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Tuesday 3rd May 2016 - 5:32 pm
Comments Off on Testing investors

Testing investors

by Alan Thornhill

Analysis

Falling prices have allowed the Reserve Bank to shave interest rates.

But how well with this fit, with the Federal government’s economic policies?

We don’t know yet, because at the time of writing the Treasurer, Scott Morrison, still had not delivered his budget speech, in which he is expected to spell out those aims, in detail.

But we can say, safely, that the patience of Australian investors will be tested, in the months and years ahead.

The Reserve Bank’s decision today, to lower its cash rate from 2 to 1.75 per cent, is of historic significance, in the management of the nation’s finances.

The bank’s Governor, Glenn Stevens, was frank about the bank’s assessment of the circumstances in which it was made.

He said:” This follows information showing inflationary pressures are lower than expected.

“The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently.

” While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.”

That’s not what investors are looking for, when they decide where to put their money.

Low risk and the prospect of reliable returns are more attractive, or even just acceptable prospects.

Will Mr Morrison’s budget help to produce happier circumstances of that kind?

Well, Australia is, once again, going through a time of quite basic adjustment.

The minerals boom is over.

Investors must look for fresh opportunities, in this time of adjustment.

They will be available.

But will tonight’s budget be compatible with them?

Perhaps that’s the real question.

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Tuesday 3rd May 2016 - 3:57 pm
Comments Off on The Reserve Bank decides

The Reserve Bank decides

by Alan Thornhill

The Reserve bank has cut its cash rate by 25 basis points to 1.75 per cent

In a statement explaining the decision the bank’s Governor, Glenn Stevens, said:”At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016.

This follows information showing inflationary pressures are lower than expected.

“The global economy is continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently.

” While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies.

‘”China’s growth rate moderated furthe”r in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook.

“Commodity prices have firmed noticeably from recent lows, but 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.

“Sentiment in financial markets has improved, after a period of heightened volatility early in the year.

“However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

“In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom.

“GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved.
Indications are that growth is continuing in 2016, though probably at a more moderate pace. Labour market indicators have been more mixed of late.

“Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.

“Monetary policy has been accommodative for quite some time. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector.

“Credit growth to households continues at a moderate pace, while that to businesses has picked up over the past year or so.

“These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

“In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate.

“At present, the potential risks of lower interest rates in this area are less than they were a year ago.

“Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting,”Mr Stevens said.
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Sunday 1st May 2016 - 5:10 pm
Comments Off on The PM’s hard sell

The PM’s hard sell

by Alan Thornhill

Analysis

Malcolm Turnbull might well find it hard to sell the budget strategy his government will introduce into parliament on Tuesday.

Not that there is anything particularly striking about it.

Indeed early indications that the Treasurer, Scott Morrison, gave in a television interview on Sunday, suggest that his first budget is likely to be a timid document.

The most attractive thing the Turnbull government is offering is an extra $1.2 billion for Australia’s schools, if they agree to meet new minimum standards of literacy and numeracy.

The Labor government, of Julia Gillard, tried that.

It didn’t work, then, and is difficult to believe that it will work in future.

That’s largely because our politicians, not our educators would, once again, be setting those standards.

Labor learnt from its mistake and has advanced some thoughtful ideas, under its Gonski proposals.

The Prime Minister has also ceded some ground to Labor, with his less that adroit handling of the election, itself.

He might well have allowed the current session of Federal parliament to run its full term.

That would have meant a full parliamentary election about September, or perhaps even a little later.

But he was not satisfied with that.

So he threatened to call an early election, if the Senate would not agree to his plan to revive the Australian Building and Construction Commission.

The Senate called his bluff.

That has left Mr Turnbull facing an unusually long election campaign, with little to say.

Yes, there will be some tax cuts, for people earning more than $80,000 a year, some tightening of the superannuation tax rules, for what Mr Morrison calls people on “very high” incomes, and tobacco taxes will be increased.

But negative gearing and the GST will both be left alone.

And, yes, our new submarines will be built in Australia.

But this still looks more like nervous politicians’ strategy, drawn up to win the next election, than the bold reforming approach, the country may actually need.

And John Howard’s former chief of staff, Peta Credlin, might well have a point.

She was quoted, in the Murdoch press, at the weekend, saying the Opposition Leader, Bill Shorten, is the man to watch now, as he has been busily working away at policies, while all this has been going on.

Thursday 14th April 2016 - 1:50 pm
Comments Off on Trend job growth eases

Trend job growth eases

by Alan Thornhill

Trend employment growth in Australia has eased.
The Bureau of Statistics reported today that this indicator, which the Bureau regards as the most reliable it produces, fell to just 2.2 percent in March.
That was down from 2.6 per cent in December last year.
On its more commonly used seasonally adjusted measure, the Bureau reported that the number of Australians with jobs rose by 26,100 in March.
That left the nation’s seasonally adjusted labour force participation rate for March at 64.9 per cent.
The Bureau said too that – on the same basis – the number of people unemployed fell by 7,300 during the month
This left Australia with a seasonally adjusted unemployment rate of 5.7 per cent for the month, 0.1 percentage points below the February level.

