What lies ahead for Australia's economy?

Thu, 03 Dec 2015  |  

This article first appeared on Yahoo7 Finance at this link: https://au.finance.yahoo.com/news/what-lies-ahead-for-australia-s-economy--005956922.html 


What lies ahead for Australia's economy?

Australia’s economy gained some momentum in the September quarter, with GDP up 0.9% for the quarter and 2.5% over the year.
The quarterly jump in GDP is the biggest rise in over three years. Which ever way you cut this result, it is good news for the economy.

In looking at the makeup of the economic growth, it is broadly as one would expect with interest rates at record lows and the Australia dollar down a massive 40 cents or so from the peak level in 2011. Household consumption spending was up a solid 2.9% over the past year while dwelling investment, which includes spending on alterations and additions, as well as the construction of new houses, is up a strong 10.3%.

Net exports surged adding 1.5 percentage points to quarterly GDP growth which means that while the price for many of our exports is in the dumps, we are selling ever increasing tonnages or volumes of goods and services. Of course business investment fell sharply, but this was concentrated in the mining sector.

The stronger GDP fits with the better news recorded recently in the jobs market since the middle of 2015. There was some concern that the jobs data were ‘wrong’, given the economy appeared to be soft, but with GDP expanding at a decent clip, there are less reasons to doubt the reliability of the labour market data. If the economic growth momentum continues at the current pace, the peak in the unemployment rate for this cycle has probably passed.

The bigger question than the GDP result is what is ahead for the economy?

2016 looks like being a year of stronger economic growth. The low interest rates still in place and a very low Aussie dollar, the key drivers of the economy are clearly very positive. This alone will underpin a decent economic expansion. To be sure there appears to be some offset to these positive drivers from the recent renewed decline in commodity prices, but the negative impact of these declines is close to running its course with global economic growth tilting higher. Commodity prices have already fallen a lot meaning further sharp and importantly protracted lower levels for commodity prices is unlikely.

This is especially the case with the signs of decent rates of economic growth being registered in the global economy.
If business investment, currently very weak, can find a floor during 2016 as the non-mining sector picks up steam, real GDP growth could easily reach – and exceed – 3% by the end of 2016.

For interest rates, it means interest rate cuts are very unlikely. Frankly, there is no need for lower interest rates if the economy is on the up.

The RBA yesterday seemed quietly pleased with the momentum of the economy, albeit with inflation a little too low for their comfort.
Which begs the question if interest rates are not going down, when will they be going up? Clearly, it is too early to be seriously suggesting that the RBA will be lifting interest rates any time soon.

But if we see another two quarters where GDP growth is 0.9% or so, if the unemployment rate dips towards 5.5% and the inflation rate by mid 2016 is on the rise, in the latter part of 2016 the RBA just might be wanting to take away the super easy monetary policy settings with a small lift in interest rates.

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Wed, 29 Jul 2020



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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.