The Reserve Bank of Australia (RBA) has released its monthly Chart Pack – “a set of graphs that summarise macroeconomic and financial market trends”. It’s quite a big compilation, so let’s have a closer look at a select few interesting and relevant charts for MacroBusiness readers.
World Economy
First, what will likely be our future largest export partners and arguably the two rising superpowers in Asia: China and India.
India’s economic growth, while positive and high, is decelerating and if continues at this pace is set for a sharp retraction. China appears to be in the same boat, although the deceleration is a bit slower and still stunningly high growth overall.
Contrast that with the developed economies growth which although positive is well below the boom era of the last decade:
Interestingly, the rest of Asia appears also to be reverting to a more sustainable, low growth trend:
What is the most important economic problem in Europe? Debt? No. Inflation? No. Unemployment? Yes:
You can also plainly see that the very tight U-3 measure for the US has improved marginally, but still at multi-decade highs around 9%. If a recovery is underway and continues at this pace it will likely be the end of the decade before unemployment, in the US at least, “recovers”.
Australian Economy
I’m not sure if I can post this chart enough, but I hope new readers can understand the trend in Australian economic growth:
And the reason? You aren’t spending enough and you’re saving too much money. Stop that.
Finally, what really drives the economy? Its not the Holes, but the houses. Here’s the latest ABS Dwelling Price Index:
And here’s the impact on household wealth, which whilst growing in nominal terms, has been flat as a multiple of your income for nearly 10 years:
And of course the reason we are all “wealthy” – amongst the highest indebted countries in the world, having tripled our debt load and paying approx. 30% more on interest on the household budget than at the height of the 17% mortgage rates of the last recession:
For some reason, this chart doesn’t seem to be wildly read by consensus market economists. Interesting no?
Interest Rates, Credit and Money
With all the hoopla yesterday over the RBA’s decision to hold rates, let’s put this in context.
First, the interest rates faced in US, Euro Area and Japan and why the AUD is so high:
Now in Australia, and adjusted for inflation (i.e the real rate), you can see the offical cash rate is already quite low, but nowhere near the countries of above – is this our path?
But what matters now is not the RBA rate, but the standard variable mortgage interest rate provided by the banks. Why? A trillion dollars in household debt is why. As the Unconventional Economist pointed out last night on ABC24, even a 25 basis point (0.25%) move in interest rates can have a dramatic effect on household sentiment:
From this chart it is clearly evident that rates that households are actually paying are still above average over the credit boom cycle period, whilst the cash rate – apart from the GFC emergency setting – is at a low. Can this divergence be sustained?
A race to the bottom with the government bond bubble still showing no signs of abating. Here are the US, German and Japanese 10 year bond yields:
And the Australian, catching up to its brethren, and now well below the official cash rate:
Share Markets
Finally, are you frustrated at why the ASX200 (and your super) is still going sideways four years after the GFC? Be thankful for the resource sector, marked in green below:
Also remember, share market prices are measured not by the underlying strength of the economy, but by the perception of risk: note how our price/earnings ratio (i.e the amount an investor is prepared to pay as a multiple of earnings) has now converged with all other developed countries share markets:
