by Alan Thornhill
A new business survey shows that while the Australian economy is still strong, medium to longer term risks are becoming more apparent.
These are the conclusions the National Australia Bank’s Chief Economist, Alan Oster, reaches from the results of the bank’s latest monthly business survey.
The bank sid: “for a while now, the NAB Business Survey has provided a relatively consistent message on the health of the Australian economy.”
And it added: “It continues to show a steady recovery in non-mining activity, with the services sectors clearly leading the way.”
However Mr Oster added a warning.
He said: “there were some notable differences in business conditions across industries this month. “
“The largest deterioration was in mining, followed by big falls in transport and wholesale.”
“Retail saw the largest improvement, following a weak result last month.”
But Mr Oster said: “…the contribution from major industries suggests a relatively mixed bag.”
He said the service sectors continue to be the best performers.
“ Signs of a broadening recovery in recent months have again become more obscure following sharp deteriorations in transport and wholesale – although the recovery in retail conditions was encouraging.”
The bank said the economy could run into headwinds from 2017.
And it added: “these headwinds may require additional policy action to support growth, especially if the RBA hopes to see inflation return to within its target band.
“ Both global and domestic disinflationary pressures are expected to keep CPI inflation below the target band for an extended period.
And structural shifts in the economy and modest economic growth would leave the unemployment rate under pressure.
“To stabilise the unemployment rate (at around 5.5 per cent) we expect the RBA will feel the need to provide further medium term support through two more 25bp cuts in May and August 2017 (to a new low of 1 per cent).
“And thereafter raises the prospect of the RBA thinking about the use of non-conventional monetary policy measures,” it added.
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 Federal government and opposition differed sharply today, after a major ratings agency, Standard and Poors, put Australia’s prized triple A status on negative watch.
It did so citing both the still unresolved Federal election result and high levels of both household and external debt.
The Treasurer, Scott Morrison, said the agency’s move, “reaffirmed the government’s fiscal direction and the need to “stick to the plan” the Coalition set out in its last budget.”
However the shadow treasurer, Chris Bowen, said it underlined the government’s “fiscal failure” and cast further doubt on its budget projections.
The agency’s warning means that Australia’s AAA credit rating might be slashed in future if there is no improvement in its budgetary performance.
This could increase government borrowing costs and weaken international investment.
Mr Bowen said S&P statement is “sombre reading.”
He said the agency “…calls out the Government on three years of fiscal failure, based on unrealistic Budget revenue forecasts and savings measures that will never pass the Parliament.
“S&P makes it clear that it doesn’t have much faith in the Government’s Budget revenue forecasts – a point Labor has consistently made since the Budget in May,” Mr Bowen added.
However Mr Morrison took a different view.
He said the agency’s warning reinforces the government’s message that Australia must “live within its means”.
He said S&P were clearly concerned about the outcome of the election and that “the pace of fiscal consolidation may be postponed”.
Mr Morrison said it would be irresponsible to increase the deficit over the next few years, because “that increases the debt and you can’t get that money back”.
by Alan Thornhill
The Reserve bank left interest rates on hold today, but hinted that there could be another rate cut soon.
After a meeting of the bank’s board today, its Governor Glenn Stevens noted that Australia’s inflation is low – at 1.3 per cent – and likely to remain so.
Then he added: “Over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.”
Mr Stevens also said: “Several advanced economies have recorded improved conditions over the past year.”
However he added: “but conditions have become more difficult for a number of emerging market economies.
He said: “China’s growth rate has moderated further, though recent actions by Chinese policymakers are supporting the near-term outlook.”
The bank last cut its marker interest rate from 2 per cent, to a new record low of 1.75 per cent, in May.
Mr Stevens said: “Commodity prices are above 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.”
He also noted the impact of Britain’s Brexit decision to leave the European Union but said nothing about Australia’s cliffhanger election, last Saturday.
Mr Stevens said global financial markets had been “volatile recently as investors have re-priced assets after the UK referendum.
“But most markets have continued to function effectively,” Mr Stevens added.
“Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative.
“Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern,” he concluded.
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by Alan Thornhill
Australia’s political leaders will be hitting their phones this week, trying to scrape together enough support to give the country stable government for the next three years.
The main rivals, Prime Minister, Malcolm Turnbull, who heads a conservative coalition and Bill Shorten, who leads the Labor party both found themselves short of the 76 seats they would need, in the House of Representatives, to govern in their own right, at the end of the initial, but still incomplete, count.
