There are a few snippets of news suggesting that the economy will be a little stronger by the second half of 2015.
Personal wealth is booming with house prices and the share market both rising strongly. Household wealth has risen by around $2 trillion in the 3 years and when people have rising wealth, they tend to have a positive view about their financial future and as a result, they are more inclined to spend. Recent retail sales data suggest reasonable growth in consumer spending and this is before the full effect of the most recent lift has had a chance to impact on spending.
In addition to that, the number of new dwellings being built is at a record high. This is adding to the economy via the construction process, obviously, but there will also be a spill over to spending in the form of fittings, furniture and the like as the houses are completed.
It is also noteworthy that commodity prices, in Australian dollar terms (which is the only thing that matters), have been steady in the last 5 months. In other words, the weaker Aussie dollar over the past few months is doing its job and helping to support national incomes and growth.
There are also a few snippets of positive news in the labour market with steady, albeit moderate, gains in job ads over recent months. To be sure, the labour market is still soft with the unemployment rate trending higher and wages growth mired at record lows, but there must now be some hope that the unemployment rate will peak around 6.5 per cent.
There is also some solid growth in export volumes. While the price of many export items are well down over the past year, the amount exported is still growing strongly. There are also signs of an upswing in exports of tourism and education services which will underpin the economy for the next year or two.
To be sure, the economy is in aggregate weak – with business investment in free-fall, business confidence in the dumps and inflation risks skewed clearly to the downside. But all is not dreadful, all is not weak and with a little luck via a stronger world economy as 2015 unfolds, there could be some upside to the Australian economy over the next 6 to 12 months.