The terms of trade rise … and other snippets of economic news

Thu, 01 May 2014  |  

The last few days have seen some low impact, but nonetheless enlightening, data hit the screens.

Credit growth remains solid, with a 0.4 per cent gain in March which meant the annual growth rate was 4.4 per cent. Not weak, not strong but the annual increase was the fastest since March 2009. Housing credit drove the lift in growth with a 5.9 per cent annual increase while business credit was also on the mend with an annual rise of 2.6 per cent. It seems borrowers and lenders are stepping up to take advantage of the current low level of interest rates and stronger growth more broadly.

The terms of trade (export prices divided by import prices) were broadly stable in the March quarter (up 0.4 per cent) with export prices rising to their highest level since December 2011. The curious thing – at least for the terms of trade doomsayers – is that since the end of 2012, the terms of trade have actually risen by 1.4 per cent, aided by a stronger world economy.

While the terms of trade may yet collapse, there is scant evidence of this at the moment.

The RPData house price series locked in the stellar house price momentum of the past two years – price rose a further 0.3 per cent in April for an annual rise of 11.7 per cent. While the April rise seems reasonably well contained, it follows a record monthly rise of 2.3 per cent In March. There seems little doubt that house price growth remains particularly strong.

The otherwise unremarkable AIG Performance of Manufacturing Index fell 3.1 points to 44.8 points. This reflects a mix of long run structural issues for manufacturing where low cost overseas competitors are likely to continue to negatively impact Australian business and related to that the difficult being imposed from the Australian dollar at current levels.

The net result of all of this information is that the economy is growing solidly and is likely to continue to do so for some time, or at least while ever the RBA holds interest rates at record lows.

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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   

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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.