From our Craig on today’ GDP:
- The gloomsters will say the data is wrong, the economy isn’t that strong. Or they will say that the growth is unsustainable or unbalanced or even both. But it is hard to argue with a mountain of evidence. Exports, tourist arrivals, home prices, building approvals and car sales are at record highs. Unemployment is at 2½-year lows. Economy-wide sales are at 6-year highs. And not only are they at record highs, but home prices continue to lift, boosting wealth. And those figures are just the ‘top level’ results – there would be a raft of other highlights if you dig beneath the surface.
- The economy is not only growing at the fastest rate in 3½ years, it is growing faster than the “normal” rate – the 10-year or 15-year average. And what is happening is what is supposed to be happening – mining construction gave us extra production capacity, now that extra capacity is being put to work.
- Does it get any better? An economy that is growing at a fast clip, above the “normal” rate, but with inflation well under control.
- Other advanced economies can only wish for economic data as strong as that being published in Australia. The Australian economy hasn’t experienced a recession for 25 years. And the 26th year of uninterrupted growth begins in a month’s time. Importantly, Australia is transitioning from a one-in-a-century mining construction boom, and – so far – the transition is proceeding seamlessly.
- The $64 question is what does the Reserve Bank do now. Arguably with inflation low and likely to remain low, the Reserve Bank could cut rates, run the economy at a faster rate, and generate more jobs. But the risk is that lower rates will just add more fuel to the super-strong housing market. The last thing the Reserve Bank wants is to create an unsustainable boom in housing that could lead to a housing bust and broader economic downturn. We have worked too hard to see it all wasted with an economic downturn.
You don’t know us very well, Craig! What us gloomsters will say is this:
