Wed, 07 Dec 2016  |  

It is always interesting to superimpose facts over perceptions and one that springs to mind is the perception that the Coalition side of politics are better at economic management than Labor.

With the horrid September quarter GDP result today, I thought it useful to dust off the average quarterly GDP results of each government since 1972.

You draw your own conclusions.

Average quarterly GDP

Abbott/Turnbull      0.58%

Rudd/Gillard          0.62%

Howard                 0.89%

Hawke/Keating      0.90%

Fraser                   0.54%

Whitlam                0.76%

Note that in today's dollar terms, 0.01% difference on GDP is approximately $42.3 million per quarter or $170 million a year. 



Wed, 07 Dec 2016  |  

This article first appeared on the Yahoo 7 Finance website at this link: 


Is the Australian economy going backwards?

The news on economic growth is shockingly weak. GDP fell a stunning 0.5 per cent in the September quarter to register only the fourth decline in the last 25 years. It was the second worst GDP result since 1991. It is not good news given the ‘normal’ or long run average rate of quarterly GDP is around 0.75 per cent.

The shock GDP crash follows a raft of other surprisingly poor news on the economy since the July election, where the Coalition campaigned and won on an economic platform of “jobs and growth”. Employment has dropped an alarming 25,700 since the election, as employers have shed staff in reaction to the shrinking economy.

At the same time, annual growth in wages has dropped to an all time low, which is undermining household incomes and with that, the spending power of consumers. It is little wonder household spending growth remains weak and consumer sentiment is hovering around its long run average level. Reflecting these moribund conditions in the economy, underlying inflation has fallen to a record low as firms increasingly resort to price discounting to sell their products.

Fri, 02 Dec 2016  |  

This article first appeared on the Yahoo 7 Finance website at this address: 


Are Aussie interest rates about to hike?

There is a slowly growing vibe that the next move in interest rates in Australia will be up. Perplexingly, money markets are starting to price in higher interest rates for reasons that are paying scant regard to local economic news.

It is a case of the local market reverting to its unthinking, unquestioning attitude to what the RBA tells them in private “Chatham House rule” meetings plus the lead from the US where its strong economy will see the Fed hike its interest rates a few times over the next six months.

In Australia and for the RBA, it is an approach that is ignoring a litany of weak economic indicators.

Think about this for a moment for the Australian economic scorecard. Private sector business investment is in free-fall to be down 13 per cent in the last year and 33 per cent in three years. Underlying inflation is the lowest ever recorded and has been below the bottom of the RBA target range for over a year. Wagers growth has slipped below 2 per cent which is the weakest wages growth in many decades. Employment growth has stalled and underemployment is at a record high.

Tue, 29 Nov 2016  |  

This article first appeared on the Adelaide Review website at this link: 


2016: A Most Reasonable Year for the Economy

The Australian economy is in reasonable shape as 2016 draws to a close. Real GDP growth is around three per cent, inflation is 1.5 per cent while the unemployment rate is hovering near 5.75 per cent.

To be sure, it would be desirable if growth was a little stronger and unemployment lower, but given the collapse in mining investment, consumer spending being constrained by record low wages growth and the pressure of global disinflation on local producers, 2016 has been a stronger year than almost all forecasters were anticipating at the start of the year.

There are reasons to think that 2017 will also be a reasonably good year for the economy.

Commodity prices are edging up and are higher now than at the start of 2016, and, in some cases, this is by a large amount. This is leading to a lift in national income and nominal GDP growth. The Australian dollar, which has been stuck around US 75 cents for many months now, is providing a competitive boost which will further underpin economic growth. One only has to look at the surge in tourism and education exports to see how the lower Aussie dollar is helping the economy.

Sat, 26 Nov 2016  |  

It’s here!

The book I co-wrote with Alan Kohler, Our World in Charts, is available for purchase.

Here is the link to buy it now: 

As the blurb says: An old proverb says: "a picture paints a thousand words" and in this book, the pictures are the charts. The World in Charts has over 150 charts that depict a range of economic, market and social issues. There is a lot of information in each chart and each tells a story which authors Alan Kohler and Stephen Koukoulas explain.

Charts give context. An annual budget deficit of $30 billion sounds a lot, but relative to the size of the economy in 2017 it's about the average of the last 40 years. A chart can show this. Ask a good economist, "how are you today?" and they should answer, "relative to what?" Charts show how the economy or markets are today relative to the past.

Wed, 23 Nov 2016  |  

How about a government policy that benefits people’s health? Raises revenue to help ‘repair’ the budget? Saves the government money in health care and medicine because health outcomes are improved?

No - I am not referring to the tobacco industry, I am talking about a sugar tax.

A sugar tax that raises the price of, say, soft drinks, will lead to lower consumption (gotta love price signals) and raise revenuefor the government. A win-win.

For the sugar growers – be agile. Grow pawpaws, pumpkins, rockmelons, corn or lychees and you will still make a good return. There’s a handy link here for all sugar farmers looking for alternative crops. 

Oh, and if you want to see how the policy on tobacco has worked, see 

Reproduced blow:

Tue, 22 Nov 2016  |  

The Turnbull government is hell-bent on delivering company tax cuts over the next decade. The cost to the budget of these cuts is about $50 billion when fully implemented.

With the budget still in deficit and the surpluses into the 2020’s rice paper thin at best, the money to cover the cost of these tax cuts will have to be borrowed by the government. In other words, there will be a tub-thumping $50 billion of extra government debt once these company tax cuts are in place.

