Recovery:meet your new customers

The recovery is finally gathering strength.

But those who do best from it will be those who recognise their new customers first.

The Federal Treasurer, Wayne Swan, spent some time explaining this concept yesterday, in New Delhi.

He said business would have to rely more heavily on domestic growth in emerging countries  in future

That is countries like India and China.

Why?

That’s because our old stand-by, the US consumer, won’t be spending so much in future.

Mr Swan was adamant about that.

“No longer will the world be able to rely on the American consumer as the primary driver of global demand,” he said.

Mr Swan said American families had already begun to save more and spend less.

He is describing a fundamental change in world trade patterns here.

China’s rise as the workshop of the world was based squarely on booming  consumer demand in the United States.

So what, if anything, will replace that?

Mr Swan said that rising living standards, in countries like India and China, might fill that gap.

He warned that this would be critical, if the world was to return to growth rates anywhere near those seen before the global financial crisis struck last September.

And he has been deeply impressed by India’s performance so far.

“India’s economic performance through the global recession points to Asia’s growing ability to generate its own growth,” Mr Swan said.

“And this will only get stronger,” he added, in an address to Indian economists.

Mr Swan said almost 90 per cent of the world’s economic growth in 2010 is expected to come from emerging economies.

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The Treasurer thanks you

Treasurers don’t often thank their citizens.

But Wayne Swan came close in his latest economic note.

He was reflecting on last week’s national accounts, which showed that the Australian economy grew by 0.6 per cent in the three months to the end of June.

Mr Swan’s precise words are worth recording here.

“When you go through each of the components making up our GDP outcome, you quickly see how well the community has backed the government’s stimulus,” he said.

The national accounts also showed that the Australian economy had expanded by 0.6 per cent, over the 12 months to the end of June, despite the global economic crisis.

Mr Swan, who was writing from London, where he has been attending a G20 meeting, said the Federal Treasury had calculated that the Australian economy would have contracted by 1.3 per cent, over the year, if it had not been for the government’s stimulus measures.

He said, too, that the US economy had, in fact, shrunk by 3.9 per cent, while the Euro had contracted by 4.7 per cent, the UK economy had seen negative growth of 5.5 per cent and the Japanese economy had chalked up negative growth of 6.4 per cent.

Mr Swan said economic ministers, at the G20 meeting had agreed to “begin coordinated exit strategies”  from the  “extraordinary policy measures” they had adopted, to tackle the global economic crisis.

However, they had also stressed that their stimulus measures should not be stopped before global recovery had been “firmly secured.”

And Mr Swan said that has not happened yet.

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Retirement:not so super for women

The average superannuation payout for Australian women is just $73,000, according to new research.

That’s less than half the average – of $155,000 – for men.

This research has just been published by the Queensland Institute of Technololgy.

Australia’s superannuation funds are worried about the disparity.

“Many women have had – or will have  – time  out of the paid labour force for family and other care responsibilities,”  Pauline Vamos, the chief executive of the Australian Superannuation Funds Association said.

“As well, a significant proportion have only had superannuation since the Superannuation Guarantee was introduced in 1992,” Ms Vamos added.

And average wages for women are often lower than those of men.

Ms Vamos said, too, that women are over-represented in low paid and casual work, which typically have low or no super.

She said, also, that many women have to rely on their own resources in retirement, as a result of  divorce or separation.

Ms Vamos said that as a result of these differences, men hold about 66 per cent of  Australia’s superannuation assets.

“The gender divide in superannuation is well known, as is the inadequacy of most people’s savings for retirement,” Ms Vamos said.

She said the recommendations that her association has made to the retirement incomes inquiry, being conducted as part of the Henry Review of Australia’s taxation system, would help to correct that situation, for both men and women.

The research, conducted by the Queensland Institute of Technology, recommended that superannuation contributions for women generally need to be 12, or even 15 per cent of their salaries.

Ms Vamos said her association agrees with that conclusion.

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Australia has a new economic hero:guess who?

Australia has a new economic hero.  You.

