China’s, whoops, Australia’s strong Q1 GDP result

Wed, 04 Jun 2014  |  

The March quarter national accounts confirmed the economy accelerating to an above trend growth pace in the first quarter of 2014. GDP rising 3.5 per cent is a sign of the robustness of the economy in the past six months in particular (annualised GDP in last two quarters was 4.0 per cent) and it is clear that, in normal circumstances, the RBA would be looking to normalise (hike) interest rates from the current record low 2.5 per cent.

Things are not normal.

Almost half of the 3.5 per cent GDP growth in the past year has been due to China buying the raw materials that are rolling off conveyor belts 24 hours a day, 7 days a week.

Not that there is anything wrong with that. Indeed, it is a great thing that the economy is being supported by an external benefactor who is willing to buy a lot of those materials and pay a high price for them. While the strength in China lasts, the Australian economy will continue to grow, earn income and flourish.

The shocking aspect of the national accounts was a 0.3 per cent fall in gross national expenditure. Those in the community not feeling warm and fuzzy about the above trend growth now being recorded are exposed to parts of the domestic economy and are not those linked to the export sector.

This is why the RBA is not hiking interest rates – the non-export parts of the economy are soggy. To be sure, dwelling investment and household consumption growth were solid or strong into early 2014, but in recent months, dwelling approvals for housing have fallen sharply and the most recent retail trade data has been weak.

It is lovely to see GDP growth at 3 per cent and more, but it is important to acknowledge where that growth is sourced. An occasional boost from exports, or government demand, or housing construction or any other component is fine if other parts of the economy or soft or indeed, going backwards.

At the moment, it is exports, mainly to China, that is the driver of growth while mining investment, government demand and inventories are weak.

It is more likely than not that the surge in exports to China will continue. The concern is the monopsony-like environment via Australia's dependence on China which leaves it exposed to swings in Chinese growth and macroeconomic policy settings.

For now, the economy is looking good. The test as to whether this continues will be in three months when we see the June quarter national accounts and whether or not the recent dip in housing starts and retail spending undermines growth and even more importantly whether Chinese demand for mining output remains strong enough to support bottom line GDP growth.

comments powered by Disqus

THE LATEST FROM THE KOUK

CLIMBING THE COVID MOUNTAIN

Wed, 29 Jul 2020

TEN ECONOMIC STEPS THAT FORM A PATHWAY TO THE TOP

THEKOUK and EVERALDATLARGE OUTLINE A WAY FOR THE PEOPLE OF AUSTRALIA TO CREATE AND MAINTAIN SUSTAINED PROSPERITY

Covid19 has opened a door for Australians to positively accept significant changes that will lead to a shared good. This rare opportunity enables us to achieve sustainable economic and social goals that create a new ‘normal’ as our way of life.

These Ten Steps are presented as non-partisan recommendations to the Australian Parliament in the firm belief that, if they embrace them, the Australian economy and society will be greatly enhanced after the Covid19 pandemic has passed.

*A job for you if you want one.
A significant increase in part time and casual employment can be created that will enable you to enjoy a more creative and peaceful lifestyle and to live longer and better. The traditional age at which you would have been expected to retire will become obsolete as a result. An access age for pension and superannuation will become your choice. This will enable you to remain in paid work for as long as you want to, on a basis that you choose, while boosting the productivity and growth of Australia.

*You will get wage increases that will be greater than your cost of living.
A demand for enhanced innovative skills at all levels of employment will be created as the economy grows in strength, thereby enhancing your stature in the workforce and enabling executive salaries and bonuses to drop to levels that are accepted as justifiable by employees, shareholders and customers.

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.