Is it too much to ask for just a bit consistency in our economic commentators? Alan Kohler and Robert Gottliebsen both do neck-breaking about turns today leaving readers wondering why they bother. Kohler recently argued rightly that:
The fact that there will be an election later this year was hardly a surprise and the result is already clear: no need to wait to start spending.
…In last week’s national accounts, GNE or gross national expenditure (which is GDP minus external trade, so a proxy for the domestic economy) declined for the second consecutive quarter – that is, we’re in a “domestic recession”.
…I suspect the main reason domestic demand is declining is the high level of household debt, which is producing a return to higher savings to repair personal balance sheets.
…In some ways a recession would suit an incoming Coalition government. The lack of one for 22 years has produced an expectation that there will never be any losers in economic reform. Mining tax, carbon tax and Gonski education reforms have all been over-compensated.
Worthwhile reform requires losers because it is always designed to remove economic capture by a vested interest; all the great reforms of the past needed a crisis atmosphere to strip some group or other of its monopoly rent.
Tony Abbott just might get one next year.
Today, three weeks later, we get this:
The incoming Australian government is likely to inherit the best economic conditions for a generation: the lowest ever interest rates, a falling exchange rate and a recovering global economy, led by the United States.
The key risk is that Chinese growth falls short because of the credit crunch going on there.
But on balance this looks like being the best election to win since the 2001 Tampa and 9/11 election, when the economy hardly figured in the campaign.
As I pointed out last month (The problem is debt, not the election, June 12) domestic demand has been contracting and some analysts have raised the probability of recession, but with rates at all-time lows and likely to be cut again, and the Australian dollar down another 4 per cent since then, conditions are improving daily. It’s now all about the US economy.
…The US dollar and US long-term interest rates are now rising as America prepares to end the extraordinary monetary stimulus that has been required to stabilise its economy. The Australian dollar is now closely following the US 10-year bond yield, inversely, which is in turn following US payrolls. So notwithstanding yesterday’s brief blip lower and then back again after the Reserve Bank’s statement came out reaffirming its easing bias, the level of the Australian currency is being determined entirely by the US economy.
As an isolated article this makes no sense. What about:
- falling commodity prices and national disposable income;
- falling mining capex;
- rising unemployment.
As a follow up to the previous article it is downright discombobulated.
Over to Gotti, who argued one week ago that:
No matter where you are in the world, people express their confidence by what they pay for houses. So the movement in house prices tells us what is happening in a country and, sometimes, what is likely to happen.
Accordingly, when Knight Frank produced their global house price index for the year to March 31 it revealed a remarkable story about what is happening around the world.
Let’s start with Australia, where in the 12 months to March 31, despite falls in interest rates, house prices rose a moderate 2.6 per cent including just 0.1 per cent in the final quarter. We face lower commodity prices, a lower dollar and a horrible mess in Canberra and it is showing in house prices, particularly in the March quarter. According to Morgan research Australian consumer confidence is at its lowest level since 2012.
And today:
Australia is going to see a change in geographic growth emphasis as the mining investment book runs down and some mines are shut. The action returns to the eastern states including Brisbane despite the Queensland coal problems.
If the election results in a clear majority I think we will see a rise in confidence as our low interest rates start to kick in, helped by the lower dollar.
According to BIS Shrapnel it will be the Sydney housing market that will start to rise first. I think they are right because our largest city has the most pent-up demand. But Melbourne and Brisbane will also follow once Sydney begins to move.
Honestly, the extrapolations from random factoids in this stuff is something to behold.
