by Alan Thornhill
Australia has chalked up substantial improvements in its current account, retail trade and home building approvals.
These all showed up in figures that the Australian Bureau of Statistics has just released.
The bureau reported a $9.7 billion improvement in the nation’s goods and services trade in the June quarter of this year.
That left Australia with a $6.5 billion trade surplus for the quarter, a strong improvement on the deficit of $3.2 billion seen in the March quarter.
All of these figures are seasonally adjusted.
The bureau also reported a seasonally adjusted rise of 0.7 per cent in Australia’s retail trade in July, following rises of 0.4 per cent in May and June.
Home building approvals also rose by 2.3 per cent in July, on a seasonally adjusted basis, following steep declines over previous months.
by Alan Thornhill
Talk of political punches and dirty deals are hitting the nation’s airwaves as Federal politicians struggle to put together a stable minority government, for the next three years.
Bob Katter, one of the three rural independents who will hold the balance of power in the new Parliament, at first accused the National Party leader Warren Truss of throwing a punch at him, then boasted that he had responded by sending “10 back.”
However Mr Katter later issued a statement saying that he had only been speaking figuratively about comments Mr Truss had made about him, on election night – and that no punches had actually been thrown.
Another rural independent, Alby Schultz, who represents the New South Wales seat of Hume, attacked the new West Australian National Party member, Tony Crook, over a deal he said Mr Crook had done with the Labor party to defeat the veteran Liberal MP, Wilson Tuckey. He described Mr Crook’s tactics as “the absolute pits.”
Meanwhile another Liberal Senator Bill Heffernan, admitted that he had telephoned the home of another of the independents, Rob Oakeshott last weekend, and introduced himself, to Mr Oakeshott’s wife as “the devil.”
Mr Heffernan apologised yesterday for his action.
Mr Oakeshott has told the Liberal leader, Tony Abbott, that Coalition MP’s have been conducting a smear campaign against him.
Observers said these developments reflect the pressures that have arisen, as MPs from all sides try to put together a stable minority government, that can govern Australia for the next three years.
Mr Oakeshott, Mr Katter and a third independent, Tony Windsor are conducting a series of meetings this week with the Prime Minister Julia Gillard and Mr Abbott.
So far, they have not indicated which leader they would support in a minority government.
A fourth independent, Andrew Wilkie has had separate meetings, with the major party leaders.
He also said that he, too, is still undecided.
“I had said I’d hoped to make an announcement about my decision as early as tomorrow,” Mr Wilkie said.
“That may be the case, it may take a little longer.
“I’m well aware the Australian people need an answer quicksmart,” Mr Wilkie added.
“And I would hope this is resolved before the end of the week.”
However he said a decision is definitely closer.
“I feel very optimistic. I think the Australian community can feel quite optimistic that a resolution is coming closer,” Mr Wilkie said.
by Alan Thornhill
Can a subdued economy be boosted by printing more money?
That’s a critically important question right now, as the power of conventional monetary policy – based on manipulating official interest rates – is reduced those rates approach zero.
With the Reserve Bank’s cash rate at 4.5 per cent, the issue is not urgent in Australia, at least not directly.
But with official rates already approaching zero in Japan, the United States and several European countries, the question has a lot of kick for the global economy.
What it comes down to, in the real world, is can these economies be revived by printing money?
The chairman of the US Federal Reserve, Ben Bernanke, signalled last week that he might well try some “unconventional” steps, like this, to revive the US economy, which now has 9.5 per cent unemployment.
Although the Reserve Bank would certainly wish Mr Bernanke every success, if he does go down that path, two of its economists, Stephen Elias and Mariano Kulish, have their doubts.
They acknowledge the problem.
“With little or no room left to lower policy rates, central banks in these economies have moved to purchase a variety of assets with newly created money,” they say in a research discussion paper the Reserve Bank has just published. (see RBA.gov.au)
The two economists admit that there is some econometric evidence which “on the surface”…”often suggests that real, base money growth can be a significant determinant of total output for a number of countries and sample periods.”
The two economists, though, tested these conclusions, through several models.
They concluded that these apparently positive outcomes, in fact, are “likely to be biased.”
They said, too, that the bias is likely to be either upwards, or downwards, depending on the model chosen.
Their paper is highly technical.
However their basic conclusion is clear enough. They says there isn’t yet good evidence to show that these policies actually work.
