+ About Peter Switzer
About Peter Switzer
Peter Switzer is one of Australia’s leading business and financial commentators, launching his own business 20 years ago. The Switzer Group has since grown into three successful companies spanning media and publishing, financial services and business coaching.
Peter is an award-winning broadcaster, twice runner-up for the Best Current Affairs Commentator award for radio, behind broadcaster Alan Jones. A former lecturer in economics at the University of NSW, Peter is currently:
• weekly columnist for Yahoo!7 Finance
• a regular contributor to The Australian newspaper and ABC radio
• host of his own TV show, Switzer and Grow Your Business, on SKY News Business
• regular host of the Super Show on 2GB radio.
Dear Peter, What fun! You are really very good at what you do. I appreciated our time together and wish you continued success in all you do. Have fun (I know you will).
Jack Welch, former CEO, GE, and ‘Manager of the Century’ (Fortune magazine)
Peter, It was great to have worked with you – you really made the event come alive. I hope you enjoyed yourself. I know Steve Ballmer [CEO, Microsoft Corporation] did.
John Galligan, Director of Corporate Affairs & Citizenship, Microsoft Australia
Here’s a home truth, my only real education – or teacher who I actually ever listen to – is your interviews on Qantas. So thank you with sincere respect.
Sean Ashby, Co-Founder, AussieBum
Peter did a wonderful job on the night; keeping the program moving, working around changes to the run sheet, and ensuring each award recipient, and our sponsors, were made to feel welcome and important.
The feedback received from those attending has all been extremely positive.
Peter Mace, General Manager NSW, Australian Institute of Export
Peter, We would like to congratulate you for performing your master of ceremonies role in such a professional, entertaining and informative manner. We were impressed by your ability to tease out each winner’s story so that the audience gained maximum benefit from their collective business experiences.
Greg Evans and Nicolle Flint, Directors, Australian Chamber of Commerce and Industry
Hi Peter, I listened to you speak this morning and thought you were amazing. I am an accountant and in risk management and have never thought about doing a SWOT on myself – thanks for the tip!
Serife Ibrahim, Stockland Corporation Ltd
Dear Peter, Thank you for your valuable contribution to this year’s forum. Ninety-two per cent of delegates rated your presentation highly, commenting on its useful and topical content.
Catherine Batch, Head of Marketing and Communications, Indue
Peter has facilitated our CEO and CFO symposiums over the last three years. A true professional, he takes away the stresses of hosting and organising an event.
Justine Goss, Strategy Group
Monday, January 16, 2017
A polo field in Victoria missed out on the company of the Foreign Minister, Julie Bishop and it’s all because of Susan Ley and her taxpayer-funded real estate escapades to the Gold Coast. Or is it because of the political opportunism of second-rate politicians and desperate media outlets always needing someone to kick into for attention-grabbing headlines?
David Panton (left) with Minister for Foreign Affairs Julie Bishop. Source: AAP
I’ve been watching and commenting on politicians in major media outlets for over 30 years and piggy politicians, with their heads in the public trough, come up from time to time. However, way back in my Triple M days when I was the network’s political and business commentator, I always can remember when I first looked at what politicians get paid and I used the line: “If you pay peanuts, you get monkeys.”
Well, I’m not sure what pay actually relates to peanuts but we seem to have a lot of peanut brains as politicians right now!
I like to think I’m a mate of Malcolm Turnbull. As I’ve known him since we were both 21, I always wanted him to succeed and he certainly did that in business and then politics. At the moment, however, this job of being a non-monkey PM seems to be beyond him.
Of course, we know the job is tougher nowadays — just ask Kevin Rudd and Julia Gillard — but equally understand that the past four PMs simply weren’t in the leadership class of Bob Hawke, Paul Keating and John Howard. There are many who think Peter Costello could have pulled it off, if he’d stayed. I think these speculators are right.
Luckily for Malcolm, Bill Shorten, who’s not a bad bloke as a pollie, is also closer to the monkey branch on the tree of life, so the PM isn’t under immediate pressure to get better quickly. But given the feedback I’m getting, a lot of one-time Malcolm fans are bitterly disappointed with him.
Given his business success and wealth, our PM shows that he isn’t a monkey but he certainly isn’t looking like the opposite of a political tree swinger, which I guess is a remarkable leader.
