Doomsday merchants and nervous Nellies got some bad news on Wednesday — the Oz economy is looking a lot better than they’ve predicted or stressed about! Sure, they will find some excuse for discounting this 3.4% growth number for the year, which was the best for six years but we’ve seen this happen for six months now and some might be thinking up how to make a face-saving apology.
Others will simply say that this number tells a story that ended in July and it’s now September and things are weaker. And they might be right but it doesn’t change the fact that many experts were bagging the economy when it was actually doing a lot better than they thought.
It’s great news for PM Scott Morrison, who would have worn the criticism if this growth number was weak, as he’s been the chief bean counter for the country since Malcolm Turnbull replaced Tony Abbott as Prime Minister in 2015. It won’t be easily digested by Malcolm, who is now ensconced in New York City for a break.
Interestingly, I’m doing a speech on Saturday and in my power point I said “the economy was good but not great” but this 3.4% growth number really makes me rethink that rating. I reckon wages have to pick up before I pull out the “great” tag but we certainly are in with a damn good chance to get to great over the rest of the year.
Despite some media outlets doing their best to scare people about housing price collapses and predictions that poor old Aussie consumers have mortgage stress, these numbers actually found that the local consumer is alive and kicking and spending!
Here’s a rundown of the good economic tidings around of late:
• Annual economic growth rose from 3.2% to 3.4% – the strongest growth rate in almost six years. Over 2017/18, the economy grew by 2.9% – the strongest gain in six years.
• The biggest contribution to growth came from household consumption with +0.4 percentage points followed by government consumption (+0.2pp). Dwelling investment and net exports both contributed +0.1pp .
• 17 of the 19 industry sectors expanded in the June quarter.
• The AiGroup services sector gauge eased 1.4 points to 52.2 in August. Services activity has now expanded for 18 consecutive months - the equal longest stretch since March 2008.
• Business investment rose by 3.1% in 2017/18 to a record $118 billion.
• Almost 93% of ASX 200 companies recorded a profit in 2017/18.
• Over the year to June, sales of our top 200 companies were up 3.2% on a year earlier – the strongest growth in 9½ years.
• The Australian jobless rate fell to 5.32% in July – a 5½-year low.
• ANZ job advertisements fell by 0.6% in August but ads are still only 0.9% away from the 7-year high set in May.
• The NAB business conditions index was +12.4 in July (+5.7 points long-term average).
• The Australian Industry Group (AiGroup) Performance of Manufacturing Index rose from 52 points to 56.7 in August. Any number over 50 says the sector is expanding.
• Despite the PM revolving door, consumer confidence has not been hurt, with the weekly ANZ-Roy Morgan consumer confidence rating rising by 1% to 117.7 to remain firmly above the longer term average of 113.
On the other hand, there are some negatives, such as falling house prices but let’s keep put into perspective. The CoreLogic Home Value Index of capital city home prices fell by 0.4% in August to stand 2.9% lower over the year. The national home price index fell by 0.3% in the month to be down 2% over the year. This isn’t wrist-cutting stuff after such a big boon for so long.
Dwelling approvals fell by 5.2% in July to be down 5.6% on the year and annual credit growth has slowed to 4.4% – the slowest rate in 4½ years. But regulators have been doing their best to hose down the hot housing sector.
I’d argue that the greatest thing we have to be afraid of is fear itself and what some damn media outlets will do to scare the pants off readers to make sales and attract eyeballs!
To the doomsday merchants out there, I say respectfully: “Eat my shorts!”
Go the Aussie economy!
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