The weak economy is turning higher

Mon, 15 Jul 2019  |  

This article first appeared on the Yahoo Finance web site at this link: 


The weak economy is turning higher

In the space of a couple of months, the rhetoric on the economy has gone from strong to weak.

Curiously, both assessments are wrong.

The economy was actually weak during the first half of 2019 and, if the leading indicators are correct, late 2019 and 2020 should see a decent pick up in economic activity.

It is not clear what has caused this error of judgment and the about face from so many commentators and economists, including importantly the Reserve Bank. A level-headed, unbiased look at economic data confirms that in late 2018 and the first half of 2019, the economy was in trouble. There were three straight quarters of falling GDP per capita, house prices were diving at an alarming rate, there was a rise in unemployment, wages growth remained tepid and low inflation persisted.

These are not the dynamics of a “strong” economy.

Only now, in the rear view mirror look at the economy, are these poor indicators gaining favour, leading to generalised economic gloom.

There’s an old saying, it’s always darkest before the dawn. Which in economic terms means there is a tendency for the herd to be very pessimistic, dark if you like, just before the sun starts to shine. And to be frank, the last month or so has seen some better news on the economy which is largely being ignored now, like the bad economic news was earlier in the year.

The economy is poised to enjoy some sunshine.

Let’s look back at how this misreading of the economy has evolved.

The odd change in the commentary, including from the RBA, appears to have been heavily influenced by the timing of the election on 18 May. Before then, the “strong economy” rhetoric dominated discussions. Now, post-election, the commentators and policy makers are playing catch up.

The Reserve Bank has changed its tune to the extreme point where it has cut interest rates twice in the six weeks after the election and Governor Lowe is screeching at the government in an unedifying campaign to do something to stimulate the economy. A little self reflection would show that it was the RBA’s own misjudgement prior to the election and its failure to cut interest rates a year or so ago that has compounded the current downturn.

While it is still early to say the economy has turned the corner and growth is poised to accelerate significantly into 2020, the run of recent news has been encouraging.

The housing sector, which was a drag on household wealth and spending, has seen a lift in auction clearance rates and the Corelogic measure of house prices is showing prices stabilising after the sharp declines from the 2017 peak. With housing affordability at the best levels in several decades and significant pent up demand from investors and first homebuyers alike, it is easy to forecast a pick up in house prices in coming months and certainly into 2020.

There is more solid news from consumer sentiment and business conditions, which are a little higher now than in the earlier part of 2019. These are pre-conditions for more favourable economic conditions. At the same time, exports are booming, with monthly trade surpluses hitting record after record, buoyed by strong commodity prices and strong global demand.

The ABS measure of expected business investment in 2019-20 is strong. The business sector is poised to lift its capital expenditure by close to 10 per cent after many years of decline. Add to this the yet-to-be-seen effects of the interest rate cuts from the RBA, the relaxation of credit conditions on the banks, the income tax cuts which have passed the Parliament and still favourable tailwinds from the global economy and it would be no surprise to see the domestic economy pick up before year end and for the RBA to have ended its monetary policy easing cycle.

Like many fashion trends, there can be a herd mentality when it comes to economics. It goes something like, ‘follow the RBA, follow the Treasurer, don’t think independently’.

This is a mistake.

For now, the economy is negotiating the low point in the current cycle and there are growing reasons to be optimistic that by year end, the gloom will have passed and the economy will be on track to return to what will be truly strong growth.

comments powered by Disqus



Wed, 29 Jul 2020



Covid19 has opened a door for Australians to positively accept significant changes that will lead to a shared good. This rare opportunity enables us to achieve sustainable economic and social goals that create a new ‘normal’ as our way of life.

These Ten Steps are presented as non-partisan recommendations to the Australian Parliament in the firm belief that, if they embrace them, the Australian economy and society will be greatly enhanced after the Covid19 pandemic has passed.

*A job for you if you want one.
A significant increase in part time and casual employment can be created that will enable you to enjoy a more creative and peaceful lifestyle and to live longer and better. The traditional age at which you would have been expected to retire will become obsolete as a result. An access age for pension and superannuation will become your choice. This will enable you to remain in paid work for as long as you want to, on a basis that you choose, while boosting the productivity and growth of Australia.

*You will get wage increases that will be greater than your cost of living.
A demand for enhanced innovative skills at all levels of employment will be created as the economy grows in strength, thereby enhancing your stature in the workforce and enabling executive salaries and bonuses to drop to levels that are accepted as justifiable by employees, shareholders and customers.

The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.