If we work on the reasonably conservative assumption that the average interest rate paid by the government on the money borrowed to fund these lower company tax rates is 2.5 per cent, there will be an additional $1.25 billion of interest to be paid each and every year in perpetuity to cover this cost.

That’s interest only.

That’s $100 million a month in interest, just to fund those company tax cuts. $25 million a week, every week forever, just on interest for this one promise.

Mon, 21 Nov 2016  |  

This article first appeared on the Yahoo 7 Finance website at this link 


Do we need to be worried about government debt?

Here’s a question for those worried about government debt. Which side of politics is racking up debt at a faster pace – Labor under Rudd and Gillard or the Coalition under Abbott and Turnbull?
The answer would surprise most people – it’s the Abbott / Turnbull Coalition government.

Remember when the Labor government was being slammed by the Coalition for creating a “debt and deficit emergency”, Labor were a “budget disaster” and “addicted to borrowing and spending”?

Well, it seems that the Coalition now has a debt problem.

The Labor Party was in government for 70 months from November 2007 to September 2013, during which time gross government debt rose $320 billion. A mix of collapsing revenue from the terms of trade slump plus the huge fiscal policy stimulus associated with the global financial crisis accounted for the bulk of the rise in debt. The rise in government debt averaged $4.6 billion a month for those 70 months.

Recent data from the Australian Office of Financial Management shows that the Coalition government have been racking up debt at a faster pace than Labor. In the 38 months the Coalition has been in power, government debt has risen by $185 billion which is an average increase of $4.9 billion a month.

Mon, 21 Nov 2016  |  

The recent labour market data threw up a few disconcerting facts about the economy.

Since the July 2016 election, employment has fallen by 25,650 people despite growth of over 70,000 in the working age population.

The Coalition government plan for 1 million jobs in 5 years is in tatters. Since the September 2013 election when the pledge was made, monthly employment growth has averaged 12,600 which extrapolated over 5 years means employment gains of just 757,000, some 243,000 short of the 1 million commitment. 

The workforce participation rate fell to 64.4 per cent, the lowest since 2006. At a time when Australia needs more of the population working, participation is falling. Little wonder the budget deficit remains too high.

The underemployment rate rose to a record high of 9.3 per cent, meaning that almost one in 10 people who do have a job would like to work more hours. The economy is simply not growing quickly enough.

In absolute terms, the data are disconcerting and the trend is going the wrong way.  


Fri, 18 Nov 2016  |  

The Turnbull government borrowed another $900 million today which means that gross government debt hit a fresh record high of $458.6 billion. It seems a long time ago that the Coalition threatened to block legislation to raise the debt ceiling to what now looks like a puny $300 billion. That was May 2012.

According to the Australian Office of Financial Management, the current government debt level is some $185.5 billion above the level inherited by the Coalition when it won the September 2013 election on a platform to return the budget to surplus and pay off Labor’s debt.

On any objective measure, the Coalition has failed dismally in this KPI. And the AOFM suggests there is still around $40 billion to be borrowed between now and the end on the financial year on 30 June 2017.


Inflation is low and remains low

Thu, 27 Apr 2017

This article first appeared on the Yahoo7 Finance website at this link: 


Inflation is low and remains low

Inflation edged up a little in the March quarter – from an annual rate of 1.5 per cent at the end of 2016, the headline rate rose to 2.1 per cent. The underlying rate of inflation, which the RBA trends to place more weight on when it comes to assessments of interest rate policy, was even more muted, lifting from 1.5 per cent to 1.8 per cent.

And recall, the RBA target range for inflation is between 2 and 3 per cent.

Annual underlying inflation has been at or below 2 per cent since late 2015, and has been below 2.5 per cent, the midpoint of the inflation target, since the end of 2014. That is a long time.

The data today confirm that inflation is low and remains low and in isolation, continues to give the RBA plenty of scope to further reduce interest rates. When the recent data on unemployment, building approvals, private sector business investment and wages growth are added to the mix, the case for an interest rate cut is strong.

The Australian budget is likely to confirm this is a big-spending, big-taxing government

Thu, 20 Apr 2017

This article first appeared on The Guardian website at this link: 


The Australian budget is likely to confirm this is a big-spending, big-taxing government

While much of the focus of the upcoming federal budget will, quite rightly, be policy issues associated with housing affordability, areas of changes to spending and revenue, there will also be an opportunity to analyse the underlying values of the government.

This will be the fourth budget of the current Coalition government and will show us the ‘big picture’ of government policies and priorities. There will be data on aggregate government spending, taxation receipts, gross and net government debt and the budget deficit.

The most accurate way to analyse the trends in the key budget figures will be to assess them as a ratio of GDP. Government spending, for example, totalled $48.8bn in 1982-83 and this rose to $423.3bn in 2015-16, which is, at face value, an enormous increase. But spending actually fell from 25.8% of GDP in 1982-83 to 25.6% of GDP in 2015-16. It is a similar issue with government debt, the budget deficit and other benchmarks.

Based on the performance of the economy since the last fiscal update in December 2016, the budget is likely to confirm that this is a big-spending, big-taxing government with a strategy for continuing budget deficits and rising debt as it funds some of its pet projects.

It is all but certain that government debt will remain above 25% of GDP in 2017-18 and the forward estimates, meaning the government will be the first in the last 50 years to have spending at more than a quarter of GDP for eight straight years.