If they are right, their central conclusion is very significant.
It means that some of the world’s biggest economies are likely to remain subdued, for some time yet.
by Alan Thornhill
We should get a good idea of where the Australian economy is heading this week.
That will come when the Bureau of Statistics releases the June quarter national accounts on Wednesday.
Wayne Swan says that while Australians will have to wait till then, for those figures, the early signals have been good.
The Treasurer says other figures have shown that the outlook for business investment in Australia is “very strong.”
He says the Bureau’s latest capital expenditure figures, released last week, show that Australian businesses are planning to invest $123 billion this financial year.
This represented a rise of 24.3 per cent over the previous financial year.
Mr Swan said he is “optimistic” about the prospects for improvement in private sector activity, that he expects to see in Wednesday’s national accounts.
That will be critical, as government stimulus programs are now close to ending..
“…I’m optimistic that we will continue to see private activity improve as our infrastructure stimulus winds down,” Mr Swan said.
He noted, though, that the global economic outlook is still not strong.
“The global economic recovery is patchy,” Mr Swan said.
“And there has been some unwelcome data abroad in recent weeks.”
Mr Swan noted that the US Federal Reserve Chairman, Ben Bernanke, had warned that the US economy “remains vulnerable” and that the task of economic recovery and repair “remains far from complete” in many other countries.
US growth slowed to 0.4 per cent in the June quarter and America’s unemployment rate had remained “stubbornly high” at 9.5 per cent.
Mr Swan also said high debt levels are still a concern in many European countries and Japan’s economic recovery is still “fragile.”
He said Japan’s growth slowed to just 0.1 per cent in the June quarter as private demand had stalled.
by Alan Thornhill
Although Australia’s political impasse is still far from resolved, events might finally be moving in Tony Abbott’s direction.
This is a big change from the situation on Thursday, when Mr Abbott seemed determined to dig his own political grave, by refusing the independents’ request for a Treasury costing of Coalition policies.
He later backed down on that issue, saying he would submit his policies to Treasury for costing.
At the last count, Labor had 72 seats in the House of Representatives, where governments are made and broken, while the Coalition had 73.
The three rural independents, who have so far been acting together, all have strong conservative backgrounds. They were once National Party members, but all left that rural based party in unhappy circumstances.
Despite that, Mr Abbott says he would welcome them into a Conservative minority government.
He praised them, in a television interview yesterday.
“…and look, the three rural independents, they’re all adults, they’re all patriots,” Mr Abbott said.
“They all want to see the best possible deal for our country and particularly for regional Australia.
“And I think the Coalition can deliver that,” Mr Abbott said.
The Treasurer, Wayne Swan, put Labor’s case, in a separate interview.
“I think Labor is best placed to form a stable and effective Government,” he said.
“We’ve got a very clear program.
“We’ve got a proven track record when it comes to economic management, saving this country from recession.
“We’ve got a plan to broaden and strengthen our economy.
“So what’s important here are the national interest issues<” Mr Swan said.
He said these were Labor’s “bottom line.”
However the three former Nationals might well accept Mr Abbott’s invitation, even though Mr Windsor, in particular, is warning that people that should not automatically assume that he will do so.
If all three support the Coalition, though, Mr Abbott would have the 76 votes he would need to form a government in the 150 member chamber.
Labor, which would need four extra votes, might find it harder to get them.
The new Green MP, Adam Bandt, would most likely form some kind of alliance with Labor.
The Tasmanian independent, Andrew Wilkie, could, too.
However those two, together, would still leave a Labor alliance two votes short of government.
If one, or more, of the so-called three amigos does supports Labor, though, the situation becomes much more interesting.
This, of course, is the simple analysis. The deals, ultimately worked out, are likely to be hideously complicated.
And there may well be good reason to wonder if deals, reached this week, really can lay the groundwork for stable government.
If they can’t, we may all be sent back to the polls, within a very short time.
So what, precisely, are the main players saying right now?
Mr Windsor and Mr Wilkie have both declared that they want to make their decisions, this week.
Mr Windsor said:”We’re entering into a range of meetings this week.
“I would hope that by the end of the week we should be able to make a decision,” he told Channel Ten.
But he also told the ABC:”it could take a little bit longer than that”.
However Mr Wilkie also said he would be “very surprised” if the talks went beyond this week.
