2017

I am reluctant to bag and slag the employment data, because it is all we have when looking at the health of the labour market. But there are a few quirky bits and bobs in the news of the wonderful run of job creation over the past year.

Employment rose by a remarkably strong 3.1 per cent in the year to September, a fabulous result.

But, and it is a big but, the results are at odds with just about every other indicator in the economy. EIther they are misleading or the employment data are misleading.

One way to check it to have a look at the economy the last time annual growth in employment was above 3 per cent. This takes us to the period around 2007 and into early 2008.

In 2007, annual real GDP growth was generally around 4 to 5 per cent, as you would expect with such jobs growth. The economy was on fire!  In 2008, the CPI surged by over 4 per cent which is again as you would expect given the boom in employment. The RBA was hiking rates at an agressive pace, with the official cash rate hitting a stonking 7.25 per cent in 2008. Wow! 

What bubble? The financial sector is fighting fit

Tue, 17 Oct 2017

This article first appeared on the Yahoo 7 Finance website at this link: https://au.finance.yahoo.com/news/1897318-045821149.html 

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What bubble? The financial sector is fighting fit

Australia’s banking sector is in peak health and the household sector is having few if any problems managing its debt.

This is the good news from the Reserve Bank of Australia Financial Stability Report which effectively put the kybosh on the fear-mongers who continue to forecast a crisis in household debt, a crash in house prices and turmoil in the financial system and more specifically, the banks.

The key conclusion from the RBA was that “the financial system is in a strong position and its resilience to adverse shocks has increased over recent years.”

These are strong and direct words from the normally cautious RBA.

It also noted that the bank’s non-performing loans (bad debts in other words) “remain low” and bank profitability “is high”, which are the key indicators of financial stability and strength. The RBA went as far to say that “the banks also have ample access to a range of funding sources at a lower cost than a decade ago” which is fundamental to the functioning of the financial system. Nothing was presented that indicated current problems in the financial sector.

The RBA assessment can be tested from the markets, specifically bank share prices. Most evidently, bank share prices remain strong as the investment community continues to place its money where its mouth is when determining actual performance and even risks when allocating investment funds.