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
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 Federal government says there has been ‘encouraging” progress with its efforts to reduce the gap between the pay of men and women.
The Minister for Employment and Women , Senator Michaelia Cash, said today this is reflected in the latest average weekly earnings figures published by the Bureau of Statistics.
These showed, on average, that men working full-time earned $1,613.60 a week in May this year, while women were earning $1,352.50.
Although Senator Cash admitted that this still represents a difference of $261.10 a week, she said a close look at the Bureau’s figures also suggests that women are starting to catch up.
For example, she said that: “between May 2015 and May 2016, women’s weekly earnings grew by 3.4 per cent while men’s weekly earnings grew by 1.3 per cent.”
She said there is other evidence, too, that the “gender gap” between the pay of men and women is being trimmed.
The ABS data, for example, also showed that the gap,for full time employees has narrowed to 16.2 per cent, a decrease of 1.7 percentage points from a year ago.
However Senator Cash also said that while this is “encouraging,” the Government’s determination to cut this still “stubbornly high gap is unwavering.”
“Given that less than two years ago the gender pay gap was 18.5 per cent, these figures demonstrate significant progress,” Senator Cash said.
She claimed progress, too, in the government’s efforts to employ more women.
“In the month of July, the level of employment for women rose by 8,100 and is now at a record high of over 5.5 million.
“Furthermore, the participation rate for women has also trended upwards over the last 12 months,” she said.
Senator Cash also said: “the Turnbull Government is working to close the gender pay gap by:
* Ensuring women have the skills and support they need to work in growth industries, with $13 million invested through the National Innovation and Science Agenda in
getting more women into science, technology, engineering and maths
* Shining the light on pay equity through the work of the Workplace Gender Equality Agency
* Setting a new target of men and women each holding 50 per cent of Australian Government board positions and strengthening the BoardLinks program and
* Its scholarship and mentoring programs, improving gender diversity in senior leadership roles
*Partnering with UnitingCare on the Springboard Project to give women the opportunity to train and build a career in the UnitingCare network, while also
providing the flexibility to care for their families
* Supporting Australian women to participate in the workforce through our Jobs for Families Child Care package
* Boosting the superannuation of women who have taken time out of work through the Low Income Superannuation Tax Offset.
Senator Cash said it is clear from these latest figures that employers are taking action and this effort is producing results.
“To see these encouraging results continue we all need to maintain our attention on improving gender equality and that applies to Government, employers and individuals – ensuring we achieve true gender equality will require a concerted and lasting commitment from everyone,” she added.
by Alan Thornhill
New vehicle sales rose by 0.1 per cent in July, on trend figures the Australian Bureau of Statistics published today.
However, on seasonally adjusted figures sales fell by 1.3 per cent, over that time.
On trend figures, sales rose by 1.5 per cent in the 12 months to the end of July.
And on seasonally adjusted figures, the rise was 1.6 per cent.
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
Commercial lending fell by 2.2 per cent in June on trend figures the Bureau of Statistics published today.
On seasonally adjusted figures the fall that month was even bigger at 8.7 per cent.
Lease finance fell by 2.8 per cent in June, but rose by 13 per cent on seasonally adjusted figures.
Personal finance rose by 0.3 per cent on trend figures, but fell by 3 per cent on seasonally adjusted figures.
Housing finance for owner occupation rose by 0.2 per cent in June on trend estimates, while seasonally adjusted figures showed a 1.8 per cent rise.
by Alan Thornhill
Critics of the Federal government’s decision to block a Chinese bid for a large part of the NSW energy grid are calling it “xenophobic.”
However the Treasurer, Scott Morrison, who rejects that description, says the decision was taken on “national security” grounds.
That led Bob Carr, a former foreign minister, who is now director of the Australia-China Relations Institute, to ridicule the decision.
“The Treasurer’s decision …is a huge concession – the first major policy sacrifice – to the Witches’ Sabbath of xenophobia and economic nationalism stirred up in the recent Federal election,” Mr Carr said .
“The Treasurer’s statement refers not to FIRB (the Foreign Investment Review Board’s) advice but to the “review process,” he noted.
“Does this mean that his decision is not based on the analysis of FIRB but has been arrived at in his own office?” Mr Carr asked.
Last year the FIRB approved State Grid bidding for Transgrid, which holds New South Wales electricity distribution and telecommunications assets.
“Ausgrid’s telecommunications assets are meagre in comparison.
“ There was a different political climate,” Mr Carr said.
“If State Grid’s offer for a New South Wales distribution asset raises a security risk why weren’t the same risks apparent when State Grid was allowed to purchase the distribution assets of South Australia and Victoria?” he added .
“Unless no foreign investment in Ausgrid is to be allowed, this decision is not driven by public opinion.
“A Lowy poll showed the Australian people nominating China as our best friend in Asia, over and above the Japanese.
“The US Studies Centre at Sydney University produced a poll that showed more Australians seeing China’s role in Asia in a positive light than America’s. ”
“Only one conclusion can be reached,” Mr Carr said.
“The Treasurer is conceding to economic populism in the Senate and sacrificing the health of the New South Wales budget and jobs and investment in infrastructure.”
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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