Prime Minister Malcolm Turnbull. Source: AAP.
When we use that line “if you pay peanuts, you get monkeys”, the implication is you get second-raters, who couldn’t get great jobs on great pay elsewhere.
So let’s see what politicians get.
Malcolm is the fifth best paid leader in the world, if you ignore corrupt, under-the-table payments in some dodgy countries. He gets $522,000, against Barack Obama on $527,000. These salaries are chicken feed compared to Singapore’s PM, Lee Hsien Loong, who takes home a cool $2.32 million a year!
While on the subject of our northern neighbor, which country often gets nominated in smart circles as a well-run, efficient and productive nation? Yes, you guessed it — it’s Singapore.
Our MPs get a base salary of $195,130, while Ministers are on $307,329 and Cabinet Ministers pocket $336,599. Under the rules as they exist, they can claim travel expenses when doing official business, which range from $273 for Canberra to $472 for Perth. This isn’t taxable and if they can get a bed for $100 a night, they can pocket the rest!
But wait, anyone in private business can do this too. Mates of mine who worked for Qantas would get daily allowances when travelling and if they didn’t spend it all, they collected the income tax-free.
I’d say hundreds of thousands of white collar lawyers, accountants, finance people and consultants travel for business but also enjoy tax-deductible expenses. I’m not saying whether it’s right or wrong, but it is the law.
If a CEO of a big four bank flew to London for a banking meeting and was given a daily allowance but he spent time with his mother, who happened to live in the UK, he could pocket the money. And if he enjoyed a lovely meal in a great restaurant, his daily expenses/income would cover it.
This seems extraordinary to normal Aussies but it goes on all the time though it seems more outrageous when it’s a politician doing it.
The funny thing is we all seem to hate politicians until we meet them. Sure, the extreme left or right-wing nuts are great haters and can find an insult when they meet a politician at the polo or at a Gold Coast auction. However, I’ve always been staggered at how most normal Aussies love to meet politicians.
I do a speech each year for PwC in Brisbane after the Budget, with John Howard. People come up to him and some might say: “I never voted for you but I’m pleased to meet you!”
I’ve seen business audiences, who hated Paul Keating, go weak at the knees when he addressed them to explain what he did and why he did it.
As a kid at North Bondi Surf Club, the local MP, Syd Einfeld, would always show up for award nights. If Syd had a weekender at Palm Beach and he travelled to the surf club for the award night, he might be accused of using the public purse for a piss-up with his surf club mates.
If we go too far with this witch-hunting, politicians won’t show up for stuff. They will dodge business, sporting and social events and will only do stuff that looks like political business.
If Julie Bishop goes to the polo and an exporter, who potentially can employ 1000 workers, is having problems with, say, a Malaysian official and gets to tell the Foreign Minister of her plight, then the problem is fixed. And that polo perk was worth it! If a Labor politician goes to an NRL grand final and learns about a social issue in the local area, which he then brings up in Parliament, then wasn’t that taxpayer-funded footie match worth it?
Given the importance of an MP, given the silly salaries that many silly jobs pay nowadays, I don't think it’s too much to pay our politicians about $300,000 a year. And that’s what many would pocket via expenses and super, etc.
It is an important job. If they’re no good, they should be chopped. Worrying about their perks is a small beer matter, compared to what they should be achieving.
The Budget Deficit was expected to be $37 billion, with the Government spending something like $450 billion. The ‘waste’ on pollies expenses is around $100 million a year and in 2016, Tony Abbott’s meal and travel expenses were $60,000. That said, Abbott-lovers loved to see him getting out and pressing the flesh.
If we go too far with this, the only place we’ll be able to see our beloved monkey politicians will be in the ‘zoo’ in Canberra or on TV!
I’m not sure if the old proverb “waste not, want not” applies because we actually do like to see our politicians hanging out with us. In fact, if they knew us better, maybe they would start leading us better.
This witch hunt on expenses underlines how weak our leaders are that we’d waste time on this trivial issue, when there are bigger fish to fry.
Friday, January 13, 2017
According to some feedback, a few followers are getting tired of my positivity around Donald Trump, so I’ll give it a rest and just hope Donald can resist his Trumpisms and, consequently, behaves like a US President who can deliver on the economic promises he has made.
Donald Trump, AAP
Let’s take stock of the latest readings on the Oz economy to see if the doomsday merchants will be wrong on the December quarter’s economic growth.
Recall the September quarter was a surprise negative. If we get two negative quarters, we end up in a technical recession. I’ve been betting we will grow in the December quarter and go on to break the world record of growth without a recession of 103 quarters held by the Dutch.
Let me bullet point the main stories on the economy to see if my optimism isn’t misplaced. Here goes:
- The average credit card balance rose by $76.40 to $3,149.00 in November, which suggests consumers started to spend more in the December quarter.
- Spending at hardware, building and garden suppliers was up by 10.2% in the 12 months to November – the fastest annual growth in 1½ years. This suggests we’re starting to renovate, big time.
- Retail trade rose by 0.2% in November, to be up 3.3% over the year.
- The ANZ/Roy Morgan consumer confidence rating surged to a four-month high, up by 5.9% to 120.1 in the week to January 8. Confidence is up 5.3% over the year, well above the average of 113 since 2014. All five components of the index rose in the latest week.
- Job vacancies rose by 2.2% to 182,000 in the three months to November – a 5-year high. Job vacancies are up 9% on a year ago.
- New dwelling approvals rose by 7% in November after sliding by 11.8% in October. It was only the second gain in the past seven months.
- Our trade balance improved by $2,362 million to a surplus of $1,243 million in November. It was the first monthly trade surplus in 33 months. The rolling 12-month deficit improved from $28.6 billion to $23.8 billion (the smallest deficit in 18 months).
- CommSec’s Craig James showed that “in October the number of passengers on the Sydney-Melbourne route was up by 1.1% on a year ago to a record 775,717. The Sydney-Melbourne route is one of the busiest air routes in the world. The Sydney-Melbourne route is also a key measure of business activity.”
- The Performance of Services index lifted by 6.6 points to 57.7 in December – marking the fastest pace of expansion since May 2007.
- In 2016, a total of 1,178,133 new vehicles were sold – a record for a calendar year.
- The CoreLogic Home Value Index of capital city homes surged by 1.4% in December and was up 10.9% over the year. Prices rose in five of the eight capital cities. Regional prices rose by 1.1% in November.
- The Performance of Manufacturing index rose by 1.2 points to 55.4 in December. A reading above 50.0 indicates that the sector is expanding.
I think you can see that there’s a pretty strong case for being positive, even if you can’t stand Donald Trump.
My point is that when you add the optimism he has brought to an already pretty good economic picture, you can see why I remain bullish on the economy and stocks.
Thursday, January 12, 2017
It’s 5:30am and as I bound out of bed and grab my iPhone, then press my stocks app, I want to see green on screen. And yep, the Dow is up 20 points. Phew! This means Donald Trump hasn’t blown his first real test since the November 8 election with the pre-inauguration press conference.
It’s now 5:54am and the Dow is up 41, so his grade is improving by the minute.
My quick reading of what he said at the conference at Trump Tower, which included a wish to start building the Mexican wall as quickly as he can, and that he intends Mexico eventually to pay for it, tells me he didn’t say anything to spook Wall Street.
This is an important test to pass because the only reason I’m on board the Trump train is because of the potential positivity he brings to the US, world and Aussie economies and the related stock market gains this should then underwrite.
Donald Trump. Source: AAP.
Like him or loathe him, Trump has helped stocks surge 12% since November 9. That’s huge - so if he can face over 250 members of the fourth estate and not say anything seriously scary for stocks, that’s a big plus.
Sure, he put US companies on warning that going overseas to escape US taxes and to create jobs elsewhere will be a thing of the past. And health companies benefiting from Obamacare were set to have to learn to do business without the government’s help. However, aside from that, there were no shock economic curve balls tossed at Wall Street.
Of course his Russian links, his denial of hacking and his conflicts of interest were all dragged up. On his family, who will run his business with a whole web of controls to ensure he doesn’t hurt his Presidency by being involved, he cracked a joke that if they screwed up, they’d “be fired!
Like all US Presidents, Donald Trump will be continually on Wall Street’s watch. And by the way, even though Barrack Obama’s economic record wasn’t great, in terms of economic growth, the Dow Jones has gone from 6469.95 on 6 March 2009 to nearly 20,000 now! Even if you give Donald 10% of this huge 200% plus rise, it still says a lot for Obama and the central banks that helped his GFC rescue plan.
That said, the world economy needed a confidence circuit breaker and Donald Trump has become that key economic ingredient that has bolstered economic, business, consumer and investor confidence, not just in America but globally.
Only yesterday, the Yanks learnt that the National Federation of Independent Business (NFIB) index of small business optimism rose from 98.4 to a 12-year high of 105.8 in December! And that’s no coincidence.
On the local front, we saw home improvement sales soar to 10.2% for the year, which is the greatest growth rate in 18 months. On top of that, the ANZ/Roy Morgan consumer confidence rating surged to four-month highs, up by 5.9% to 120.1 in the week to January 8. Confidence is up 5.3% over the year and well above the average of 113 since 2014. All five components of the index rose in the latest week.
I could go on about this positive post-election Trump effect but that’s enough for now. I’m just really glad that in Donald’s first public test he didn’t blow it.
It’s 6:27 and the Dow is up 60*, so that’s at least a pass bordering on a credit.
*At the close, the Dow Jones rose 99 points to 19,954.
Wednesday, January 11, 2017
One of my followers on Twitter posed the counter question about what Donald Trump might mean with his nuclear, trade and migrant agenda. To get the real handle on what the new President-elect brings with his economic and market pluses, Marcie asked: “Don’t we need to figure out the cost of these?”
These important questions followed yesterday’s column, where I looked at the Trump-inspired positive headlines for the economy and the stock market since November 8, when US voters showed the old political world, characterised by Hillary Clinton, the door.
This was not what I expected — nor wanted — because Donald Trump is a risk on so many fronts, as Marcie points out. And most of us could add more, starting with potential conflicts of interest and nepotism, as seen by his son-in-law’s likely position representing the administration. Jared Kushner is the son of a real estate developer and is set to be involved with the Middle East and trade deals!
Jared Kushner. AAP
These are strange times indeed. I’m not arguing that we have to submit to that antiquated UK advice to unlucky women - that we all need to lie back and think of the economy - but I am saying we just might need a Trump experience to break out of the post-GFC economic funk that saw central banks rule the world with limited economic success. They helped the stock market but unless economies start responding positively — creating jobs, raising wages and encouraging business investment — we could end up in a global recession and a market crash without really enjoying a boom.
Last year taught us that political events (such as Brexit and even the Trump victory, which the market didn’t predict or want), can often be overrated. This reminds me of Bill Clinton’s Presidential revelation that “it’s the economy, stupid” and that’s the biggest and most important plus that Trump brings.
And another important 2016 revelation was the Washington Post US election wash-up story headlined: “I’m a Muslim, a woman and an immigrant. I voted for Donald Trump.”
Here, a former Wall Street business reporter, who co-founded the Muslim Reform Movement (if you can believe reports) admitted that she had felt duped by the old political world of Democrats that promised economic miracles for middle class America and never delivered.
Why? It could have been political hubris or opportunism but I suspect it was an economic or government resource problem or an old-way-of-thinking difficulty.
Let’s say the world of President Obama, Angela Merkel, David Cameron and Monsieur Hollande of France was all good-intentioned but we still ended up with a Syrian migrant crisis, the arrival of ISIS, a European Union tottering on the edge and stagnant ‘going nowhere’ economies (such as the EU and Japan), so it might just be time for what Edward De Bono called “lateral thinking.”
The great poet T.S. Eliot once counseled us with: “Only those who will risk going too far can possibly find out how far one can go”. And given our economic funk, which had us exposed to a ‘going nowhere’ scenario for the world economy and the countries that make it up, maybe Trump is the risk we had to have.
I’m prepared to gamble that Trump will be influenced by Congress and other Republican politicians, who might be more sensible. He will have some advisers who should be a little more balanced. And he will be influenced by other world leaders.
Donald Trump. AAP
Trump is a largely successful entrepreneur and has pulled off one of the greatest political coups of all time. The reality is we are stuck with him. Hope is never a strategy (we certainly tell our financial planning clients things like that) but as I say, President Donald Trump will be a reality after January 20.
