Your $9 billion loss

Prepare for a shock on Wednesday.

That’s when Australia is expected to start chalking up income losses, that are – eventually – expected to total some $9 billion.

This horrifying figure comes from the Treasurer, Wayne Swan.

No doubt he had a little help, though, from the number crunchers in his Department.

Those Treasury officials, of course, have been totting up the cost of income lost in three disasters, earlier this year.

These were the floods, cyclone Yasi and disasters in Japan, which is still Australia’s second biggest trading partners.

By all reasonable standards, these were terrible events.

Despair would certainly have been understandable.

Strangely, perhaps, Mr Swan is still optimistic.

He believes we are, too, at least mostly.

Why Wednesday, though?

That’s when the Australian Bureau of Statistics is to release its March quarter  National Accounts.

These are expected to reflect the brunt of those three natural disasters, earlier this year.

In his weekly Economic Note, Mr Swan says:”The latest estimates from the Treasury are that those three events are likely to have subtracted more than 1 per centage point from growth in the quarter.

“The total economic is likely to be around $9 billion, with the March quarter bearing the brunt of that,” he added.

How then can Mr Swan be optimistic?

Why, also, does he believe most other Australians are, too?

He says that, despite those losses, the nation’s economic fundamentals are strong.

“Our economy is forecast to create some 500,000 jobs “in the next couple of years,” he said.

Mr Swan said the latest official investment statistics supported that.

They showed that Australian companies are planning record levels of investment, in the years immediately ahead.

Mr Swan conceded that prosperity had not yet reached everyone, in Australia’s “patchwork economy.”

Many families and  businesses had suffered a very “tough start to the year.”

But, even now,  most Australians believe their nation’s best years “still lie ahead.”

Mr Swan said this is a belief he shares.

We’re fussier about wine, but spend less

Australians are gradually losing their taste for white wine in casks.

But we are still fond of a nip of fortified wines, like port and sherry.

The Australian Bureau of Statistics reports that, back in 2007-08, more than half of the white wine sold in Australia was packaged in cardboard cartons.

Fifty two per cent, to be precise.

In the first three months of this year, though, that proportion was down to just 47.5 per cent.

However our clear preference for red wine in bottles has been maintained.

It stayed at 59.4 per cent, at both points.

We are drinking less wine, though, in both varieties.

The Bureau reports that white wine sales fell by 7.7 per cent, in the 12 months to the end of March this year.

Red wine sales fell by 6.2 per cent over the same time.

Brandy sales have taken an even bigger hit, falling by 8.4 per cent in the 12 months to June past year.

The Bureau offers no explanation of these falls.

However, they are in line with a broader trend, evident over the past year, for Australians to spend less and save more.

The Bureau did urge caution in the use of its figures, though.

It said a significant change has been observed in the reporting of bulk wine sales since the June and September quarters of 2009.

Significant revisions had been made, as a result.

However, the Bureau also said that the total impact, at this stage, is still unquantifiable.

The Bureau  reported that total combined sales of port and sherry rose by 10.6 per cent, in the 12 months to the end of March this year.

The budget’s forgotten men

Farmers and builders are deeply worried about their prospects.

The strong $A has hit farmers hard.

And many are still struggling to repair damage done by recent wild weather.

They were looking, particularly, on budget night for some sign that the government might restrain the almighty $A.

That didn’t happen.

Speaking before budget night, the President of the National Farmers’ Federation, Jock Laurie, noted that the $A had appreciated by 55 per cent in the last two years.

This had been “the single greatest enemy of the agricultural sector,” cutting farm  incomes by about $11.5 billion.

The Treasurer, Wayne Swan, told Federal parliament, that the government is trying to help by imposing the tightest fiscal restraint Australia has seen in more than 30 years.

But that won’t curb the $A’s rise, while demand for Australia’s iron ore and coal is still running hot.

Australia’s builders, too, have been making no secret of their fears.

They have said that the interest rate rises, which came last November, have already put “a wrecking ball” through their industry.

The builders were also looking for help in the budget.

But they were  disappointed, too.

Andrew Harvey, a Senior Economist at the Housing Industry Association, said that while the budget had contained useful boosts to training, it had not tackled Australia’s chronic housing shortage or deteriorating affordability.

However, a Commonwealth Bank economist said the government had done all that it could to restrain spending in difficult times.

Mr Swan was quick to endorse that message, as he defended his budget in Parliament.

Hold that $A:farmers

Farmers are urging the Federal government to avoid any action, in its budget, that would strengthen the Australian dollar.

“It is … essential that the Government avoids measures that fuel consumer spending and lift discretionary demand, taking the Australian dollar beyond the ‘death zone’ for our exporters,” Jock Laurie, the President of the National Farmers’ Federation said.

“What is required are measures that build economic capacity,” Mr Laurie added.

“Every one percent increase in the value of the dollar is estimated to shave off $210 million dollars from Australian farm incomes,”Mr Laurie said.

“ With the Australian dollar appreciating by a staggering 55 per cent in the last two years, this factor has clearly been the single greatest enemy of the agricultural sector.”

Mr Laurie said the $A’s appreciation, over that time, had cut farmers’ incomes by about $11.5 billion.

“No sector of the economy feels the brunt of a strong dollar more than agriculture,” he added.

Meanwhile the Federal Treasurer, Wayne Swan, strongly defended the spending cuts that he will announce in tonight’s budget.

“Well, we’ve made it very clear that in coming back to surplus in 2012-13 and then building surpluses thereafter, there is a need to put in place substantial savings.

“And you’ll see on Budget night substantial savings.

“In our time in Government and in the previous three Budgets we have made substantial savings.

“Savings worth $83.6 billion over three years have been made.”

Mr Swan also revealed that he will be announcing changes to Family Tax Benefit Part A.

“We will make savings to make room for new initiatives,” he said.

The Chinese giant

China is now the world’s biggest saver – and its biggest investor – Glenn Stevens says.

Australia’s Reserve Bank chief also  said China’s exports are now displacing those of other Asian countries.

Although he did not name Japan, in this context, his indirect reference to it was clear.

Mr Stevens also warned, in his speech  to the American Australian Association in New York, that it would not be wise to see China’s rise through “a bilateral prism” of the US-China relationship.

“…the world is changing, and quite quickly,” he said.

“The rise of China -and very likely India – is a transformative event for the global economy.

“Unless something pretty major goes wrong, we are likely to see much more of this trend for quite a long time yet,” Mr Stevens said.

” China’s saving rate, at about 55 per cent of GDP, is one of the highest recorded,” he added.

“And because China has become a large economy, the extent of that annual flow of saving is now globally very significant.

“In absolute terms, according to the available national income statistics, China is in fact now the world’s largest saver,” Mr Stevens said.

“Its gross national saving, at an estimated US$3.2 trillion, exceeded that of both the United States and the euro area in 2010.

“Its gross investment is also the world’s largest – at an estimated US$2.9 trillion in 2010,” Mr Stevens said.

He said China’s rise had greatly affected Australia’s trade.

“There are few countries that have noticed this more in their trading patterns than Australia.

” Our trade patterns have been strongly oriented towards Asia since the emergence of the Japanese trade relationship in the 1960s.
“But this has taken a further step up in recent years, with the share of merchandise exports going to the Asian region rising from a little over 50 per cent as recently as 2003 to over 70 per cent in 2010.

” A similar trend has occurred in imports. China alone has risen from 6 per cent of exports a decade ago to 25 per cent today.

“The rise in Australia’s terms of trade – about which I will not give yet another sermon today – is part of this same picture,” Mr Stevens said.

Job crisis looms

Australia’s job market is improving.

But 8 million Australians don’t have the skills needed, to take grab the new opportunities.

They lack the necessary skills.

Two reports, just published, throw new light on this critical situation.

The ANZ job vacancy index has shown steady and sustained improvements in the number of jobs on offer over the past year.

The number advertised, in newspapers and on the internet, rose by 1.8 per cent last month to about 277,000 a week.

