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This is a huge day for the world. Make sure you drink to it!

Peter Switzer
15 December 2016

By Peter Switzer

While you were sleeping, the US central bank (the Federal Reserve) raised interest rates for (now wait for it, this is really important), the second time in a decade! If you want to know how scary the GFC was and how close we came to a Great Depression, then just think about that. In a unanimous decision, the fed funds target rate was lifted from 0.25-0.50% to 0.50-0.75%.


So if you’re popping champagne over Christmas, make sure you salute this momentous economic event. This has nothing to do with the positivity that Donald Trump has delivered to the US, Wall Street and all other stock markets, which, like ours, have headed up on the prospects that he now (potentially) offers.

Janet Yellen, Federal Reserve Chair. Source: AAP.

Although I never expected it, Trump has become a confidence circuit breaker, which was needed to get rid of the dark clouds that have hung over big and small companies. This has reduced their inclination to increase business investment and and their willingness to pay higher wages as well as to create good full-time jobs.

Some of this reluctance to invest and employ has not been just post-GFC reservations but has been the new, disruptive digital age, with the likes of Amazon, Uber, Airbnb, and Airtasker unsettling a lot of traditional businesses. 

Even the banks nowadays have to compete with US actor, Alec Baldwin, flogging loans to Aussies and unknown websites have become new lenders on the block. We even have crowd funding or people backing other people with their ideas, with no guarantee of returns. This tells you how much the Internet has changed a lot of us.

Right now, confidence is building, despite there being a few reservations about the Aussie economy. And today, we see the latest employment and unemployment numbers that could add to, or take away from, the small concerns that have become bigger since we saw the September economic growth result of minus 0.5%, which took our annual growth down from 3.1% to 1.8%.

Interestingly, the USA’s annualised growth for the September quarter was looking like 3% but the December quarter has been downgraded from 2% to 1.8% by a consensus of US economists.

Back home, as the December quarter is nearly over, I thought I’d do an eco-check to see how we’ve been tracking for that quarter. I must say I have been seeing some negatives that weren’t around earlier in the year. That said, there are positives, so let’s take stock and I’ll rate each fact with a good or bad news’ tag. Here goes:

  • Employment rose by 9,800 in October, after falling by 29,000 in September (previously reported as a fall of 9,800 jobs). Full-time jobs rose by 41,500, while part-time jobs fell by 31,700. (Good ✔)
  • Hours worked rose by 0.9% in October to record highs – the fastest growth in five months. Hours worked are up by 0.9% on the year. (Good ✔)
  • The unemployment rate was steady at 5.6% in October. It was really 5.58%, which was the best number in 3½ years! (Good ✔)
  • The weekly ANZ/Roy Morgan consumer confidence rating rose by 3.2 points (2.8%) to a 10-week high of 118.6 in the week to December 4. (Good ✔)
  • The Westpac/Melbourne Institute survey of consumer sentiment fell by 3.9% in December to 97.3. The confidence index is down 3.5% on a year ago but the survey was conducted between the 5th and 10th of December, so the negative economic growth news was around then. (Bad ✕)
  • The NAB business conditions index eased from +6.6 points to +5.3 points in November (long-term average +4.8 points). (Bad ✕)
  • However, the NAB business confidence index rose from +4.3 points to +5.0 points with the long-term average +5.8 points. (Good ✔)
  • Job advertisements rose by 1.7% in November to 4½-year highs and are up 6.1% on a year ago. (Good ✔)
  • New motor vehicle sales totalled 98,937 in November – a record for a November month and up 0.3% over the year. (Good ✔)
  • Retail sales rose by 0.5% in October to be up 3.5% over the year – a 5-month high. (Good ✔)
  • The CBA’s Business Sales Indicator (BSI), which is a measure of economy-wide spending, lifted by 0.4% in trend terms in October, matching the gain in September. It was the biggest back-to-back increase in spending in nine months. (Good ✔)
  • While business investment has fallen because of the dying mining boom, over the last six months, investment expectations have lifted by 17.1%, which could be good for the December quarter. (Good ✔)
  • The CoreLogic Home Value Index of capital city homes rose by 0.2% in November and was up 9.3% over the year. Prices rose in all capital cities except Melbourne (-1.5%) and Canberra (unchanged) Regional prices were only up 1.4% in the year to October. (Mostly good ✔)
  • The Performance of Manufacturing index rose by 3.3 points to 54.2 in November. A reading above 50.0 indicates that the sector is expanding. (Good ✔)
  • Coal and iron ore prices have surged in the December quarter. (Good ✔)
  • The stock market is up 2.6% for the quarter and 8.3% since Donald T won! (Good ✔)

So my quick good-v-bad count is: 

14 goods beat two bads. Even if I’ve missed an odd bad, the story does look largely positive for the December quarter and next year.

Also, a lot of the bad stuff we’ve been seeing lately has actually come from the September quarter but the data has surfaced in the December quarter.

Of course, today’s job numbers will be important. For confidence reasons, I hope this good-v-bad story here shows up in the employment stats. Statistics can let you down on a month-to-month basis and growth numbers can look bad when governments spend less for good reasons and imports come in that can bring a growth number down in the quarter that they arrive. However, imported goods can create growth when they’re used to build roads, buildings and airports in future quarters.

I hope the employment revelations today can give us another reason to raise a glass for the good old Aussie economy.

Go Australia! 

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