He is bringing economic and stock market hope, which could be something worth taking a risk on. Let’s hope Trump grows in stature in the job. After all, America remembers Ronald Reagan fondly and I can remember how disastrous I thought that would be as a young university student.
And it would be hard to argue that Ronnie wasn’t important to the tearing down of the Berlin Wall and the end of the USSR as we knew it before him.
No one saw that coming.
I know there are risks with Trump. However, there were risks without him. As George Bernard Shaw pointed out in 1903 in Maxims for Revolutionists: “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
Trump certainly fits the bill.
Tuesday, January 10, 2017
The news that grabbed the headlines yesterday was that great actress Meryl Streep giving it to Donald Trump, who then tweeted that she was a “Hillary lover” and was “overrated” as an actress!
He couldn’t be so right on the first accusation and so wrong on the second but this Trump sideshow takes away from more important stories yesterday that point to stronger growth in the USA and in Oz!
Overnight while Streep and Trump were at it stealing the headlines, thanks to a press that evaluates news on a click-bait basis, a little-known chief economist from the very well-known Deutsche Bank, David Folkerts-Landau, said that the new US President, who takes over on January 20, might just keep his promise to double US economic growth!
This is a huge story and you have to hope this Deutsche view on Trump is more accurate than Trump’s assessment of Streep’s acting ability. On the other hand, it might show that Meryl’s economic credentials don’t match her ability to tread the boards and to be a caring, good egg.
This is what CNBC reported that Folkerts-Landau predicted:
- The combined impact of tax cuts, infrastructure spending and less regulation would pump up US and world growth.
- US growth for 2017 would be 2.4% and 3.6% in 2018.
- World growth was pushed up from 3% to 3.4% this year!
- This would not only help economic growth, but also underpin great stock market rises.
"This policy will be successful in moving the U.S. economy away from low-growth secular stagnation towards significantly more buoyant performance," Folkerts-Landau said.
"We would not be taken by surprise by a doubling of the growth rate of real GDP in the U.S. over the next two years, nor by a further significant move up of equity valuations and a material further appreciation of the dollar."
But wait, there’s more.
The Australian ran with a front page story that was headlined: “Ray of light in economic tunnel”, which is the kind of sentiment I love to see because it helps build confidence. Since the GFC, the media has help perpetuate our negativity, partly explaining lower business investment than we need and the part-time job creation from employers.
This positive story was linked to the Government’s advice from top public servants that our export outlook, from the likes of iron ore and coal, should exceed expectations.
Energy and mining exports are expected to bring in $204 billion this year and this will underpin a sustained period of trade surpluses. Last week, we registered our first trade surplus for three years.
This could be a corner-turning event for our economy and should help us beat the world record for growth without a recession, which is held by the Dutch at 103 quarters.
All this comes with the economic outlooks for China, Japan and Europe coming in better than expected.
I know Donald is a pain in the butt, however if he can pull off this economic miracle, then he will be an Oscar-winning US President, who, one day, could be praised for getting the US and world economy out of its post-GFC funk that bred economic negativity and low growth.
I’d bet Streep is a miles better actor and person but this guy can act too and right now he can pull a bigger crowd than anyone in the world, as our news services prove nearly every day.
Of course, I hope we never have to look at his work and cry “Mama Mia” because what he has to pull off can be summed up by another movie starring Streep and Alec Baldwin (another Trump-hater and impersonator). And the title to that movie? “It’s Complicated.”
Monday, January 09, 2017
One of the great tricks of economists is to look at indicators that tell them important things that give them insights into how the economy is performing. This can help them predict inflation, interest rates and how many jobs can be expected, along with what the stock market might do.
However, there are times when the structure of an economy changes and some measure on the economy, which might have been really reliable in the past, becomes a little dodgy.
An example might be the retail figures from bricks and mortar stores in an age when we’re all becoming digitally-inclined. There isn’t just a lesson here for economists, but also I reckon my old mate Gerry Harvey could be taught a lesson as well!
Yep, I reckon he’s one of the most informed retailers in the country, though he rates his wife, Katie Page, as one of the best in Australia and he also has a lot of respect for the mob that runs Cotton On. (I’m not sure if he means the founder, Nigel Austin or his cousin and CEO Peter Johnson.)
