by Alan Thornhill
A Reserve Bank chief says “the fundamentals” of the Australian economy “are strong” and provide grounds for “optimism” about the future.
Philip Lowe, the Bank’s Deputy Governor, made the observation in a speech he delivered to the CFA Institute Australia Investment Conference in Sydney today.
Mr Lowe said the central message of his speech was: “that these fundamentals are strong.”
“…and that they provide us with the basis to be optimistic about the future.”
“ At the same time, none of us has a crystal ball, so we can’t be sure exactly what that future holds,” Mr Lowe added.
“What we can be sure of is that we will be best placed to take advantage of our strong fundamentals if our economy is flexible and if it is able to adapt to the changing world in which we find ourselves,” Mr Lowe added.
“Hence the title of my remarks this morning: Fundamentals and Flexibility.”
Mr Lowe said advancing technology had greatly affected the way Australians work.
“The advances in technology are reshaping, in unexpected ways, the jobs that we do,“ he said.
“If we were to go back to 1995, or perhaps even to just 2005, I suspect that there are very few of us who could have imagined many of the new occupations that have emerged.”
“There are big data architects, cloud computing experts, social media strategists, mobile app developers, information security technicians, green retrofit architects, genetic counsellors and the list goes on.”
“Each of these new occupations is possible only because of advances in technology.”
“More broadly, the huge growth in employment in the services sector has taken many by surprise,” Mr Lowe said.
“I suspect that if in the early 1990s we had known that there would be a net loss of over 100 000 jobs in the manufacturing sector in Australia over the next 25 years, there would have been a sense of despair about the future.”
“This despair would probably have been compounded if we had also known there would be no growth in jobs in both the utilities and wholesale trade sectors over the next quarter of a century.”
“Yet, over this period, we have enjoyed a strong rise in our living standards, the unemployment rate has come down substantially and we have generated around 4 million new jobs across the economy, mostly in the services sector.”
by Alan Thornhill
Australian shoppers spent 0.4 per cent more in August, than they did in July.
This is shown in seasonally adjusted figures the Bureau of Statistics published today.
The rise followed a 0.1 per cent contraction in July.
Food sales – which rose by 0.6 per cent – were the biggest contributor to the rise seen in August.
However the Bureau also noted we also spent more that month in the nation’s department stores and household goods stores.
We spent less, though,on clothing, shoes and personal accessories.
We also reduced our spending in cafes, restaurants and take away food stores.
The Bureau also reported that, on trend estimates, retail turnover rose 0.2 per cent in August, following a 0.3 per cent rise in July.
It said, also, on trend figures, retail turnover in August this year was 4.3 per cent higher than that seen in the same month last year.
by Alan Thornhill
Events like today’s economic mini-summit can worry particular groups.
And this one is no exception.
That shouldn’t surprise anyone.
After all, it’s no secret that some very high powered – and persuasive – people in Canberra believe a higher GST would be good for the nation.
However others are arguing – anxiously – that this is not the time to take that path.
The Urban Development Institute of Australia (UDIA) is among them.
The UDIA, which describes itself as the peak body representing Australia’s urban development industry isn’t opposed to tax reform.
In fact, in a statement today, it renews its call “for a major shakeup of Australia’s tax system.”
But it also warns that a higher GST would present “a negative shock to both housing affordability and the economy,
In a statement today, it said:” the UDIA is urging recently appointed Prime Minister Malcolm Turnbull and his new ministry to revitalise tax reform discussions with businesses and the broader community, so that a well-considered package of reforms can be taken to next year’s election.
The UDIA ‘s National President Cameron Shephard said: “a great deal of Australia’s economic potential is being held back and squandered by a tax system that has failed to keep up with the times.”
“Inefficient taxes and charges are dragging on economic growth and productivity, holding back jobs, and worsening Australia’s housing affordability crisis.”