A close look at the latest national accounts, just released by the Statistician, confirms that the government’s stimulus packages have, indeed, kept the nation out of recession.

The government – and the Federal Treasury -  though – could not have done that alone.

They needed your help.  And when that co-operation was required, the Australian public gave it, powerfully.

The bureau’s figures show, for example, that family spending rose by 1.7 per cent in the June quarter, after a 0.8 per cent rise in the March quarter, in what the statistician calls chain volume terms.

That’s a particularly brave performance, in a country that has seen employee pay fall by 0.3 per cent in each of those quarters.

The Federal government’s so-called cash splash, in the first of its stimulus packages, helped there.

Business people, too, have shown real courage, in the face of the global economic crisis.

They saw their profits fall by 0.8 per cent in the March quarter and by a massive 7.6 per cent in the June quarter.

But how did they respond?

The bureau’s figures show that they went out and spent heavily on new machinery and equipment.

Of course a tax break, that was part of the government’s stimulus measures, helped there, too.

But things might not have turned out this way.

The world reacted very differently, after the stock market crash of 1929, which set off the Great Depression.

That collapse was ultimately set right, by a global make work scheme, now known as World War II.

It is, at least, clear now that Australians have learnt that spending, after a market collapse, can be a good idea.

Australia would certainly have sunk into recession, like so many other advanced economies, if people like you had not reacted so positively to the government’s stimulus packages.

It is time that Australians, everywhere, get the credit they deserve for these brave responses.

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Stronger than expected growth sparks rate hike speculation

Australia defied a sharp downturn in its trade over recent months, to record remarkably strong growth of 0.6 per cent in the June quarter.

That might be just enough to bring forward the next rise in Australia’s interest rates.

Figures just released by the Australian Bureau of  Statistics also record 0.6 per cent growth in the national economy in the 12 months to the end of June.

Although that would be considered a very poor result  for a normal year, it must be counted as a good one as the global economic crisis grips world economies.

Even so, it implies problems.

Australia needs annual growth of something like 4 per cent, just to absorb each year’s shool leavers into the national workforce.

The Treasurer, Wayne Swan, has consistently warned that Australia still has a rocky path ahead, as it emerges from the present crisis.

How, though, has Australia managed to maintain at least some positive growth, in the face of the crisis?

The bureau’s detailed figures tell the story.

They show, for example,  final consumption growth of 0.8 per cent in the June quarter and 1.9 per cent over the year.

The Federal government’s stimulus measures had a lot to do with that.

Gross fixed capital formation rose by just 0.7 per cent in the quarter and fell by 2.3 per cent over the year, on a chain volume basis.

The most spectacular figures in the bureau’s report, though, were those reflecting the nation’s terms of trade.

These fell by 7.4 per cent in the June quarter and 11.6 per cent over the year.

That happened as the price of major commodities, like iron ore and coal, plunged as the crisis hit.

Even those falls, though, require perspective.

Australia’s commodity exports were fetching record, b0om time prices, before the crisis hit last September.

Equally sobering, though, were the Statistician’s estimates of real national disposable income.

The bureau said real disposable income in Australia fell by 2 per cent in the June quarter and 3.2 per cent over the year.

All of these figures are seasonally adjusted.

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After the crisis:70,000 new jobs?

The global economic crisis won’t last for ever.

And when it ends, Australia must be ready.

That’s the message behind a statement the Prime Minister made yesterday, announcing the establishment of a new task force meant  to secure 70,000 skilled workers, to build and operate major resource projects, over the coming decade.

Significantly, Mr Rudd made the announcement on Barrow Island, as he announced final approval for the $50 billion Gorgon LNG project.

His  timing was bold.

Shortly before Mr Rudd spoke, the Australian Bureau of Statistics produced new figures, showing that Australia had chalked up a record $11 billion slump in its export returns for the June quarter.

“Export prices fell sharply, down 15.8 per cent in the quarter, reflecting declines in prices for a broad range of both rural and non rural commodities,” the Treasurer, Wayne Swan, said sadly.