That’s a tale for another day, but my retail secret for Gerry has to wait for a moment while I sketch a picture of what’s been happening to retail in the USA.
CNBC recently summed up the retail experience in the States: “Despite several early reads that the season came in better than expected, most of the department stores and specialty chains that have announced their results said sales at their established stores continued to slide in November and December.”
So what’s happening? Old stores like Macy’s and J.C. Penny, which rely on promotions to get sales, have struggled. Stores that have become consumer-centric, such as Lululemon and Adidas, have beaten expectations and, of course, Amazon has nailed it in a modern digital world.
CNBC says “data from ComScore shows that desktop spending rose 12 percent this season...” so retail is still alive and kicking but it’s done differently. So we have to be careful about retail numbers if they don’t reflect this changing structure of how we buy stuff.
Now for the lesson for Gerry.
Recently, I was with a friend who was fixing up her property in South Melbourne. She needed a fridge but there were no discount stores nearby. The closest seller of electrical goods was Harvey Norman near Docklands but my colleague wasn’t keen to drive into the city.
I suggested she check Harvey Norman online. Within half an hour, she’d bought a fridge and it was delivered for $49 the next day. The delivery guys were great at customer service and it was a win-win for Gerry, Katie and my friend.
But here’s the lesson: if I wasn’t there, my friend might have taken the advice from a local, who told her there was a Good Guys store at Brighton.
I knew Gerry did online because I know him, I interview him and I listen to commercial radio where he advertises and I’m a sports fan, so I also get marketed to.
The point is that a big chunk of the market doesn’t get how easy online shopping can be. I know it’s set to grow and it will hurt my reliance on retail numbers, unless the Statistician upgrades his/her processes.
Also this digital disruption is changing the labour market, where jobs on the department store floor will be lost but delivery jobs and logistics positions will be on the rise.
Tomorrow we get the latest retail numbers but they will only be for November. Given our changing shopping story, we will have to take a long hard look at those official numbers.
And Gerry needs to think about how he’s going to market to people like my friend. Maybe he needs to pay me a spotter’s fee!
Wednesday, December 21, 2016
Let me ‘bore’ you for exciting reasons because I suspect a lot of important things are getting better, though a lot of people don’t actually know it right now. Like superannuation, economics can be unfairly tagged as boring but it’s really important for our hip pockets.
That said, whether you’re feeling wealthier or positive on how the economy will treat you in the future can sometimes have a timing problem.
For example, I asked Mark Levy (my colleague at 2GB who’s hosting the station’s afternoon show over summer) if he thought the economy was going well, average or badly. Wisely he said “average” but others could have said “poorly”, given the negative economic growth number we saw recently. This encouraged negative types in the media to pull out the R-word for recession but few of these journalists/commentators pointed out that this was a September quarter number.
We’re now closing in on Christmas and this was data from July, August and September. It’s old news. Last week, I looked at how the economy is actually going in the December quarter and got 14 good news data drops and three bad ones.
I also surprised myself in finding that some of the bad news I heard reported this quarter actually related to the September quarter. Negative news can leave incorrect impressions, even in the minds of someone like me, who analyzes economic data daily!
Therefore, in the interests of you having the full story, let me load you up with some super good news stories to take to your Christmas and New Year celebrations. Here goes:
- The Commonwealth Bank Business Sales Indicator (or BSI, which is a measure of economy-wide spending) rose by 1.2% in November, after an upwardly revised 1.1% lift in October. Now get this: spending is now expanding at the fastest pace in 7½-years!
- The annual trend growth in sales rose from 5.5% to 6.2% in November – the strongest annual growth rate in a year!
- According to super fund watcher, Warren Chant: “After averaging 11% per annum over the past four years, super funds look set to deliver a fifth consecutive positive calendar year return. A gain of 1.1% in November propelled the median growth fund (61% to 80% growth assets) to a cumulative 5% for the first 11 months of 2016. And with share markets continuing to rise in December, the median return for the year currently stands at an estimated 6.3%.”
