by Alan Thornhill
The Federal government is expecting no more than moderate economic growth in the short to medium term.
But its economists, like those in the private sector, have been looking – with some interest – at the higher than expected prices Australian miners have beeen receiving for their coal, over recent times.
As well they might.
For if the higher prices last, government revenues will increase, and the job of getting the Federal budget back into order will become much easier.
However, no-one is singing in the basement of the Federal Treasury, just yet.
Economists, working for the National Australia Bank, have also been studying this situation very closely.
And, in an an assessment published last week, they concluded that Australians can still look forward to moderate economic growth – and possibly some further rate cuts.
However there are also some risks in sight.
They said their real forecasts for economic growth ( GDP) “are largely unchanged’.
They have been left at 3.0 per cent in 2016, easing to 2.8 per cent in 2017 and 2.6 per cent in 2018.
But they added: “the unexpectedly high settlement for Q4 coking coal prices however will provide a boost to Australia’s terms of trade, nominal GDP and government revenues.
They were not overwhelmed by those higher prices just yet, though.
“…this is unlikely to be sustained,” they said.
“And we retain our view that the recent surge in coal prices reflects short-term supply constraints and government initiatives offshore which will not continue,” they added.
So the real question now is just how long these higher prices will last.
How long will the surge be sustained?
Well, at least, we might say that Australia’s chances are looking better than they have for some time.
by Alan Thornhill
Retail sales were flat in July, according to figures the Bureau of Statistics published today.
The bureau also reported that new private capital spending continued to fall sharply in the June quarter.
But it said and that the number of working days lost through strikes – and other industrial disputes – rose over the past year.
The bureau said retail turnover did not change in July, although it had risen by 0.1 per cent in June.
It made this comparison on seasonally adjusted figures.
On the same basis, there were rises in food retailing (0.7 per cent), cafes, restaurants and takeaway food services (1.2 per cent), and other retailing (0.2 per cent).
Sales of clothing, footwear and personal accessories also rose by 0.3 per cent.
However department store sales fell during the month.
The bureau also said that, in seasonally adjusted terms, retail sales rose by 0.5 per cent in Queensland, South Australia and Tasmania while sales in WA rose by 0.3 per cent and those in the ACT increased by 1.2 per cent.
Sales in the Northern Territory rose by 0.4 per cent.
However these rises were offset by falls of 0.6 per cent in Victoria and 0.2 per cent in NSW.
The bureau also noted that private new capital spending fell by 5.4 per cent in the June quarter of this year and dropped 17.4 per cent from the level seen in the same quarter of last year.
These falls are generally associated with the end of the mining boom.
The bureau also noted that Australia lost 100.7 thousand working days through strikes, in the 12 months to the end of June.
That was up from 76.8 thousand working days in the previous 12 months.
by Alan Thornhill
The Reserve Bank admitted today that estimates of recent housing price growth had been “overstated.”
The admission, made in the minutes of the meeting of the bank’s board meeting on August 2 , is significant.
That’s because the bank has been relying on stronger than expected growth in the building and housing sectors to offset weaker performances in major resource export sectors, such as coal and iron ore.
However in today’s minutes the bank said: “data on housing price growth from CoreLogic, which had been discussed at previous meetings, indicated that housing prices had increased very strongly in several cities in April and May.”
But it added: “… new information had revealed that these growth rates were overstated.”
The bank said that had happened: “.. because of changes to CoreLogic’s methodology.”
And it added: “data from other sources indicated that housing price growth had instead remained moderate in the June quarter.
“Other information showed that, while auction clearance rates had recently picked up a little in Sydney and Melbourne, the number of auctions was lower than in the preceding year and the average number of days that properties were on the market had increased.
“Housing credit growth had been little changed in recent months and remained below that of a year earlier.
“Rent inflation had declined to its lowest level since the mid 1990s and the rental vacancy rate had drifted higher to be close to its long-run average.”