“For example, stamp duties are well known to be among the least efficient and most economically damaging taxes available to governments and there is a strong and growing consensus across the community about the need for governments to replace them with something better” Mr Shephard said
“They reduce labour mobility and productivity by locking people into a certain location and – along with other high up front taxes and charges – reduce housing affordability and the supply of new housing. ”
“In contrast, the GST and taxes on the value of land are widely recognised as being much more efficient from an economic perspective, particularly when applied across a broad base.”
However UDIA has strongly warned against raising the rate of the GST, which could raise the cost of new housing substantially at a time when housing affordability is a major concern. ”
“Increasing the GST by just a few percent could result in tens of thousands of dollars in additional tax on new homes, which would push up prices further and reduce the supply of new dwellings”
The UDIA has even done some sums, to bolster its case.
It calculated how much raising the GST from 10 to 15 per cent would add to house prices in Australia’s capitals.
It’s results were
by Alan Thornhill
Chris Bowen says tax reform is needed to promote economic growth.
Addressing the Australian Financial Review’s Tax Reform Summit in Sydney, the Shadow Treasurer said Australians have just seen five quarters of declining living standards.
“Barring the GFC, this is the first time this has occurred since records began,” he said.
Monetary policy was no longer as effective in boosting growth as it had been.
And Australia could no longer rely on its terms of trade for that purpose.
So other paths, such as tax reform, had to be tried.
Explaining the problem, as he saw it, Mr Bowen said:” Australia’s growth rate averaged 3.5 per cent between 1992 and 2008.”
“ It reached 5 per cent in 1999.
“And now, growth is running at just 2 per cent, not enough to see unemployment come down.
He said :”sometimes people ask: “Is the age of reform over?”
They ask:“Has the 24 hour media cycle and the rise of social media killed it?”
“Has the fact that no working person today under 40 has lived through a recession meant that reform is just too hard?”
My answer is: “We can’t afford to let the age of reform be over.”
But Mr Bowen said tax reform is never easy.
Agreeing on the need for reform is relatively easy.
“ Agreeing on what that reform should look like, however, is the harder part.
“Unquestionably though, tax reform must be part of that reform process.
“It helps to be clear about the problem.
“Too many taxes.
“Too much collected by inefficient taxes.
“A not always coherent distribution of responsibilities between the levels of government.
“But let us also be very clear about what the solution is not.
“More regressive taxes.
A tax system which takes us backwards on inequality instead of making our society fairer.”
“I believe there is a sensible discussion to be had about tax reform,” Mr Bowen said.
I believe the Australian people understand that that sensible discussion will not involve every individual being better off.
“But people rightly expect that every tax change which primarily affects higher income earners shouldn’t be automatically ruled out while the tax debate inevitably and continually gets dragged backed to taxes which predominantly hit low and middle income earners.”
“So Labor is happy to participate in the tax reform discussion.
“In fact, objectively we have been leading it,” Mr Bowen said.
by Alan Thornhill
Malcolm Turnbull has put the Coalition back in a winning position in barely a week.
The latest Morgan poll, for example, has the Coalition on 55 per cent, to Labor’s 45 per cent, on its critically important two party preferred basis.
The poll showed that Primary support for the L-NP jumped a massive 11 per cent. .
What a reversal.
And all without a single word of policy.
No wonder the Labor Leader, Bill Shorten, is calling it “a sugar hit.”
With the next general election now due in just 12 months or so, he had better hope that is what it is.
But no-one can be sure of that.
It might be something more permanent.
The Morgan organisation, certainly, says if a Federal Election were held now the L-NP would win easily.
It says its latest poll showed support for the Greens fell to 13 per cent the Palmer United Party is 1.5 per cent (unchanged)…
This week’s Morgan Poll on Federal voting intention was conducted last weekend, with an Australia-wide cross-section of 2,059 Australian electors.
Gary Morgan says Malcolm Turnbull’s victory over Tony Abbott gave the LNP both a huge boost and its largest lead over Labor since the 2013 Federal Election.
