Growth accelerates as the RBA is caught flat footed

Thu, 03 Apr 2014  |  

The run of data in the few days since Tuesday's meeting of the RBA Board has continued the trend of strength, confirming a substantial lift in the non-mining investment parts of the economy.

The RBA appears to be too gloomy with its views on growth and sanguine on inflation as it happily leaves interest rates at record lows, inflating house prices along the way and allowing the rest of the economy to pick up momentum at an increasingly worrying pace.

In terms of the specifics, retail sales rose a further 0.2 per cent in February and this is after a stonking 1.2 per cent rise in January and 0.7per cent increases in both November and December. Since September 2013, the annualised growth rate of retail spending is an over-heated 8.5 per cent. In trend terms, retail sales are also strong and barring some massive shock, it looks like real retail spending rose by massive 1.25 per cent in the March quarter. This is a terrific kick-start to the GDP growth.

The export performance remains super-charged with annual growth now at 17.6 per cent and the balance on international trade moving squarely into surplus. All of that investment in mining is clearly yield extra output, the bulk of which is being exported and adding to bottom line GDP.

What's more, the number of building approvals for dwellings remains strong, with the 5.0 per cent dip in February only partly unwinding a stellar 6.9 per cent rise in January. Put another way, the month to month noise is merely a distraction from the fact that dwelling approvals have been rising on a trend basis for more than two years.

Even job vacancies are turning, with the ABS measure up a decent 2.3 per cent in February. This marks the start in the uptrend in demand for labour. The ABS series is now matching the ANZ job vacancies series which is also showing signs of improvement.

In all, the economy is transitioning away from the mining investment phase and more towards domestic activity and exports.

Indeed, when the March quarter national accounts are released, GDP growth will be back at a trend pace of 3 per cent. With that growth rate all but baked in the cake, get set for the unemployment rate to start to fall soon and for the inflation outlook to become a little more problematic.


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Is the Aussie economy slowdown good or bad news for you?

Mon, 04 Mar 2019

This article first appeared on the Yahoo Finance web site at this link: 


Is the Aussie economy slowdown good or bad news for you?

Your economic well-being is undergoing some significant changes at the moment. Whether that is good or bad news depends on your home ownership status and intentions to buy, and the amount of money you have in invested in shares either directly or indirectly in your superannuation fund.

To the stock market first

Having been beaten down late last year, the Australian stock market has staged a powerful pick up. Compared with the low point in December, the ASX200 has risen over 12 per cent in two months. This is, quite clearly, great news for your superannuation balance and for your wealth if you own any shares directly.

The change in sentiment about interest rates and a solid profit reporting season has underpinned this jump in share prices and with US and local interest rates set to remain low or be lowered in the months ahead, share prices should continue to do well.

Falling house prices met with dismay and joy

From the perspective of personal finances, the news on falling house prices has been greeted with both dismay and joy. Home owners in Sydney Melbourne, Perth and Darwin and reeling under the weight of wealth destruction with prices down by between 10 and 25 per cent.

In Sydney, for example, that house that was valued at $1 million back in the middle of 2017 is now worth around $870,000, a drop of $130,000 in less than two years.


2019-20 budget will be 'problematic': here's why

Wed, 20 Feb 2019

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


2019-20 budget will be 'problematic': here's why

Word has it that the framing of the budget, due to be handed down by Treasurer Josh Frydenberg the day after April fools day (and around 6 weeks before the election), is more problematic than usual.

Problematic because there is some mixed news on the economy that will threaten the current forecast of a return to budget surplus in 2019-20.

Housing has gone into near free-fall, both in terms of prices and new dwelling approvals. This is bad news for GDP growth.  The unexpected severity of the housing slump is the key point that will see Treasury revise its forecasts for GDP growth, inflation and wages lower when the budget is handed down.

It will be impossible for Treasury to ignore the recent run of hard data, including the weakness in consumer spending and a generally downbeat tone in the recent economic news when it sets the economic parameters that will underpin its estimates of tax revenue and government spending and therefore whether the budget is in surplus or deficit.