However, the minutes also noted that net exports are expected to make a positive contribution to output growth over the forecast period, supported by the earlier exchange rate depreciation and ramp-up in LNG production.
“ In contrast, mining investment was expected to fall further,” the bank said.
It said there had been some signs that non-mining business investment was rising in some parts of the economy.
But, overall, “it is still expected to remain subdued in the near term,” the bank’s notes said.
by Alan Thornhill
Malcolm Turnbull directly challenged Australia’s big banks today, saying they should pass on the rate cut the Reserve Bank announced earlier this week in full, or explain why.
So far the banks have been passing on about half of the 0.25 per centage point cut.
That has left families with $300,000 mortgages some $20 a month out of pocket.
The Prime Minister said Australia had needed a period of economic transition after its huge mining construction boom.
“That’s why we have the big trade export deals, the big deals, the big free trade deals,” he said.
However the shadow Treasurer, Chris Bowen disagreed.
He said the government was simply “chest beating” on the rate cut.
So, this is a Government which is being exposed for a lack of economic leadership, for a lack of economic plan,” Mr Bowen said.
He said the government had no plan to increase investment in the non-mining sector, to ensure that we have jobs for the future. “
Malcolm Turnbull and Scott Morrison are simply not up to the job,” Mr Bowen said.
by Alan Thornhill
The Reserve Bank today cut its cash rate by 25 basis points, to its lowest level ever, just 1.5 cent.
Explaining the decision, the bank’s Governor, Glenn Stevens said: “the global economy is continuing to grow, at a lower than average pace.
“Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies.
“Actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of China’s growth appears to be moderating, “ Mr Stevens said.
He noted that: “commodity prices are above recent lows.”
However he added: “…this follows very substantial declines over the past couple of years.
“Australia’s terms of trade remain much lower than they had been in recent years.
“Financial markets have continued to function effectively.
Mr Stevens said: ” Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.
“In Australia, recent data suggests that overall growth is continuing at a moderate pace, despite a very large decline in business investment,” he added.
“Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend.
“Labour market indicators continue to be somewhat mixed, but are consistent with a modest pace of expansion in employment in the near term.
“Recent data confirm that inflation remains quite low.
“Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
“Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time,” Mr Stevens said.
The Bureau of Statistics reported that Australia’s inflation rate, on the Consumer Price Index, stood at just 1 per cent in the 12 months to the end of June.
That is well below the bank’s target range – of 2 to 3 per cent inflation – over the course of a business cycle.
by Alan Thornhill
Tony Abbott has missed out on a place in Malcolm Turnbull’s new ministry and Christopher Pyne is to become Australia’s new minister for defence industry.
The Prime Minister has also named Josh Frydenberg Australia’s new environment minister.
This has angered environmentalists who say Mr Frydenberg has always favoured the coal industry over the Great Barrier Reef.
Mr Turnbull’s new ministry and cabinet are to be sworn in next week.
The Prime Minister’s decision to leave his predecessor, Mr Abbott, off his front bench comes as no surprise, even though hard right MPs, within the Liberal Party, would have welcomed such a move.
As he promised do before the election, Mr Turnbull generally avoided unecssary changes changes when he announced his new team today.
But Mr Frydenberg will become minister for the environment and energy.
Mr Turnbull said all his previous cabinet ministers had been reappointed although there had been some changes and expansions in their duties.
He said: “Senator Fiona Nash will add Local Government and Territories to her Regional Development and Regional Communications roles.
“Christopher Pyne will be appointed to the new role of Minister for Defence Industry, within the Defence portfolio.
“Mr Pyne will be responsible for overseeing our new Defence Industry Plan that came out of the Defence White Paper.
“This includes the most significant naval shipbuilding program since the Second World War.
“This is a key national economic development role. This program is vitally important for the future of Australian industry and especially advanced manufacturing.
“The Minister for Defence Industry will oversee the Naval Shipbuilding Plan which will itself create 3,600 new direct jobs and thousands more across the supply chain across Australia.
