by Alan Thornhill
Watch the Chinese consumer closely.
That’s the message John Fraser, the Secretary to the Treasury, gave to a Fixed Income Forum in Tokyo today.
And he wasn’t modest about it.
He said Chinese consumers could boost – or weaken – the Australian economy.
But his message was essentially positive.
“Australia is entering its 26th year of continuous economic growth,” Mr Fraser said.
“We did not fall into recession in the aftermath of the global financial crisis of 2008, unlike many economies.
“ And real GDP is growing by 3.3 per cent per annum, faster than every country in the G7,” he added.
So what does the Chinese consumer have to do with all this?
Well, Mr Fraser has a few words for the sceptics, on that issue.
“ Indeed, 8 out of Australia’s top 10 trade partners are in Asia,” he said.
Mr Fraser also noted that with the mining boom now well past its peak, lower levels of of mining investment have already become “a significant drag” on our economy.
And worse is to come.
“ Mining investment is expected to fall by 25 per cent in 2016-17 and a further 14 per cent in 2017-18,” Mr Fraser said.
But he added: “as this detraction eases it is expected that investment in other areas of the economy will pick up, despite uncertainty over the exact pace and timing of this recovery.”
This is where – hopefully – the Chinese consumer – or tourist – comes in.
Or, as Mr Fraser said: “of particular importance – for Australia and the world – are the implications of the transition of the Chinese economy towards a more consumer-driven growth model from its present reliance on investment.’
“ Sustainable growth in China is in our interest and China’s economic transition will present opportunities for Australia.”
“ However, this process is unlikely to be smooth and there is a tension between policies to support short-term growth and the structural reforms required to re-balance the economy.”
Mr Fraser added: “the potential for this transition to lead to a greater-than-expected slowdown in the Chinese economy remains a key risk to Australia, the region and the global economy.”
“We are leveraged into the Chinese economy through many channels,” Mr Fraser said.
by Alan Thornhill
Australia’s housing markets – and its economy – presented distinctly mixed pictures today, as member of the Reserve Bank board met to review interest rates.
Some economists expect the board to cut the bank’s marker interest rates by another 25 basis points today, taking it to a new low point of 1.5 per cent.
However, the late advice they received today, shows that their choice will not be easy.
The Housing Industry Association, for example, reported that new home sales had bounced back in June.
It’s Chief Economist, Dr Harley Dale conceded that“The overall trend, reflected in a report his association published today “is still one of modest decline for New Home Sales.
However he added that “…a bounce of 8.2 per cent in June 2016 highlights the resilience of the national new home building sector.”
“The overall profile of HIA New Home Sales is signalling an orderly correction to national new home construction in the short term, as are other leading housing indicators,” Dr Dale said.
Meanwhile Corelogic, which studies property prices and rents, reported that while capital city dwelling values had reached a record high in July, rental yields had slipped to a record low.
The firm’s research head, Tim Lawless, said: “the recent moderation in the rate of capital gains should be viewed as a positive sign that growth in dwelling values may be returning to more sustainable levels.
“However, the growth trend rate is still tracking considerably faster than income growth resulting in a deterioration of housing affordability.” He added.
HIA New Home Sales bounce back in June.
The HIA New Home Sales Report, a survey of Australia’s largest volume builders, shows that total new home sales ended 2015/16 on a higher note, said the Housing Industry Association – the voice of Australia’s residential building industry.
“The overall trend is still one of modest decline for New Home Sales, but a bounce of 8.2 per cent in June 2016 highlights the resilience of the national new home building sector,” commented HIA Chief Economist, Dr Harley Dale.
“The overall profile of HIA New Home Sales is signaling an orderly correction to national new home construction in the short term, as are other leading housing indicators,” he noted Harley Dale.
“Below the national surface, the large geographical divergences between state housing markets have been a prominent feature of the current cycle – that will continue.
The New Home Sales series highlights this fact.
Comparing the June quarter this year to the same period last year, detached house sales are down very sharply in South Australia (-21.4 per cent) and in Western Australia (-27.5 per cent), yet sales are up by 17.0 per cent in Victoria and by 7.1 per cent in Queensland. New South Wales rounds off the detached house coverage provided by the New Home Sales report and sales are down by 7.3 per cent on an annual basis.”
The sale of detached houses bounced back by 7.2 per cent in the month of June 2016. ‘
Multi-unit’ sales continued their recent recovery, growing by 11.5 per cent after a lift of 4.9 per cent in May. In the month of June 2016 detached house sales increased in all five mainland states with the largest increases occurring in Queensland (+14.9 per cent) and WA (+9.1 per cent).
Detached house sales increased by 7.5 per cent in NSW, 3.7 per cent in South Australia, and 2.2 per cent in Victoria.
