by Alan Thornhill
John Fraser is warning Australian business leaders not to place all their hopes in the Asia Pacific.
The Treasury Secretary also urged them to remember that “business as usual” won’t guarantee success in future.
Addressing a business forum in Melbourne yesterday, Mr Fraser first assessed prospects for business in Europe, then said:” closer to home, we need to keep close watch on the prospects of the Asia-Pacific region more generally.
“You might think this is an unusual statement to make, given that the region will remain the fastest-growing in the immediate-term at least.
“But growth has started to slow in some of the major economies in the region. And there are different issues driving the change in many of these countries.
“And in some countries, crucial reforms to address slowing growth have been stalled.
“That is why we can’t put all of our eggs in the ‘Asia-Pacific basket.’”
Mr Fraser also noted that:” the Australian economy is now entering its 25th consecutive year of growth.
“This is the second longest continuous period of growth of any advanced economy in the world.”
And he said its short term outlook is better than that of many other countries.
But he warned against complacency.
“In essence, we need to do more to secure our future prosperity,” Mr Fraser said.
“Global growth remains subdued and a number of major economies face long-term challenges.
“This is not new.
“It has been seven years since the collapse of Lehman Brothers and yet the global economy continues to struggle to regain rates of growth seen prior to the global financial crisis.
“This is not to say there aren’t any bright spots.
“The US economy is one of them.
“The US labour market is strengthening and recent data suggest renewed momentum.”
by Alan Thornhill
Commercial finance fell 1 per cent in June, on seasonally adjusted figures the Bureau of Statistics published today.
However lease finance rose 1.6 per cent during the month, while housing finance rose 5.5 per cent.
Also on seasonally adjusted figures, the Bureau also reported that the value of personal financial commitments rose 1 per cent in the month.
Fixed lending commitments rose by 2.3 per cent in this area, while revolving credit commitments fell 0.9 per cent.
by Alan Thornhill
With inflation cotained – and growth low – the Reserve Bank has again decided to keep its marker interest rate on hold at 2 per cent.
In a statement today, after a bank board meeting, its Governor, Glenn Stevens, said:” While the rate of growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”
Mr Stevens also said:” Recent information confirms that domestic inflationary pressures have been contained.
“That should remain the case for some time, given the very slow growth in labour costs.
“Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”
The bank aims to keep Australia’s underlying inflation rate between 2 and 3 per cent, over the course of a business cycle.
Mr Stevens said:”” In such circumstances, monetary policy needs to be accommodative.
” Low interest rates are acting to support borrowing and spending.
” Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months.”
The Reserve Bank Governor then noted that:” Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities.”
He said:” The Bank is working with other regulators to assess and contain risks that may arise from the housing market.”
And he added:” In other asset markets, prices for equities and commercial property have been supported by lower long-term interest rates.
” The Australian dollar is adjusting to the significant declines in key commodity prices,” Mr Stevens said.
He said:” The Board today judged that leaving the cash rate unchanged was appropriate at this meeting.
” Further information on economic and financial conditions to be received over the period ahead will inform the Board’s ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.”
by Alan Thornhill
Home renovators and gardeners boosted Australia’s retail sales in June, contributing heavily to the 0.7 per cent rise seen in the month.
This seasonally adjusted figure – which the Bureau of Statistics published today – was far stronger than the rise – of just 0.4 per cent – recorded in May.
The Bureau noted that we spent 2.8 per cent more on hardware building materials and garden supplies in June than we did in May, on seasonally adjusted figures.
We also spent 2.4 per cent more on electrical and electronic goods and 1.2 per cent more on furniture and floor coverings.
However we were much more careful with what we spent in our local supermarkets.
The Bureau reported, once again on seasonally adjusted figures, that we spent 0.4 per cent less there in June than we had in May.
However we increased our spending in other specialised food stores by 1.8 per cent.
We also spent 0.8 per cent more on liquor.
The Bureau also noted that we spent 1.2 per cent more in the nation’s cafes, restaurants and take away food stores, on seasonally adjusted estimates, in June.
It said, too, that online retail sales contributed 3.3 per cent to total retail turnover during the month, on original figures.
by Alan Thornhill
Spears of light are starting to shine through the dark economic clouds that descended with the global economic crisis eight years ago.
The strongest so far, perhaps, appeared today in the results of the latest Dun & Bradstreet Survey of Business Expectations, for the fourth quarter of this year.
It showed that the Sales Expectations Index for the fourth quarter surged to 40.8 points, up from 28.6 points last quarter and to the highest level recorded since the fourth quarter of 2003.
Some 48 per cent of companies surveyed now expect to see an increase in their sales in the fourth quarter of 2015.
In a further positive sign, the Actual Sales Price Index leapt to 17.6 points, up from 10.1 points in the prior quarter but still below the 2014 peak of 24.7 points.
According to the survey, 36 per cent of businesses increased sales during the second quarter, while 19 per cent saw a drop in sales.
Adam Siddique, Head of Corporate Affairs at Dun & Bradstreet, said the findings indicate the corporate sector may be emerging from its recent state of inertia.
“The strong survey results suggest businesses have a brighter short-term outlook than we’ve seen in recent months, which is a positive sign for increased economic activity during the second half of the year,” Mr Siddique said.