Already, some industries, such as mining, are  reporting significant labour shortages.

However the second report, called No More Excuses, shows that millions of  Australians simply do not have the writing or mathematical skills they would need to train either for a trade or a profession.

The report showed that 53 per cent of adult Australians have difficulty with numeracy, while 46 per cent  have difficulties with reading.

Predictably, many of these people are also unemployed.

Many are migrants from non English speaking backgrounds.

The Industry Skills Council, which produced this devastating report,  also warned that this situation is getting worse, not better.

A spokesman for the authors, Rhoni Stokes, said the report presents “a significant challenge” to all Australian industries, particularly as labour shortages are likely to get worse in the years ahead.

“We are talking about the health and welfare of people,” she said.

Ms Stokes was adamant about one thing.

People, who are trying to improve their skills in these areas, must have greater support.

A turning point?

We have been spending – and borrowing – less over recent times.

While that is a natural aftershock of the global financial crisis, it is still causing great anxiety.

Particularly among the nation’s shopkeepers.

They have found themselves doing deals they once would not have believed, just to stay in business.

“Suicide deals” as they are known in the trade.

If that goes on too long, though, the results are thoroughly predictable.

That’s why the retail sales figures, which the Australian Bureau of Statistics is to released on Thursday, will be watched – and analysed – with intense interest.

Those figures, which will be for  the month of  February might contain early evidence of a revival in our spending habits.

The bureau will also release its building approval figures for February on Thursday.

These, too, will be watched with great interest, although that will be confined mainly to the building and the hardware sectors.

The new Premier of New South Wales, Barry O’Farrell, is declaring that the main thrust of his first term will be to decentralise.

He predicts that his State’s population will continue to grow in the this time and said that would make a reduction of the proportion of its people living in Sydney a necessity.

That implies a great deal of new work – and opportunities – outside the State’s capital.

There will also clearly be much extra work in Queensland, too, as rebuilding gets under way after the recent floods.

What everyone will be looking for now, though, is a sign of a turning point in Australia’s economy.

And that might, just might, appear on Thursday.

Flood levy secured

Wayne Swan says new trade and housing figures  now show just how big the task of rebuilding after recent floods – and cyclone Yasi – will be.

The figures, produced by the  Bureau of Statistics, revealed that Australia’s coal exports – and home building approvals -  fell sharply in January.

Both falls resulted largely from the floods.

A separate study also showed that consumer confidence  fell sharply, in February,  after the Prime Minister, Julia Gillard, announced plans for a carbon tax, to tackle climate change.

However the government also had a big win, when the  Independent Senator, Nick Xenophon, announced that he would support its proposed flood levy.

That will give the government the critical vote it needs to push the levy through Parliament.

This   followed month- long talks between the Senator and the government.

The government agreed, in these talks, that States and Territories would have to meet new insurance requirements in future.

The Treasurer told parliament that both the trade and  home building approval figures ”…show the size of the task we face, in rebuilding, particularly in Queensland.”

Ms Gillard  welcomed Senator Xenophon’s decision to support the proposed flood  levy.

”This now means that the flood levy will pass the Parliament, allowing us to get on with the critical job of rebuilding Australia after the devastating summer floods,” she said.

The Prime Minister put the likely cost at $5.6 billion.

She has  said, previously though, that two thirds of that cost would be met by cutting government spending, in other areas.

The plunge in consumer confidence, though, was ominous for the Federal government.

The Opposition was quick to point out, in Parliament,  that it followed the Prime Minister’ announcement that her government would set a price on carbon emissions.

Senior Liberal, Andrew Robb, warned that the carbon tax would be ”compounded” as the items people buy moved through all stages of  production  and distribution.

The Roy Morgan organisation said consumer confidence fell 6.6 points in a week  after Ms Gillard announced the new carbon tax.

The organisation’s chief, Gary Morgan, said that is the ”biggest weekly fall since the November interest rate rises…”

”Consumer Confidence is now 15.5pts lower than a year ago, ”  Mr Morgan added.