Business confidence seems set to improve,
The latest Dun and Bradstreet business expectations survey, which was also published today, showed that Business expectations for sales, profits and employment have all bounced back for the three-month period to 31 December 2016.
The firm said this is surprising, in view of the British vote to leave the European Union.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, claimed victory today in the Federal elections that were held on July 2.
He said the Labor Leader, Bill Shorten, had telephoned him earlier today and congratulated him on being re-elected as Prime Minister.
Then he added: “Mr Shorten said earlier today that he looked forward to seeking to reach common ground.
“And I welcome that remark, I welcome that.
“Because it is vital that this Parliament works.
“It is vital that we work together and as far as we can, find ways upon which we can all agree, consistent with our policies that we have taken to the election, consistent with our political principles, that we meet the great challenges Australia faces.
“We need to ensure that we have a strong economy in the years ahead,” Mr Turnbull said.
The newly re-elected Prime Minister then set out broad objectives, for his second term.
He said: “We need to ensure that we maintain a successful transition from the economy fuelled up by the mining construction boom, to one that is more diverse.
“We need to ensure that Medicare and education, our health services, and all those vital government services are provided for and Australians feel secure that they are provided for and guaranteed.
“And at the same time, we have to ensure that we bring our Budget back into balance.
“These challenges are not easy, there’s no simple solution to them.
“But that’s why they need our best brains, our best minds and above all, our best goodwill in this new Parliament to deliver that.,” he said.
He also dismissed a reporter’s suggestion that he might have more trouble with the new Senate than he had with the old, saying there were always cross benchers in the Senate and there would only be one more in the new Senate.
Mr Turnbull also signalled, very clearly, that he would not be taking his predecessor, Tony Abbott, back into Cabinet.
He said: “I have obviously given consideration to the Ministry both before and after the election and as you know I have said that the Ministry I lead – I led to the election, will be the Ministry I lead after the election.
“Regrettably several ministers have not been returned and so there will be some changes.
” but you shouldn’t anticipate large scale changes. ”
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by Alan Thornhill
Australia’s political leaders will be hitting their phones this week, trying to scrape together enough support to give the country stable government for the next three years.
The main rivals, Prime Minister, Malcolm Turnbull, who heads a conservative coalition and Bill Shorten, who leads the Labor party both found themselves short of the 76 seats they would need, in the House of Representatives, to govern in their own right, at the end of the initial, but still incomplete, count.
Late yesterday, Labor had 67 seats, the Coalition 65, others 5 and 13 were still in doubt.
The Australian Electoral Commission had counted 78.2 per cent of the votes cast, at that point.
It will not resume the count until Tuesday, and the final result, for the House, will probably not be known until some time next week.
Mr Turnbull had made much of the need he saw for stability, during the late stages of the eight week election campaign, particularly after Britain’s vote to leave the EU.
However the swing to Labor, evident in Saturday’s election, showed that voters were more impressed with Mr Shorten’s warning that only Labor could be trusted to protect Australia’s health insurance system, Medicare.
Mr Turnbull had sought support for a plan centred on tax cuts for big companies and high income earners.
He had warned that a big spending Labor government could not be trusted to manage Australia’s economy responsibly.
And, at a news conference today, he welcomed a question from a reporter who asked him if the election result could threaten Australia’s TripleA credit rating.
He thanked the reporter and said: “This is why it is very important … for me to explain what is happening at the moment.”
“We are simply going through a process of completing a count,” Mr Turnbull said.
The Prime Minister also said that he could still form a new government, for the next three years.
However Bill Shorten greeted the initial count with a triumphal declaration.
He conceded that the public might not know the outcome of Saturday’s election : “…for some days to come.”
“But there is one thing for sure – the Labor Party is back.” he said.
But which of these two men is likely to be Australia’s Prime Minister over the next three years?
The answer to that question will depend, very much, on their relative telephone skills.
by Alan Thornhill
The Federal government is aiming to save $1.1 billion a year, by targeting “leakage, waste and abuse” in the welfare system.
However the Treasurer, Scott Morrison, who announced this crackdown today, said people who are entitled to welfare payments would continue to get them.
He was announcing the Coalition’s financial targets, for the three years following the July 2 election.
However the Greens ridiculed Mr Morrison’s statement, saying he was urging that Australia’s social security system be automated and upgraded even though its staff cannot even answer their phone calls.
Senator Rachel Siewert – the Greens spokesperson on Community Services – said Mr Morrison is advocating that Australia’s social security system be “automated and upgraded” when his staff cannot even answer their phones.
“After 22 million missed calls last year amongst other issues, there are many Australian’s accessing income support of some form, be it Family Tax Benefit, Paid Parental Leave, Disability Support Pension, Youth Allowance, Newstart, Carers Allowance, who feel extremely frustrated,” Senator Siewert said.
“The missed calls are just the tip of the iceberg,” she added.
by Alan Thornhill
Labor says it is “deeply concerned” by allegations that Medibank Private deliberately deceived its members to get a better price, when it was privatised.
The Shadow Minister for Health, Catherine King, said: “While the allegations will be tested in court, the Australian Competition and Consumer Commission (ACCC) has accused Medibank of “engaging in misleading conduct, making false or misleading representations and engaging in unconscionable conduct” by failing to tell Medibank members about a decision to limit benefits paid to members for in-hospital pathology and radiology services.”
She aslo said: “Labor is particular concerned at the ACCC’s allegation that Medibank Private kept consumers in the dark about the change in order to maximise its sale price.
“If proved, this would mean Medibank members were penalised at the benefit of the Federal Government, with Finance Minister Mathias Cormann publicly stating that the sale raised almost $5.7 billion.
Ms King said:”today’s events come only months after the newly-privatised Medibank reported a massive increase in profit for the first half of the 2015-16 financial year of $271.7 million, up $100 million or almost 60 per cent in just one year.
She said: “the Abbott- Turnbull Government consistently failed to make the case for the sale of Medibank, and today’s ACCC action indicates the privatisation has provided no benefit to either the health system or health insurance policyholders.
And she added: “…today is just another stark reminder of the danger to patients if the Turnbull Government is re-elected and continues to press ahead with its plans to privatise Medicare, putting profits before patients across the entire health system.
“Only a Shorten Labor Government can be trusted to protect Medicare. “ Ms King said.
by Alan Thornhill
The Australian economy – outside mining -is continuing to show signs of a steady recovery – as the July 2 elections approach, according to a new survey.
The National Australia’s monthly business survey for May, which has just been published, cautioned, though, that the full impact of this improvement is not yet showing up in the nation’s job market.
The bank’s Chief Economist, Alan Oster, said: “the Survey is suggesting further improvement for the non-mining sectors going into Q2, with some evidence that growth is becoming more broad-based”.
Mr Oster said business conditions had remained strong strong on the activity side.
However he added “…firms continue to be relatively restrained in terms of their demand for labour”.
“But most industries did record an improvement in business conditions for May.
“Service industries continue to lead the way, which now includes distributional services such as retail.
“But mining and construction remain quite weak.
Mr Oster said this was”partly a reflection of the ongoing downturn in spending on resource projects” Mr Oster added.
However, he noted too, that: “despite elevated business conditions, firms are reporting slightly lower levels of confidence.
The confidence index eased 2 points to +3 index points in May, pushing the index further below its long-run average.
And he added: “the RBA’s cut to interest rates did not help lift business confidence as we had hoped, even as sales activity continues to improve”.
He said, though, that “uncertainty around the upcoming election might be a factor here, but mixed results across industries suggest that other factors are at play”.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, warned today that Australia cannot take its economic success for granted.
Speaking to reporters on Queensland’s Sunshine Coast, Mr Turnbull said re-election of his government on July 2 would mean: “ More opportunity and more jobs.”
“We understand the nature of the times in which we live,” the Prime Minister said.
“More competition, more opportunities, greater challenges.
“We recognise that we cannot take our economic success for granted,” Mr Turnbull said.
Meanwhile the Opposition Leader, Bill Shorten, said Australians would see shorter waiting times, at the nation’ hospitals, if he becomes Prime Minister on July 2.
However a new poll, published today, suggests that Labor is not getting enough support, in marginal electorates, to change the government.
The ReachTEL poll, conducted, in seven marginal seats held by the Coalition, confirms that Labor could remain in opposition, even if it wins a majority of the popular vote, on July 2.
That last happened in 1998, when Kim Beazley led the party.
Mr Turnbull said:”. We understand the nature of the times in which we live
” More competition, more opportunities, greater challenges.
“We recognise that we cannot take our economic success for granted.
We need to have a plan.
“We do have a plan.
“Every element of it will deliver stronger economic growth and more jobs,” Mr Turnbull said.
However Mr Shorten chose to concentrate on health issues today.
He said a Labor Government would reduce waiting times for elective surgery and emergency departments, invest in hospitals and protect Medicare so Australia has the strong health system we need for the future.
“Labor will also ramp up investment in health care at the frontline – so fewer Australians end up in hospital in the first place,” he added.
“All Australians deserve access to the best possible health care when they need it – determined by their Medicare card, not their credit card.
That’s why a Shorten Labor Government will restore the National Health Reform Agreement for four years, at the originally agreed funding formula of 50 per cent of growth in costs based on the National Efficient Price, and provide additional support to the States and Territories to reduce waiting times for elective surgery and in public hospital emergency departments,” he said.
“This will boost hospital funding by $2 billion more than the Liberals over the next four years, and drive efficiency by funding the States and Territories on the basis of the actual services performed,” he added.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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