“The upward trajectory broadly reflected throughout the survey results is encouraging.
“The sharp rise in sales expectations is particularly noteworthy and may indicate the recently announced budget measures for small to medium-sized businesses are gaining traction,” Mr Siddique added.
But the survey also showed that the spike in the Sales Expectations Index was not uniformly reflected across all sectors, with the Business Expectations Survey revealing sales expectations in the wholesale sector eased slightly lower to 33.4 points, down from 34.2 in the prior quarter and comfortably below the 41.5 points recorded for the same period last year.
by Alan Thornhill
Tax breaks, announced in the May budget, appear to have lifted the spirits of Australians operating small to medium sized businesses.
That is reflected in the results of the National Australia Bank’s June quarter survey of these sectors.
The results, published today, show that the conditions and confidence indices rising by 2 points to +4 and +5 index points respectively.
Within the sub-indicators of SME business conditions, trading conditions stood out to be the strongest, which flowed into better profitability conditions.
However, the sectors’ continued reluctance to hire was reflected in the sustained lull in the employment conditions index, which lapsed into negative territory in the quarter.
Analysis by the size of SME businesses, though, suggested that firms have generally experienced better conditions and confidence in the quarter, with the exception of conditions for mid-tier firms.
Despite a recent improvement, low-tier firms with an annual turnover of $2-3m continued to under-perform consistently across major indicators relative to their larger counterparts.
In particular, these firms fared poorly in their cash flow conditions, with their cash flow index falling by 11 points to -17 index points.
Conditions by industry continued to paint a mixed picture, with service-oriented industries maintaining momentum ahead of non-service industries in general.
Property, business services and finance firms continued to do well, although conditions of property firms have moderated compared to last year.
Conditions in manufacturing were largely unchanged around the neutral mark. Meanwhile, retail and construction (which includes residential, non-residential and mining-related construction) overtook wholesale and transport as the worst-performing industries in the quarter, with conditions in the latter two improving significantly, albeit still marginally negative.
SMEs’ overall confidence improved slightly in the quarter to +5 to be at similar levels with that of general businesses’ as measured by the NAB Quarterly Business Survey (QBS).
Most industries recorded an improvement in confidence in the quarter except for manufacturing and accommodations, cafes & restaurants. Property and construction firms were the most confident in the quarter, while finance experienced the weakest.
Confidence by health SME firms rebounded sharply from -21 to around the neutral mark this quarter, but this could prove to be a blip in the data due to a small sample size.
Conditions across states were mixed in the quarter, with NSW continuing to claim the top spot, while a 10-point surprise jump in the conditions for South Australia (to +6) propelled it to a tie second position with Victoria.
Meanwhile, WA (-7) and Qld (-6) fared the worst in the quarter.
Forward orders leapt into positive territory at +4 index point in the quarter, with the positive reading largely driven by high-tier SME firms.
SMEs’ capacity utilisation (78.2 per cent) diverged further away from that of general businesses’ (80.9 per cent), to decrease further below its long-term average of 79.8 per cent.
by Alan Thornhill
The Australian economy appears to be continuing its gradual trend of short term improvement – but its longer term outlook remains patchy.
These developments are reflected in the results of the National Australia Bank’s June quarter Business Survey.
These results, released today, show that business confidence strengthened in Q2 to +4 index points from 0 points.
This is its highest level since Q3 2014 and consistent with the long-run average for the series.
Conditions were also marginally better in Q2, up 1 to +4 index points.
That is above the long-run average level.
The bank said that while Australia continues to face a ‘patchwork’ economy, the Q2 Survey finally gave some indication that positive momentum is broadening across sectors.
” In particular, confidence is now positive for all industries outside of the mining sector.
“This is not the case for conditions,” the bank added.
However it said too, that, leading indicators from the survey remain patchy.
Forward orders were down slightly and are at subdued levels.
Firms’ expectations for conditions in 3 and 12 months time both improved, as did conditions in the ‘bellwether’ wholesale industry – although the level remains very weak.
Perhaps most concerning is that capacity utilisation was unchanged and capex plans for the next 12 months eased back, although they were still elevated, the bank saaid.
by Alan Thornhill
The Australian dollar slid below 74US cents this morning as signs of an early US rate rise strengthened.
As office workers in Sydney and Melbourne switched on their computers – at 9am local time today – they saw that the $A was trading at 73.80 US cents.
By 4pm it had slipped again to just 73.59 US cents.
The little Aussie battler had already touched a six year low overnight, when it slid to 74.54 US cents.
These developments will delight the Reserve Bank and Australian exporters.
The bank has been warning for some time now that – in its view – the $A has been overvalued.
And if present trends continue, Australian exporters will find that their products will become more competitive in world markets.
But these developments are not good news for everyone.
Australians planning to buy a new car, in the months ahead, are likely to find that its price has risen.
So what is going on?
The once-almighty US dollar leapt overnight, as Janet Yellen, who heads that country’s Federal Reserve, signaled that it could raise interest rates as early as September.
Her remarks, in parliamentary testimony, confirmed existing market expectations.
Ms Yellen said US job markets are strengthening.
She testified, too, that recent market turmoil in Greece and China is not likely to have a big impact on the US economy,
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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