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Could we be the surprise grower, not the USA?

Peter Switzer
30 October 2015

By Peter Switzer

The post-Fed statement positivity for Wall Street lasted one day, with the market not sure if it should cheer the central bank’s apparent lack of negativity or be worried about the first rate rise since 2007.

Whatever happens, economic growth will determine it. The question I have is: will we grow faster than the US? Now, that will be a surprise!

Overnight, the Yanks got their first estimate of growth for the September quarter, which came in at 1.5%. This compares to the great 3.9% reading for the second or June quarter.

The Americans focus on the annualized number from the quarterly result, so the 1.5% figure would come from multiplying 0.375% by four.

Our last quarterly reading — the June quarter — was 0.2%, which annualizes to a weak 0.8%!

However, the previous quarter was 0.9%, or 3.6% when annualized.

We know the Reserve Bank has told us that our September quarter is surprising them when the board of the Bank looks at the forward indicators. So, it’s possible that we could grow faster than the Yanks!

During the week, I did a speech for a group of CEOs and CFOs and ran by them the list of good news stats that I recently showed in this column. It’s a big list and I’ll run them again to rub in the good news as I think this is a responsible national service.

Here it is:

  • Annual credit growth at a six and a half year high.
  • A record 225,406 homes approved in 12 months.
  • Performance of Manufacturing Index @ 52.1, which means the sector is expanding.
  • Job vacancies up 2.7% to 160,900 in August – the best in three years! Up 10.2% in a year plus unemployment is 6.2% and the growth in the number of hours worked by employees is the best in four years.
  • Job ads up 3.9%, which is the best in 15 months and the series is up 14 out of the past 16 months.
  • Retail is up 4.5% in a year.
  • Car sales record high of 1,143,109 for the year.
  • Performance of Services Index is at 52.3, which means expanding and recently was at a 7-year high.
  • Record tourists from China was 1,165,600 in year.
  • 2016 IMF growth at 3.6%, the best in five years.
  • Home loan growth best in 12 years.
  • Latest NAB business conditions is 9.1 or a five-year high.
  • NAB business confidence is up 0.8 to 5.1! 
  • Westpac consumer sentiment up 4.2% to 97.8.
  • Roy Morgan consumer confidence reading at a 15 week high.
  • Women consumer confidence up 6.1% to 96.3.
  • Work started on a record 211,484 new dwellings over the year to June, up 16.9%.
  • And I love this from the RBA only last week: “Members noted that overall growth was expected to have strengthened in the September quarter, with indications of growth in resource exports and dwelling investment.”

But I want to throw in a big positive that I uncovered just ahead of the speech. I thought it was possible that some of the audience could have doubted me and my long list of economic positives that the media often ignores, so I surveyed some of the country’s best economists on what they think we will grow at in 2016. Here is what they forecasted:

  • AMP’s Shane Oliver: 2.75%-3%
  • HSBC’s Paul Bloxham: 2.8%
  • NAB's Alan Oster: 2.7%
  • St George’s Janu Chan: 2.7%
  • Westpac’s Bill Evans: 2.75%
  • Colonial’s Steve Halmarick: 2.6%
  • BIS Shrapnel’s Frank Gelber: 3.2%
  • CommSec’s Craig James: 3%

As you can see, none of these professional economists are tipping 1% plus growth. None of them are tipping recession like a lot of strange people have been talking to me about!

The economy is not going gangbusters but it seems to be getting better and we could end up growing either not much slower than the US or even better.

If that happens, you can blame or thank currencies. The greenback’s rise will hurt US growth a bit and our depreciation will be a big help for growth.

So cheer up and get spending, investing and employing. Your country needs an optimistic you!

On Wall Street, investors went a little bit negative but it certainly was less than what we saw here yesterday. I hope my story of upcoming and expected positivity will help change local, excessive pessimism.

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