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Negative news makers frustrated by good economic data

Peter Switzer
6 December 2017

What headline would you prefer to read about coming out of the same economic data? On one hand, you could read about “Consumers on spending strike…” or on the other, “Economy growing at the fastest pace in 15 months!”

If it was up to me and I wanted to tell of the picture that seems to be emerging for the Oz economy, I’d run with: “Economy stronger than bullish RBA expected!”

Why would I do that? Well, that’s simple — it’s the truth.

The bill shock story in one newspaper came with no proof. Inside the better-than-expected 0.6% economic growth number for the September quarter — that’s April, May and June — the contribution from consumers was 0.1 percentage points, which was the weakest in five years!

That then became the target of those who want to believe that their tale of many woes about the Oz economy has been too negative or maybe even too wrong. Like a child clinging on to an unbelievable argument, they’re clutching at straws, trying to deny what’s so apparent that our economy is on the comeback trail.

Ironically, just as some doomsday lovers were pushing to weak consumer numbers in the three months to June, the day before we learnt that retail figures for October were much better than expected.

They were so good that short-sellers of our big stores — JB Hi-Fi and Harvey Norman — rushed for the exits, pushing JB’s share price up 6% in one day!

This led to headlines about Amazon underwhelming, which is true, but anyone who thought this US behemoth was going to hurt retailers from day one was naïve. 

Amazon will be a slow burn for our retailers but some will be burnt more than others, though it will take time.

Of course, the big mistake the media will make, and I’m doing that right now, is to talk about the big US online retailer, as it is the master of free publicity.

Here’s an idea: all of us in the media go on strike against this US online retailer, so it has to spend money on advertising! 

No, we could never be as sneaky as a new age, smart online business that breaks all the rules of conventional business, such as ‘don’t make a profit to lower prices to consumers and kill rival businesses in the process’.

But I digress. Let’s get back to the good news story.

The September economic growth number came in at 0.6% and, if you add up the past four quarters, you get the 2.8% growth figure, which was higher than what the RBA had tipped of 2.5%. 

Now remember, the Reserve Bank has tipped that 2018 will be a 3% plus year for economic growth, and a lot of economists have respectfully scoffed at their optimism. 

However, the pointy-headed RBA bankers look like they’re on the money.

And the stock market has probably backed their positivity, with local equities up about 7% over October and November.

Back to growth and the RBA likes to take the last two quarters of growth — 0.9% plus 0.6% — and multiply them by two to get a feel for what the economy has been doing over the past six months. This is to try and guess what might happen in the months ahead.

On that figuring, we’ve been on a 3% pace and this is the magic number where unemployment tends to fall, which I believe is a great news story.

At the risk of sounding like Animal Farm — falling unemployment, good, rising unemployment, bad! 

This is so basic and I don’t know why newsmakers can’t embrace the so obvious good news wrapped up in these September quarter numbers, which I bet will be trumped by the figures we see in the current quarter.

Lately, we’ve seen the business investment numbers come in better than expected and there are positive predictions from respected economists that 2018 will bring better wage rises. 

Add these to the surprise retail story recently and the December quarter look promising.

This is why I prefer CommSec’s heading: 

“Economy growing at the fastest pace in 15 months”. 

Oh yeah, I forgot, this heading was made by an economist rather than a journalist!

That might explain it.

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