Is the Aussie economy on the rocks?

Fri, 01 Jun 2018  |  

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/aussie-economy-rocks-050403466.html 

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Is the Aussie economy on the rocks?

I often wonder why people who analyse and comment on the economy don’t keep up to date with unfolding events.

Economics is a wonderful thing. It is vibrant, it changes every week, every month and every quarter as fresh news on inflation, employment, consumer spending, housing, business investment and a whole host of other variables are released. The reason this is important is that the recent, up to date information on the Australian economy is, all of a sudden, disconcerting.

While 2017 did see the strongest growth in employment on record, with an average increase in employment of 34,600 a month, in the three months to April 2018, the averAge monthly increase WAs just 4,800. This has seen the unemployment rate rise from what was a 5 year low of 5.4 per cent to 5.6 per cent.

The labour market has moved on from 2017.

What’s more, the ANZ job advertisement series, which provides a good guide to future trends in the labour market, has fallen for the last three months.

It is not just the labour market where there is some concern.

House prices are still falling. From the peak in October 2017, the Corelogic measure of house prices has dropped by around 2 per cent and there are no signs of the decline being arrested. While a 2 per cent fall after such strength is not yet a concern and the falls are not precipitous, there seems little doubt that further price weakness is on the cards. Housing auction clearance rates are low and banks are continuing to tighten their lending standards for new customers. There is little to suggest a reversal in the house price falls any time soon.

Retail sales are also losing momentum. Having risen 0.8 per cent in real terms in the December quarter 2017, they rose a paltry 0.2 per cent in the March quarter. Consumers are feeling the pinch from a weaker jobs market, low wages growth and high debt levels.

Areas of the economy where they have been positive signs, namely non-mining investment and public sector infrastructure spending, are not strong enough to overcome the weakness in these other areas to ensure bottom line growth in the economy is on track to reach let alone exceed 3 per cent. Unless there is a surprising and major upswing in business investment, the economy will likely remain soggy for a while longer.

For now, most economists including those at the Reserve Bank, are judging the economy to be doing well, with growth strong enough to engineer lower unemployment, raise wages growth and higher inflation. The recent facts suggest they are either looking at the hard news through rose coloured glasses or are paying little attention to run of recent facts.

Over the next 10 days or so, there will be a deluge of data which will provide the basis for a reassessment of economic conditions. By the end of next week, the market and the RBA will have before it updated and fresh news on GDP growth, retail spending, house prices, capital expenditure, credit growth, inflation, public sector spending, exports and international trade. There will, of course, be additional news from around the world.

This stock take on the economy will allow for a recasting of views on the economy. The bulk of these data will need to be surprisingly strong for there to be optimism about the economy into the second half of 2018.

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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.

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What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.