- In The Australian today, markets editor David Rogers has the following to say about our stock market that underpins many super funds’ returns and influences the decisions of our major employing companies: “Australia’s share market is on track for its strongest returns in three years, after closing at its highest point for the year.
- “Buoyed by gains on Wall Street and a pullback in the Australian dollar, the benchmark S&P/ASX 200 share index ended up 0.5 per cent at 5,591.1 amid strength in banks, utilities, consumer and real estate players.”
- The Reserve Bank’s minutes for the December meeting suggested that interest rates are on hold for most of 2017. Views on the global economy were more positive and the RBA’s Board was expecting a softer growth quarter for September but this wasn’t expected to extend to the December quarter.
- Most economists agree that the September quarter’s negative growth was a likely one-off blip for an economy that has been growing better than most western economies.
I could go on and tell you stuff, such as the median growth super fund has returned 12.8% in 2012, 17.2% in 2013, 8.5% in 2014 and 5.7% last year. And if Warren Chant is right, then we could see a 7% return by year’s end, which is an extraordinary story for our super fund assets, which, for many of us, could be our most-important wealth-builder!
Sure, January or February could bring a “we’ve gone too far with this Trump positivity” sell off for stocks but if economies respond to the shot-in-the-arm surge of confidence we’ve seen since Donald’s election win, then 2017 could be a more super year for the economy, stocks and general positivity.
Tuesday, December 20, 2016
With our Budget’s bottom line in the spotlight, it is its lack of improvement and the negativity it now brings that worries me. With the credit rating agencies hovering over us like vultures waiting for a dehydrated explorer to keel over, the only ‘outside the square’ play Malcolm Turnbull can go for is to channel Donald Trump!
Don’t worry, I haven’t taken leave of my senses since I started my break from TV and radio. This is an economic argument for PM personality progress.
Yesterday’s MYEFO (or Mid-Year Economic and Fiscal Outlook) pretty well came and went, being what we largely expected. There was no big improvement in the deficit drama story. Happily, there’s was no escalation of the anxiety linked to it.
It was a vanilla news story, doing little to kill confidence but nothing to bolster it.
In case you missed it, here’s a nutshell summary:
- The May Budget tipped 2016-17’s deficit to be $37.5 billion but is now specked at $36.5 billion on 2.4% of GDP.
- In four years’ time, it will be 0.3% of GDP.
- Economic growth for this financial year is put in at 2%, rather than the previous 2.5%, which is conservative.
Look, I can’t look at this MYEFO story anymore because it’s basically a boring guess on what might happen and it’s probably wrong. You see, the growth estimate is too conservative so the billion-dollar improvement will be better come May. And by this time next year, Scott Morrison will be looking better than he is now.
Over that time, I’d like to see Scott channel Paul Keating or, given his political affiliations, Peter Costello. However, he has to take charge of the economic debate so we all think there’s an adult at the helm.
Both former Treasurers won the economic debates of the day, despite occasional losses and mistakes. Over the Christmas break, Scott has to learn how to KO Labor’s appeal to the masses that their solution of killing negative gearing and raising the capital gains slug is a second rate, typical Labor solution.
Remember, when the mining boom was teetering, Labor wanted a mining and carbon tax. And now the housing building boom is starting to slow down, they want to hit investors in this sector.
Now in the absence of anything better, policy-wise, and any great improvement in the economy, Labor’s tax the rich strategies will appeal to the masses, unless the Government can show that these policies are actually positive for Australians.
This is where Malcolm Turnbull has to come out swinging in 2017 and it’s time he started playing to his strengths, rather than his weaknesses.
When it comes to debating and higher order matters, Malcolm has been a winner his whole life but since he became Prime Minister, he has shrunk in stature.
He’s looked reasonable, accommodating and consensual but that hasn’t worked.
In November, this is what www.news.com.au reported: “Support for the ALP has grown to 38 per cent, 3.3 points higher than at the July Federal Election, and it enjoys a 53 per cent to 47 per cent margin in the primary vote, its best result since Mr Turnbull became Prime Minister 14 months ago.”
The PM is still the preferred PM over Bill Shorten, at 42% plays 32%. However, this isn’t a convincing lead, and as Einstein reportedly said: “The definition of insanity is doing something over and over again and expecting a different result.”
Even though there is dispute whether he actually said this, if he didn’t, he should have because it’s right.