Late yesterday, Labor had 67 seats, the Coalition 65, others 5 and 13 were still in doubt.
The Australian Electoral Commission had counted 78.2 per cent of the votes cast, at that point.
It will not resume the count until Tuesday, and the final result, for the House, will probably not be known until some time next week.
Mr Turnbull had made much of the need he saw for stability, during the late stages of the eight week election campaign, particularly after Britain’s vote to leave the EU.
However the swing to Labor, evident in Saturday’s election, showed that voters were more impressed with Mr Shorten’s warning that only Labor could be trusted to protect Australia’s health insurance system, Medicare.
Mr Turnbull had sought support for a plan centred on tax cuts for big companies and high income earners.
He had warned that a big spending Labor government could not be trusted to manage Australia’s economy responsibly.
And, at a news conference today, he welcomed a question from a reporter who asked him if the election result could threaten Australia’s TripleA credit rating.
He thanked the reporter and said: “This is why it is very important … for me to explain what is happening at the moment.”
“We are simply going through a process of completing a count,” Mr Turnbull said.
The Prime Minister also said that he could still form a new government, for the next three years.
However Bill Shorten greeted the initial count with a triumphal declaration.
He conceded that the public might not know the outcome of Saturday’s election : “…for some days to come.”
“But there is one thing for sure – the Labor Party is back.” he said.
But which of these two men is likely to be Australia’s Prime Minister over the next three years?
The answer to that question will depend, very much, on their relative telephone skills.
by Alan Thornhill
“…The Labor party is back,” its leader, Bill Shorten declared triumphantly, after the result of the first night’s count in yesterday’s Federal election was known.
However his conservative rival, the Prime Minister, Malcolm Turnbull was insisting that he could still form a government.
Independent observers, though, were saying that the results, so far, are so close that voters may still have to wait days to find out which of these two men will be Australia’s Prime Minister for the next three years.
One thing is already certain, though.
Malcolm Turnbull has lost the gamble he took, when he called a double dissolution election, months early, in the hope of winning clear control of the Senate.
He did that in the hope of restoring peace in the building and construction industry, by reviving the Australian Building and Construction Commission.
The final outcome in the Senate will take even longer to decide than that in the House of Representatives.
However one thing is already clear.
The new Senate will be peppered with independents and others who may well prove troublesome to the incoming Prime Minister.
by Alan Thornhill
The Opposition Leader, Bill Shorten, set out his objectives for a Labor government after July 2, in his final speech of the current campaign to the National Press Club in Canberra today.
He said: “We are setting our markers for the Australia of 2030.”
- Strong, universal, affordable Medicare
- A school system back in the top 5 in the world
- 50 per cent renewable energy
- A first-rate, fibre NBN, putting us at the centre of the Asian Century
- Revitalising advanced manufacturing and apprenticeships
- Building the nation building, productive infrastructure unclogging our cities and joining our economic operations
- 3 per cent of our GDP dedicated to science, research and technology
- 300,000 more women in work
- Halving the national suicide rate, and
- Reducing the rates of ovarian cancer.
He said all of this would be matched with an economic and fiscal plan for the next decade, ” to fully-fund our investments in the future.”
This would mean: “Delivering the needed structural savings and tax reforms that will bring the budget back to balance in the same year as our opponents forecast, and build stronger, more sustainable surpluses in the years that follow.
“Achieving these goals over the next decade means starting work next week.
“My team and I have a clear set of priorities for our first 100 days.
“A new Labor government will hit the ground running:
– Offering certainty to Arrium in South Australia – and protecting jobs in Laverton, Rooty Hill and Acacia Ridge
– Setting up our transition fund to support 200,000 automotive supply chain jobs
– Developing the Financing Mandate for our new $10 billion Concrete Bank, so we can get private investment flowing into public infrastructure
– Drawing up the terms of reference and appointing a Royal Commissioner to investigate the rip-offs, scams and credit card interest rate rorts in the banking sector
– And convening a National Crisis Summit on Family Violence, an assembly of the frontline: counsellors, law enforcement, community legal centres, state governments and – most importantly – survivors.
These are the people who know, better than anyone, what is wrong with our system and what we need to do to end family violence.
“Underpinning all of this – our long-term objectives and our immediate plans for action – will be an old-fashioned focus on good public policy.
“A careful and considered approach – recognising that government is a most serious business, a long-term policy institution.
He said a Labor government would be “Dealing honestly with the challenges we face and being upfront about our plans.”
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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