Tuesday 29th March 2016 - 12:35 pm
Comments Off on Australians working longer than ever before

Australians working longer than ever before

by Alan Thornhill

Australians aged 45 years and over are intending to work longer than ever before, according to figures released by the Australian Bureau of Statistics  today.

The Bureau said this was shown in the the results of a survey conducted in 2014-15.

 

It said these showed that 71 per cent of Australians intended to retire at the age of 65 years or over, up from 66 per cent in last survey result of 2012-13 and 48 per cent in 2004-05.

 

(More later)

Sunday 14th February 2016 - 6:39 pm
Comments Off on Decentralisation:who really benefits?

Decentralisation:who really benefits?

by Alan Thornhill

Analysis

Barnaby Joyce’s imminent rise, to the post of Australia’s Deputy Prime Minister, is producing some apprehension in the nation’s capital, Canberra.

Not least on the issue of decentralisation.

Mr Joyce’s promotion became inevitable last week, when his National Party colleagues chose him to succeed the party’s previous leader, Warren Truss, who is retiring.

The National Party, now the junior partner in Malcolm Turnbull’s coalition government, was once called the Country Party.

And Mr Joyce retains its strong rural and regional focus.

That is reflected in his attitudes to decentralisation.

So no-one in Canberra was particularly surprised when plans to decentralise government scientific and other work to the Great Southern region, near Albany in Western Australia’s Great Southern region, Northam in that State’s Wheatbelt, or even to Tasmania, seemed to take on new life, with the announcement  of Mr Joyce’s new job.

He doesn’t actually become Deputy Prime Minister, of course, until he takes the oath of office.

That is scheduled for Thursday this week,at Government House in Canberra.

Those looking for differences between Mr Joyce and Mr Turnbull, won’t have too much trouble finding them.

Mr Turnbull is, after all, a free-trader, right to the soles of his highly polished shoes.

There is something of a protectionist about Mr Joyce.

He would not shrink from a direct intervention in a market, if he believed that to be valuable.

All this is illustrated, clearly enough, in his attitude towards decentralization.

But he is clever about it.

Earlier this month, while announcing the relocation of three research organisations from Canberra to regional Australia, he said:”I have accepted proposals from three Canberra-based research and development corporations to increase their regional presence, which will boost jobs and growth in Dubbo, Wagga Wagga, Toowoomba and other areas.

“As well as being home to vibrant farming communities, these regions also have some of the best agricultural universities and research facilities in the country.

“It is logical that strong links should exist between the RDCs, universities and farmers on the ground in each industry.

“Being geographically closer to the industries they serve will strengthen their relationships and help the RDCs better understand their individual industry’s needs.”

There are limits to this kind of thing, of course.

Valuable knowledge, built up over years, in a sophisticated city like Canberra, which offers a wide range of educational and medical services, can be lost if a key scientist, chooses to leave a particular project, rather than accept a particular transfer.

And that whole process can become economically expensive, if adopted for political, rather than industrial reasons.

There are some fine questions of balance, here.

Friday 5th February 2016 - 7:23 pm
Comments Off on Expect stronger growth – but not just yet:RBA

Expect stronger growth – but not just yet:RBA

by Alan Thornhill

The Reserve Bank sees stronger economic growth ahead – though not just yet.

In a revision to its latest statement on monetary policy published today, the bank said that – as expected –  the Australian economy had grown at a “below average” pace over the year to September 2015.

It said this had been “the starting point” in calculating its latest forecasts – which include 3-4 per cent growth in the 12 months to the end of June 2018.

The Bank said that:“over the next few years, growth is expected to remain around its current rate, which is slightly below its decade average.”

But it expects things to pick up after that.

It added that:”Activity continued to shift from mining to non-mining sectors of the economy.”

“Services sector output grew by around 3½ per cent over the year to September, while goods-related output grew only modestly.”

The bank also noted that:” Mining investment continued to decline sharply, although this was partly offset by contributions from resource exports.”

“ Net service exports also made a significant contribution to growth, partly reflecting the effects of the exchange rate depreciation.”

“ Non-mining business investment was little changed over the year.”

The bank also said that dwelling investment continued to grow strongly

and consumption growth picked up to be close to its decade average.

But it added: “ Public demand grew at a below-average pace over the year.”

The bank also said:“The forecasts for iron ore and coal prices are lower, reflecting a weaker outlook for Chinese steel demand and an expectation that there will be only a limited reduction in global supply from high-cost miners, particularly those in China.”

Tuesday 19th January 2016 - 1:14 pm
Comments Off on A glimpse of strength in our finance figures

A glimpse of strength in our finance figures

by Alan Thornhill

The Bureau of Statistics reported today that we borrowed $21 753 million in November to finance the purchase of  new homes we intend to live in.

This seasonally adjusted figure was 2.4 per cent above the comparable result for October.

The Bureau also reported that, on the same basis, our borrowing for personal finance, rose by 0.9 per cent to $6 848 million.

Borrowing for commercial finance also rose – by $1.1 per cent – to $45 886 million

Lease finance, though, was a weak spot, falling  3.9 per cent to $586 million.

However a graph published by the Bureau, still showed that our personal finance borrowing fell sharply, between May and November last year.

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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
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