6 December 2019
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Our economy is looking good but don't pop the champagne yet!

Peter Switzer
2 December 2015

By Peter Switzer

Just in case my colleagues in the media want to play down the very good economic growth number in the newspapers and in the electronic media for the September quarter, let me give you a ‘play up’ take on what has happened this week on the economy.

And I’ll stretch it back for what looks like a miles better picture than some ‘top’ economists have been predicting. Recall the R-word pullout merchants that the SMH devoured and spewed on to its front pages. Those guys must be feeling like real Wallys. (Excuse my Pommy-ism but I am writing this one from London.)

Here’s a snapshot of the economy you have lived through:

  • Business credit rises at the fastest rate in six and a half years in October.
  • Company profits have risen for the first time in five quarters in the three months to September.
  • Sales rose in 12 out of 15 industries in that quarter.
  • The Performance of Manufacturing index lifted by 2.3 points to 52.5 in November, the highest reading in two years and any reading over 50 means the sector is expanding!
  • And our September quarter economic growth was the fastest in 18 months at 0.9%, which brings the annual growth rate to 2.5%. If we were in America, we’d take the 0.9% growth rate and multiply it by four and say we’ve grown at a 3.6% rate! 
  • Sydney house prices have fallen at the fastest rate in five years — down 1.4% — but it’s not huge considering the three years  of double-digit growth and it’s exactly what the RBA wanted.
  • The last jobs number saw employment up 58,600 while unemployment went from 6.2% to 5.9%, which was hailed too good to be true.
  • There’s a lot of that at the moment and there’s so much that I’m starting to think it’s looking truer by the day. Add this further good news to the above:
  • In rolling annual terms, a total of 1,146,194 new vehicles were sold over the year to October – a record high.
  • Total new loans (personal, business, housing & lease) rose by 6.4% in September to a 7½-year high of $75.3 billion. It was the biggest monthly rise in lending in eight months and it went 0.7% higher in October!
  • The Sydney-Melbourne route is a key indicator of business activity. Passenger numbers in September were a record for a September month. Smoothed annual growth is the best in two years.
  • The Westpac/Melbourne Institute index of consumer confidence rose by 3.9% in November to 101.7 – the highest reading since May 2015. 

That was just after Joe Hockey’s small business Budget that was well received.

This chart shows how good that reading was being the second best in 12 months:

The big worry is business investment but this could start to improve as the news above and the big slide in the dollar starts to change the attitudes of those making business investment decisions, who have been wimping out with their decision to spend money on capital goods to make profits.

I’ll also add that I haven’t met one business leader who’s  unhappy about a change of Prime Ministers and I’ve met and surveyed a truckload of them. That too will help investment.

I won’t crow about our improving economy until I see the December quarter numbers and the Fed rate rise is out of the way but I’m getting plenty of champagne on ice for when it’s popping time.

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