The weak economy is turning higher

Mon, 15 Jul 2019  |  

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


The weak economy is turning higher

In the space of a couple of months, the rhetoric on the economy has gone from strong to weak.

Curiously, both assessments are wrong.

The economy was actually weak during the first half of 2019 and, if the leading indicators are correct, late 2019 and 2020 should see a decent pick up in economic activity.

It is not clear what has caused this error of judgment and the about face from so many commentators and economists, including importantly the Reserve Bank. A level-headed, unbiased look at economic data confirms that in late 2018 and the first half of 2019, the economy was in trouble. There were three straight quarters of falling GDP per capita, house prices were diving at an alarming rate, there was a rise in unemployment, wages growth remained tepid and low inflation persisted.

These are not the dynamics of a “strong” economy.

Only now, in the rear view mirror look at the economy, are these poor indicators gaining favour, leading to generalised economic gloom.

There’s an old saying, it’s always darkest before the dawn. Which in economic terms means there is a tendency for the herd to be very pessimistic, dark if you like, just before the sun starts to shine. And to be frank, the last month or so has seen some better news on the economy which is largely being ignored now, like the bad economic news was earlier in the year.

The economy is poised to enjoy some sunshine.

Let’s look back at how this misreading of the economy has evolved.

The odd change in the commentary, including from the RBA, appears to have been heavily influenced by the timing of the election on 18 May. Before then, the “strong economy” rhetoric dominated discussions. Now, post-election, the commentators and policy makers are playing catch up.

The Reserve Bank has changed its tune to the extreme point where it has cut interest rates twice in the six weeks after the election and Governor Lowe is screeching at the government in an unedifying campaign to do something to stimulate the economy. A little self reflection would show that it was the RBA’s own misjudgement prior to the election and its failure to cut interest rates a year or so ago that has compounded the current downturn.

While it is still early to say the economy has turned the corner and growth is poised to accelerate significantly into 2020, the run of recent news has been encouraging.

The housing sector, which was a drag on household wealth and spending, has seen a lift in auction clearance rates and the Corelogic measure of house prices is showing prices stabilising after the sharp declines from the 2017 peak. With housing affordability at the best levels in several decades and significant pent up demand from investors and first homebuyers alike, it is easy to forecast a pick up in house prices in coming months and certainly into 2020.

There is more solid news from consumer sentiment and business conditions, which are a little higher now than in the earlier part of 2019. These are pre-conditions for more favourable economic conditions. At the same time, exports are booming, with monthly trade surpluses hitting record after record, buoyed by strong commodity prices and strong global demand.

The ABS measure of expected business investment in 2019-20 is strong. The business sector is poised to lift its capital expenditure by close to 10 per cent after many years of decline. Add to this the yet-to-be-seen effects of the interest rate cuts from the RBA, the relaxation of credit conditions on the banks, the income tax cuts which have passed the Parliament and still favourable tailwinds from the global economy and it would be no surprise to see the domestic economy pick up before year end and for the RBA to have ended its monetary policy easing cycle.

Like many fashion trends, there can be a herd mentality when it comes to economics. It goes something like, ‘follow the RBA, follow the Treasurer, don’t think independently’.

This is a mistake.

For now, the economy is negotiating the low point in the current cycle and there are growing reasons to be optimistic that by year end, the gloom will have passed and the economy will be on track to return to what will be truly strong growth.

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How Labor lost the federal election SO badly

Thu, 07 Nov 2019

This article first appeared on the Yahoo Finance website on 20 May 2019 at this link: 

How Labor lost the federal election SO badly

The Coalition did not win the election, Labor lost it.

The tally since 1993 for Labor is a devastating seven losses out of nine Federal elections. By the time of the next election in 2022, Labor will have been in Opposition for 23 of the last 29 years. Miserable.

The reasons for Labor’s 2019 election loss are much more than the common analysis that Labor’s policy agenda on tax reform was a big target that voters were not willing to embrace.

Where the Labor Party also capitulated and have for some time was in a broader discussion of the economy where it failed dismally to counter the Coalition’s claims about “a strong economy”.

In what should have been political manna from heaven for Labor, the latest economic data confirmed Australia to be in a per capita recession. This devastating economic scorecard for the Coalition government was rarely if ever mentioned by Labor leader Bill Shorten and his team during the election campaign.

This was an error.

If Labor spoke of the “per capita recession” as much as the Coalition mentioned a “strong economy”, voters would have had their economic and financial uncertainties and concerns confirmed by an elevated debate on the economy based on facts.

This parlous economic position could have been cited by Labor for its reform agenda.

Why animals are a crucial part of the Australian economy

Thu, 07 Nov 2019

This article was written on 31 October 2019: It was on the Yahoo Finance website at this link: 


Why animals are a crucial part of the Australian economy

Animals are a critical part of the Australian economy, either for food, companionship or entertainment.

But every month, millions of sheep, cattle, pigs, chickens, fish and other animals are bred and then killed. Most of them are killed in what we define as ‘humane’, but no doubt tens of thousands are horribly mistreated, as are a proportion of the animals we keep as pets.

Animals are slaughtered to provide food for human food consumption, to feed other animals (your cats and dogs are carnivorous) and for fertiliser.

The Australian Bureau of Statistics collects a range of data on animal slaughterings and the most recent release of the Livestock and Meat data release included the following facts.