“This is the largest fall in export prices since records began in 1959,” he added.

The global economic crisis was, of course, primarily responsible for that.

This trade collapse,  in turn, is expected to cut 0.2 per centage points from the June quarter’s economic growth figure, which is to be released today.

So what, really, was Kevin Rudd  thinking about, when he announced plans to “secure” 70,000 mostly new jobs, at a critical time like this?

Your correspondent, a West Australian himself, knows all too well just how easy it is to get carried away with the call of giant resource projects, like Gorgon.

Perhaps there is method, though,  in what the Feds are doing, in this matter, with State and Territory help.

As Mr Rudd himself, said:”The Gorgon project is just one of about 80 planned or approved projects nationally that are likely to see demand for skilled resource labour sector labour increase by 70 per cent, over the next decade.”

All too often, in the past, Australia has seen serious bottlenecks appear in its job market, at times of economic expansion.

The Reserve Bank is helping, at least for now, by keeping interest rates on hold.

And the Bank’s Governor, Glenn Stevens, noted, when he made that announcement, that economic growth in China has already been “very strong.”

There are other bright signs , too.  These include the election of a new reformist government in Japan and continuing bright economic prospects in India.

Positive developments like these might well underpin strong resource project development in Australia.

And these opportunities are not to be missed, or restricted.

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Australia’s trade takes a hit

A big dip in Australia’s coal and iron ore exports over recent months led to a sharp reversal on the nation’s trade accounts in the June quarter.

This was, almost certainly, due to the knock on effects of the global economic crisis.

The Statistician reported today that Australia chalked up a deficit of almost $1.7 billion on its goods and services trade balance for the quarter.

That was down from  a surplus of almost $4.3 billion in the March quarter.

The trade shortfall contributed heavily to the seasonally adjusted current account deficit of almost $13.4 billion, that Australia recorded in the June quarter.

That was well up from the deficit of almost $6.4 billion that the nation saw in the March quarter.

Australia’s net foreign equity rose from $57.7 billion in the March quarter to $92.7 billion in the June quarter.

But the nation’s net foreign debt fell from $675.7 billion to $633.2 billion.

The bureau also reported today that Australia’s home building approvals rose 7.7 per cent in July, but remained 3.9 per cent below those of July last year.

The main rise, in July  this year, was in medium and high density project approvals.

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Signs of a possible recovery emerge

Early signs of a possible economic recovery are now apparent.

But there are still dangers ahead.  Even the Treasurer, Wayne Swan, admits that.

Mr Swan told reporters in Brisbane specifically yesterday that early withdrawal of the government’s economic stimulus package would “threaten the recovery.”

That warning came as the Australian Bureau of Statistics released a set of figures which reflected the classic early signs of an economic recovery.

It reported that retailers profits are up, that retail sales are steady, but that shopkeeper’ stocks are falling.

These are hopeful signs.

If  the nation’s storekeepers are watching their stocks fall, while  maintaining their sales, their usual response would be to place orders for more goods.

And that, in turn, should start to revive the nation’s factories.

There can be no doubt that the Federal government’s stimulus packages have helped to produce this  situation.

However the first of its peaks passed in the June quarter.  The second – and final peak – will be reached in the current quarter.

We will have to wait till Wednesday, though,  to find out just how big the impact of the government’s early stimulus measures have been.

That’s when the Bureau will release the June quarter national accounts.

The Bureau has just released are its June quarter Business Indicators.

These showed that retail profits rose 7.7 per cent in the June quarter, while sales remained steady and the level of stocks held by Australia’s shopkeepers fell by 1.8 per cent, on seasonally adjusted figures.

Factory owners, though, saw their sales fall by 2.9 per cent by volume during the quarter.

Mr Swan had told a radio interviewer earlier  that the government’s stimulus measures had supported jobs, small business and business confidence.

And he vowed that the stimulus would not be withdrawn prematurely.

“…to prematurely withdraw it would risk stalling the economy,” Mr Swan said.

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