“Beyond shipbuilding, there is a massive Defence Industry Investment and Acquisition Program on land, in the air and inside cyberspace.
“This is a massive step change set out in the Defence White Paper. This investment in Defence Industry, as you know, is a key part of our economic plan.
“It will drive the jobs and the growth in advanced manufacturing, in technology, right across the country. And I’m appointing Christopher to be the Minister to oversee that and ensure that those projects are delivered.
“As I said at the outset, this is a term of government for delivery.
“We will be judged in 2019 by the Australian people as to whether we have delivered on the plans and the programs and the investments that we have promised and set out and described in the lead-up to the election.
Greg Hunt will move from Environment to become the Minister for Industry, Innovation and Science, where he will drive the National Innovation and Science Agenda.
“Can I say that Mr Hunt has been an outstanding Environment Minister and he served in that portfolio in Government and indeed, in opposition.
“He has a keen understanding of innovation, he has a keen understanding of science and technology and he will give new leadership to that important portfolio and those important agendas so central to our economic plan.
“Josh Frydenberg will move to the expanded Environment and Energy portfolio combining all the key energy policy areas.
“These include energy security and domestic energy markets for which he has been previously responsible in the current portfolio. Renewable energy targets, clean energy development and financing and emission reduction mechanisms which are part of Environment.
“Senator Matt Canavan will be promoted to Cabinet as the Minister for Resources and Northern Australia and I welcome Senator Canavan to the Cabinet in this key economic development role,” Mr Turnbull said.
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by Alan Thornhill
What happens now that Malcolm Turnbull has at least the 76 lower house seats that he needs to form majority government?
We can expect to see tight government, as the Prime Minister takes up the reins, to start his fresh three year term.
Not quite as tight, though, as the independent Bob Katter has suggested.
Mr Katter warned, not altogether seriously, that a government with a majority of one, might lose a critical vote, if he left Parliament to attend his mother’s funeral, or to respond to a call of nature.
That’s not a worry
Australian parliaments, thankfully, have civilised arrangements called “pairing” to deal with exigencies like these.
The Opposition Leader, Bill Shorten, though, did raise as serious matter, when he warned of divisions in the Liberal party, particularly those involving the hard right, which supported Tony Abbott against Malcolm Turnbull, last September.
They have not forgotten or forgiven.
That became clear this week, when one member, Cory Bernardi, sent e-mails to supporters, urging them not to “… allow the political left to keep eroding our values, undermining our culture and diminishing our important institutions.”
The ratings agency, Standard and Poors, delivered the biggest challenge Mr Turnbull will face late last week, though, when it put Australia’s triple A credit rating on “negative watch.”
It cited both uncertainties which then existed about the July 2 election results and high levels of both domestic and international debt.
This means that the agency might well downgrade Australia’s presently excellent credit rating, if we don’t get those issues under control, over the next two years.
An astute Prime Minister might see it as more than that, too.
A “get out of jail free card” in fact.
Even governments which want to keep their pre-election promises often find it very difficult to do so.
So what could Mr Turnbull do, if he finds himself in that all-too-likely position?
Mr Shorten warned, during that eight week election campaign, that this is no time to be giving big companies $50 billion worth of tax cuts, over 5 years, even if they are to be phased in slowly.
And a report funded by Getup and published just days before the election said big miners and cigarette companies would be among the main winners, from that policy, which Mr Turnbull repeatedly said would create more “jobs and growth.
The miners, perhaps.
The cigarette companies.
So some adjustments can be expected there.
Nick Xenophon might also be in for some disappointment when he comes to Canberra, seeking more money, to protect the jobs of steel workers, in his home State of South Australia.
Mr Turnbull might even be able to convince voters that some restraint in these areas is virtuous, as well as necessary, to avoid extra interest rate pain, for home buyers and others.
If he is astute enough.
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. ”
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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