“It would be a very bad thing for Australia,” Mr Wilkie added.
by Alan Thornhill
Tony Abbott reads Private Briefing.
Or, at least we like to thinks so.
And what other explanation could there be for his volte face on his policy costings?
One day he would not tug the forelock, like that desperate harlot, Julia Gillard, and give them to the all powerful Trinity, of Windsor, Katter and Oakeshott.
The next day he would.
And what happened in between?
Yes. That’s right.
Private Briefing told Mr Abbott that he was on the wrong path. Walking to his own political grave, in fact.
He saw the light. And turned around.
So Mr Abbott might well become Prime Minister, after all.
This is a heavy weight for us, at Private Briefing, to bear.
But we will do our best, as always.
The Trinity welcomed their Prodigal Son back.
Rob Oakeshott said it made him feel good, as a Conservative, to have a Conservative candidate, again, to consider as a candidate for Prime Minister.
Others, in the media, went astray.
One commentator even suggested that, in his defiance, Tony Abbott was trying to precipitate another election, in the hope of winning it.
That might have been right, on the day.
But we, at Private Briefing, had more faith.
We always believed that, ultimately, Tony would return to the right path.
As he did.
by Alan Thornhill
Tony Abbott is digging his political grave.
Democratic politics are essentially about numbers.
And Mr Abbott is turning his back on the three men who could give him the votes he needs to become Prime Minister in a minority government.
His arguments that he is protecting convention and acting on principle are thin.
Bob Katter advanced a more robust argument, when he said Australians, generally, will believe that Mr Abbott has”something to hide” by refusing to put the Coalition’s policy costings to Treasury, for checking.
Another of the three independents with critical votes, Tony Windsor, puts it even more simply, dismissing Mr Abbott’s arguments as “silly” and his actions as “ill-advised.”
Mr Abbott’s own record, on convention, is weak. His refusal, before the elections, to submit the Coalition’s policy costings to Treasury for checking, was a clear breach of the Federal Charter of Budget Honesty, which covers such things.
Certainly Labor, too, has been less than perfect, itself, about such matters, in the past.
Mr Abbott’s second argument is that Treasury can’t be trusted, to cost the Coalition’s promises.
Not, before a pre-election leak, of one such costing is resolved, anyway.
That’s now a matter for the Federal police.
They are investigating a formal complaint the Coalition made about this alleged breach.
Mr Abbott did not complain, though, about earlier leaks, from a mid level Treasury official, later identified as Godwin Grech.
Mr Grech was leaking material, meant to embarrass the government, to the previous Coalition leader, Malcolm Turnbull.
His short career, as a leaker, came to a sudden end, though, after it became clear that the material Mr Grech was supplying to Mr Turnbull opposition was, perhaps, a little too creative.
Mr Abbott, himself, did benefit from those leaks, though.
They weakened Mr Turnbull’s authority, because he was deceived by them. That, ultimately, helped Mr Abbott get the Coalition’s top job.
So Mr Abbott, himself, really should be grateful to, not angry with, Treasury leakers.
by Alan Thornhill
Finding a good apprenticeship has always been hard.
And it’s harder this year than most.
The number of apprentices being taken on, in Australia’s building, is now so restricted that the housing shortage, already estimated to be about 200,000 homes, is almost certain to get worse over the next five to 10 years.
The Housing Industry Association says the apprentice intake, in the residential building sector, stalled in the June quarter of this year.
This is just one more sign that business confidence, too, is still being affected by the shakeout which followed the global financial crisis.
This was evident too, in new capital expenditure figures, that the Australian Bureau of Statistics has just released.
These showed that new capital spending fell by 4 per cent in the June quarter of this year. The fall surprised many economists as Australia’s mining industry, in particular, is trading very strongly.
Rising interest rates- and worries about the super profits tax - that the Federal government then proposed for the industry, are thought to have contributed to this fall.
The present impasse, in Australia’s Federal politics, also presents new elements of risk.
Alan Langford, the chief economist of Bankwest, says the deadlock in Canberra leaves the Australian economy vulnerable, if there is a sudden jump in global risk aversion.
Mr Langford said that would be particularly so if a viable minority government cannot be established quickly.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Friday December 20
The Dow Jones index rose 11 points to 16,179
Some 80 people are injured – at least four seriously – after part of a roof in the Apollo Theatre in central London collapsed during a performance.
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