The economy in a nutshell
• Job ads up
• House prices up
• Home building approvals up near record highs
• Retail spending strong
• Company profits growth up over 10 per cent
• Government tax revenue stronger than expected
• Business conditions lifting
• ASX near 6 year high
• Exports booming
• Interest rates at record low
• Government demand no longer restrictive
• Aussie dollar low
• Non-residential construction up
• Inflation lifting to upper part of RBA target bandVERSUS
• Mining investment falling very sharply (but note above the other 90 per cent of the economy)
• Employment weak (but note above, the ANZ job ads)I’ll take the high road on the weight of that evidence.
Fair enough but let’s put it in context shall we:
• Job ads up a tiny bit
• House prices overheating in Sydney, warm in Melbourne and luke everywhere else
• Home building approvals up near record highs but still very constrained by supply side issues and miles down on a per capita basis
• Retail spending strong for a couple of months and consumer confidence is falling fast
• Company profits growth up over 10 per cent but very dependent upon last year’s fading iron ore prices
• Government tax revenue stronger than expected but there’s an enormous hole in next year’s capex assumptions
• Business conditions lifting in cyclical sectors
• ASX near 6 year high but significantly under-performing other developed economy bourses
• Exports booming, but China worries are now weighing on prices again
• Interest rates at record low but not as low as they’re going to get!
• Government demand no longer restrictive but may be next year
• Aussie dollar low not
• Non-residential construction up infinitesimally
• Inflation lifting to upper part of RBA target band on tradable inflation not local capacity constraints
We are clearly experiencing some kind of cyclical bounce driven by housing and I can see conditions being decent in the first half before the mining investment surge falls in tandem with the terms of trade following iron ore’s struggle lower on the Chinese slowing. For a quick refresher, here is 150 year mining investment boom that is about to reverse:
Kouk is forecasting 3.8% growth this year and sees four rate hikes within twelve months (or did until recently, he might have changed again).
I’ll take the low road.
