by Alan Thornhill
Consumer confidence has eased in Australia, but it is still strong.
The Westpac bank, which published this assessment, with its June consumer confidence figures today, also predicted that another rate cut would “prove to be necessary, ” probably next year
It said optimists still outnumber pessimists, among Australian consumers.
However its index of consumer sentiment fell 1 per cent in June, to 102.2 per cent.
The unusually high level of 103.2 per cent seen in May followed the surge that occurred after the Reserve Bank unexpectedly cut interest rates.
Westpac Senior Economist, Matthew Hassan, said that: “coming after an 8.5 per cent surge in May, the small decline in June mostly represents a consolidation at improved levels.”
“Last month’s surprise rate cut from the RBA was the main catalyst behind May’s rally and although confidence has slipped back a touch in June this is a fairly common pattern following an interest rate driven bounce,” Mr Hassan said.
He said, too, that: “responses to additional questions on ‘news recall’ point to a somewhat calmer backdrop compared to March.
However the majority of consumers still assessed news as being unfavourable.
The highest recall levels were for news on ‘economic conditions’ (27.8 per cent) and ‘Budget & tax’ (25 per cent), he said.
But both were noticeably lower than in previous quarters.
That is despite the May Budget and campaigning in the lead up to next month’s Federal election.
News on ‘international conditions’ was also much less prominent (at 10 per cent).
This was the lowest read on this item in more than a decade.
Unsurprisingly, there was higher recall for news on interest rates at 16.5 per cent, Mr Hassan said.
“Responses to additional questions on the ‘wisest place for savings’ showed a slightly less risk averse tone but attitudes still appear to be more conservative than seen throughout 2015.
The proportion of consumers nominating ‘pay down debt’ fell from 24.4 per cent in March to 20 per cent in June.
Consumers also continue to heavily favour ‘safe’ options as well, with the proportion nominating bank deposits rising from 27.4per cent in March to 29.5 per cent in June.
That contrasts with continued lower readings for the proportion nominating real estate (15.8 per cent in June vs an average of 25.4 per cent in 2015).
“Consumer views on housing also consolidated in June.
“ The ‘time to buy a dwelling’ index declined 2.7per cent but the retracement followed a strong 12.1 per cent surge in May,” Mr Hassan said.
Price expectations also firmed in the month with the Westpac Melbourne Institute Index of House Price Expectations up 3.6 per cent to the highest level since September 2015.
“However, both buyer sentiment and price expectations are still well below the readings seen a year ago,” Mr Hassan said.
He said, too, that:“the Reserve Bank Board next meets on July 5.
Mr Hassan said a move at that meeting is highly unlikely.
In fact, he suggests that the next rate cut might not occur this year.
The key considerations for the Bank are around the outlook for inflation, he said.
On its current forecasts the RBA does not expect inflation to return to the bottom of the band until 2017.
And that is on the assumption of a further rate cut given that the Bank’s forecasts are based on ‘market pricing’ for rates.
The most important and immediate information about whether the RBA’s May assessment is correct will come from the June quarter inflation report which prints on July 27, after the July Board meeting but ahead of the August 2 convention,” Mr Hassan said.
“It is our assessment that the information in this report will confirm to the Board that another cut is indeed necessary”, he added.
by Alan Thornhill
Australian shoppers sharply increased their credit card debt, as cold weather approached this year.
The Bureau of Statistics reported today that revolving personal credit commitments rose by 14.2 per cent in April, a traditional time for buying new clothes and shoes.
The bureau also noted that, overall, personal finance commitments rose by 5 per cent in the month.
But housing finance, for owner occupation, rose by just 0.1 per cent in April.
All of these figures are seasonally adjusted
There were some signs of pre-election caution, though, in the bureau’s lending finance figures for April.
Commercial finance, for example, fell by 3.3 per cent in the month.
And lease finance rose by just 0.4 per cent.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, is trying to steer the election campaign back to where it started.
That is with his attempt to restore peace in the building and construction industry.
And in a speech to the American Australian Association & US Studies Centre last night, Mr Turnbull also argued that Australia’s increasing involvement with Asia is making this country’s reliance on America more important than ever.
He said the government had launched an unusually long –eight week – campaign for re-election “in order to break the deadlock between the House of
Representatives and the Senate over two critical pieces of legislation relating to industrial relations.