He said, too, that ….”a special Snap SMS Morgan Poll conducted last week showed Turnbull (70%) with a huge lead over Shorten (24%) as ‘Better Prime Minister.'”
A Newspoll, published separately today, produced a similar result.
Mr Morgan also said that:”In further good news for the new Prime Minister – the Roy Morgan Government Confidence Rating has jumped to 103pts (up 17pts) with 42.5% (up 7.5%) of Australians saying Australia is ‘heading in the right direction’ compared to only 39.5% (down 9.5%) that say Australia is ‘heading in the wrong direction’.
He said, too, that:” This is the first time the Roy Morgan Government Confidence Rating has been in positive territory since April 2014 – just before former Treasurer Joe Hockey delivered his deeply unpopular first Federal Budget. ”
Tomorrow’s ANZ-Roy Morgan Consumer Confidence Rating will give the first indication of how Turnbull’s ascent to the top job has impacted on Australian consumers.
by Alan Thornhill
Australia’s unemployment rate eased to 6.2 per cent in August, on seasonally adjusted figures the Bureau of Statistics published today.
The nation’s unemployment rate, in July, had stood at 6.3 per cent.
The Bureau said the number of Australians with jobs increased by 17,400 last month.
And the number unemployed fell by 14,400 to 781,100.
It said also that the rise in total employment had been driven by rises in full time employment for men and increases in both full and part time work for women.
The biggest increase, during the month, had been a rise of 10,100 in the number of full time jobs held by men.
However, Australia’s job market is still weak.
The Bureau said the nation’s under-employment rate remained steady in August, at 8.4 per cent.
“Combined with the unemployment rate, the latest seasonally adjusted estimate of labour force under-utilisation was unchanged at 14.3 per cent in August 2015 from a revised May 2015 estimate,” the Bureau said.
by Alan Thornhill
There has been a sharp fall in consumer confidence.
The Westpac –Melbourne Institute Consumer Sentiment Index fell by 5.6 per cent in September from 99.5 in August to 93.9 in September.
The index was hit by global worries.
These included a deluge of disturbing news, with violent gyrations in both Australian and overseas equity markets.
There was also poor economic data from China, a disappointing report on Australia’s growth rate and weakness in the Australian dollar.
But the Bank’s Chief Economist, Bill Evans, said: “despite soft economic growth, jobs growth has been strong over the past year.”
Mr Evans said this was partly because of the strong contribution to jobs from the improving export services sectors.
He added that: “A sustained deterioration in the jobs market will not be apparent until next year complicating the market’s expectations of a rate cut by year’s end.”
by Alan Thornhill
The Australian economy is still struggling to transition to non-mining sources of growth amidst lower national income, according to a new assessment by the National Australia Bank.
However the bank also said, there is increasing evidence that growth momentum is broadening across the non-mining economy, and not limited to the dwelling sector.
In the assessment, published today, its economists said this was a response to the lower $A and interest rates, with improvement particularly evident in services sectors.
“Our 2015/16 GDP forecast has been revised down to 2.4 per cent, reflecting a weaker than expected Q2 result, while the 2016/17 forecast is unchanged at 3.1 per cent,” they said.
The unemployment rate is expected to ease to 6 per cent through 2015/16 and to 5.75 per cent in 2016/17.
“While risks to the outlook stemming from financial market volatility and a slower China are front of mind, stronger local momentum in the non mining sector is expected to keep the RBA from cutting rates further,” they added.
But they noted, too, that global growth remains sluggish and below trend.
“… and we have slightly lowered our forecasts to take account of weaker than expected outcomes in India, Canada and Brazil,” they said.
“The bursting of the Chinese share market bubble and the authorities’ confusing response adds further unwelcome volatility and uncertainty to an already uninspiring outlook.
And we expect growth to remain soft and below trend through the next two years with no sign of any imminent upturn in activity and sizeable downside risks.
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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