“and one of those is the restoration of the Australian Building and Construction Commission,” Mr Turnbull said.
That aim had – previously – been hardly mentioned during the campaign, which has now passed its half-way mark.
But, last night, Mr Turnbull declared that the course he had chosen is: “the only way we can get the rule of law restored to the construction sector.”
He said the sector employs one million people.
“ and the restoration of law to that sector is a vital economic reform, and part of our economic plan to secure our prosperity.”
“the only way we can get that passed is through this double dissolution and getting the numbers collectively in the House and the Senate to pass that law and restore rule of law through a joint sitting of the parliament,” Mr Turnbull said.
“ That’s our commitment,” he added.
Mr Tunbull also paid tribute to a previous Liberal Prime Minister, John Howard, who attended last night’s function.
He said: “John understood that the United States is the irreplaceable anchor to the global rules-based order – an order built upon shared political values and common economic and security interests.
“The truth of his insight has been affirmed by every subsequent Prime Minister of Australia.
“Earlier this year I visited and thanked our men and women serving alongside US forces in Afghanistan, in what is now the longest commitment in our military history.
“And also our forces in Iraq, where we are together with the United States and other allies jointly pushing back, rolling back the brutality and barbarity of Daesh or ISIL.
“And not a day, truthfully not a minute, goes by without our intelligence agencies working together – saving lives – in the fight against terrorism.
“Our ANZUS alliance and broader relationship is anchored in a history that is even deeper and richer than many of us realise,” Mr Turnbull concluded.
by Alan Thornhill
Australia’ s economic growth appears to have been surprisingly strong in the early months of this year.
Indeed the Statistician put it at 3.1 per cent in the 12 months to the end of March – and said trade had played a leading role.
The Prime Minister, Malcolm Turnbull, later made that an election issue later when he said this kind of growth does not happen “by accident.”
These developments make new research, that the National Australia Bank published today, particularly interesting.
For the bank states, quite bluntly, that our iron ore trade has been “riding an unsustainable wave.”
If that is true, the Prime Minister’s carefully crafted, but still merely implied claim, to have produced that growth, takes a hit.
Mr Turnbull conceded later that there are risks associated with both government and opposition forecasts.
The reality is that forecasts – there are always risks with forecasts I think everyone understand that.
“The further out you go, the more speculative those assumptions are.
He was replying to a reporter in Ulladulla.
“What will the iron ore price be?
“What will the foreign exchange rate be?,” Mr Turnbull asked rhetorically.
The bank, itself, avoided stepping into the current election campaign, contradicting Mr Turnbull directly.
But what the NABt does say is deeply disturbing to people who worry about Australia’s economic future, especially as iron ore has long been a very big item in this nation’s trade accounts.
It says that:” After trending lower across 2015, iron ore prices staged a short-term volatile rally in early 2016 – returning close to US$70 a tonne in late April.
“This coincided with a rapid increase in Chinese futures market trading volumes on the Dalian Commodity Exchange – with may indicate a temporary speculative bull market.
“Subsequent tighter regulation on the DCE brought prices back nearer to US$50 a tonne.”
Then the NAB adds:-
- This rally occurred against a backdrop of stronger Chinese steel market conditions – with demand recovering thanks to a rebound in construction activity (the sector that accounts for over half of China’s steel demand). Steel prices rose faster than input costs between February and April, driving steel maker profitability to its highest level in almost seven years.
- We argue that the rebound in construction is not sustainable, with policy changes that have relaxed purchase requirements, looser credit and the poor performance of alternative investment options re-inflating the property bubble that had somewhat deflated across 2014 and 2015.
- The short-term boost to profitability should not be allowed to overshadow the significant long-term challenges that China’s steel industry needs to address. Excess capacity in China’s steel sector exceeds 300 million tonnes (around three times the 2015 output of Japan, the world’s second largest steel producer).
- Medium term trends for steel – both in China and globally – appear subdued. Expectations that China’s steel consumption will continue to decline in coming years will be a major constraint on iron ore demand, while sub-trend economic growth elsewhere provides little opportunity for China’s declines to be offset. Over the medium term, we expect prices to settle at around US$40 a tonne.
by Alan Thornhill
That was quite a trick.
The Australian economy grew by 1.1 per cent in the first three months of this year.
And by 3.1 per cent over the year to the end of March.
What is particularly remarkable about these seasonally adjusted figures, produced by the Statistician today is that this growth, which was boosted by our exports, was achieved, as the prices we were getting for them were falling.
Quite sharply, in fact.
Indeed the Statistician also reports that our terms of trade dropped by 11.5 per cent over the year, including a 1.9 per cent fall in the March quarter itself.
So how did we do it?
Overwhelmingly, by selling quite a lot more of the stuff that we do produce well.
Mining products, for example.
The Bureau notes that their value rose by 6.2 per cent in the quarter.
And our household consumption spending rose by 0.4 percentage points in that time.
Impressive figures, certainly.
Especially for uncertain times, like the present.
But we shouldn’t read too much into them.
And they can bounce around quite around quite a bit.
So we shouldn’t be too surprised if we find our political leaders differing a little in their views of these developments.
by Alan Thornhill
The Prime Minister, Malcolm Turnbull, told voters tonight that growth is necessary for Australia.
He said that is fundamental.
And – taking care to appear Prime Ministerial – Mr Turnbull said his government had a plan to achieve growth that would produce new jobs and prosperity.
The Opposition Leader, Bill Shorten, responded by saying that fairness is needed for growth.
And he said the government’s plan to give big foreign companies $50 billion worth of tax cuts over the next 10 years is not fair.
He said a well educated population, with access to good health care, is essential.
The two leaders were speaking in the second of their debates in the current election campaign, leading to national elections on July 2.
Tonight’s debate was the first to be televised publicly.
The first was carried only on pay television.
Although both leaders were criticised tonight for not giving enough detail about their policies, both would probably be reasonably happy with their performances.
Both managed to avoid embarrassing mistakes.
And both stuck to carefully considered strategies.
Mr Turnbull sought to re-assure those who share his philosophies and to convince doubters that voting for a reckless spending Labor government on July 2 would be just too risky.
And Mr Shorten, who realises that he is less well known than his rival, took care to present himself as a moderate responsible leader, who will advance thoroughly thought out policies, in this campaign which still has five weeks to run.
by Alan Thornhill
Australia’s trade performance last year wasn’t quite as bad as we all feared.
This became clear today when the Bureau of Statistics published revised figures for the nation’s services trade in 2015.
These showed that the deficit in Australia’s services trade last year was $10.1 billion.
That was 1 per cent smaller than the deficit originally reported.
Although the revision was based on technical factors, it will encourage Australia’s economists.
They have been looking for an improvement in Australia’s services trade to offset some of the losses incurred when mineral prices fell.
The Bureau explained that it is now using a more accurate method of accounting for sea freight charges.
This is now sourced from Bloomberg and the World Shipping Register, instead of the direct commissions data that was previously used.
by Alan Thornhill
Malcolm Turnbull sought to reassure West Australians today that high tensile Australian steel will be used in his government’s naval shipbuilding program.
Speaking at the Austal ship building yard at Henderson, Western Australia, Mr Turnbull said this would help to offset job losses that would otherwise come with the nation’s move away from an economy based on a mining boom.
He said: “some of the most sophisticated naval vessels in the world, (were being built) right here in Perth.”
Many had been exported to Amman.
“This yard, Austal ships, has built 250 vessels and 200 of them have been exported,” Mr Turnbull said.
“ This company, Austal, represents exactly what we are seeking to achieve with our defence industry plan,” he added.
“ It sums up the objectives of our national economic plan – jobs and growth, driving advanced manufacturing, exports, technology, jobs and growth,” the Prime Minister said.
At a news conference later, Mr Turnbull denied a reporter’s suggestion that the State’s Liberal Premier, Colin Barnett, had not been invited to the shipyard ceremony today, because he is “on the nose,” politically.
Mr Turnbull said this had simply been because the event was national, not a State one.
He praised the man who has built Austal ships into a successful international business.
“What John Rothwell has done here, as a great leader of Australian industry, as a great ship builder, he has taken Australian technology and created Australian jobs and built a global business,” Mr Turnbull said.
“… I am delighted that we are supporting Austal and they are providing these 19, up to 21 Pacific Patrol Boats.
“ and they’ll be built right here.
“ and we expect the Offshore Patrol Vessels, of course after the first two are built in Adelaide, they will be built here at Henderson as well,” Me Turnbull said.
He is campaigning for re-election in a vote to be held on July 2.
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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