So what’s the 2017 game plan for Malcolm? He has to channel Donald Trump and start talking to the masses that get to choose between him and Bill in two and a half years’ time. Now I’m not asking to change his more gracious and considered personality to impersonate Donald but he has to go back to his roots.
Turnbull is an entrepreneur at heart. Like Trump, he’s often the smartest guy in the room but if being ‘kicked around Malcolm’ by all the pressure groups inside and outside his party doesn’t work, then he needs to start doing some judicious kicking himself.
If he can’t get this complicated Parliament and the Tony Abbott acolytes in his own party onside, then he has to appeal to us.
I heard an economist talking about MYEFO and was a tad critical of Malcolm Turnbull’s “jobs and growth” mantra, implying it’s too simplistic. However, I’d never take advice on talking to the people from an economist (whoops I’m one of those, albeit a different one!). Malcolm has to improve his talking about jobs and growth to us because that’s what most of us care about — growth of our incomes and jobs for our loved ones and ourselves.
We think that if we at least have this happening, then we have a good chance of being happy.
Malcolm has been trying to fix his weaknesses and neglected his strengths. He is one of the smartest guys in the room but he has to learn about what the less smart guys and gals in the room want from him and he has to show them how he’s going to do it.
That’s what Donald Trump did and it worked. Hillary Clinton played a game similar to what Malcolm is currently playing and we saw how that worked out.
Malcolm’s strength is his intelligence. We want a smart, inspirational leader but we want someone who knows what we want and has a believable plan to make it happen.
Great leaders have followers to whom they add value. Right now, consumer confidence, as measured by Westpac, has dropped under 100 to 97. This means pessimists outnumber optimists.
A few months ago, it was the opposite. It’s time Malcolm and Scott played a better game, and channeling winners of the past doesn’t seem like an insane idea to me.
This chart of consumer confidence says it all and shows we were actually more confident under Labor Governments!
Malcolm in the middle needs to be Trumped! The PM needs to step up, or at least go down swinging.
Monday, December 19, 2016
All I want for Christmas is an economic case for the debt ratings agencies (Moody’s and Standard & Poor’s) to give us another chance with our ‘precious’ AAA-credit rating. However, if we do lose this rating, which keeps interest rates lower, then I wouldn’t be pointing the finger of blame at the Turnbull Government.
No, the real culprits are the voters of Australia, who thought it was a good idea to vote for Pauline Hanson and the rag tag mob in the Senate and the Greens. Now we have a Senate that looks like the bar scene from Star Wars 1V — A New Hope, and isn’t the name of that an irony because our Senate mix makes governing hopeless.
Sure, the Senate make-up reflects the ordinary performance of politicians since the Hawke, Keating and Howard days, but it says a lot about us as disgruntled human beings. Of course, it’s not restricted to Australia, as we saw in the UK with Brexit, in Greece with Grexit and in the USA with Donald Trump’s victory against the odds.
The pathetic fights between Kevin Rudd and Julia Gillard undermined any chance of Labor doing anything really hard to repair the Budget that it ruined to avoid a recession in 2008-09, when the GFC hit. I know some ‘experts’ bag this strategy, but the economic scoreboard shows that we avoided recession and unemployment didn’t go over 6%. I always say that Labor was right to spend but then they had to go responsible in ensuing years.
However, because they were unpopular with their in-fighting, they came up with expensive good ideas to hold the voters’ love, such as the NBN, Gonski and the NDIS. These ideas were all great but were put forward when we couldn’t afford them.
And that's one part of the reason why our Budget finances are under the watchful eye of the credit rating agencies.
The other was when Tony Abbott and Joe Hockey kicked off their Government with a tough Budget in 2014. It was tough and could have set us on the road to repairing our finances but Labor, the Greens and the Independents said “No!”
So a softer Budget resulted. We got growth but not enough spending and entitlement reductions.
Adding insult to injury, Tony Abbott then performed pretty poorly in the polls and along came Malcolm, with lots of promise. However, to date, he hasn’t been up to winning over the voting crowd, which today is simply more complex and has more alternatives.
Don’t forget that Malcolm Turnbull (before he was PM) was looking the goods. He won over the ABC fraternity, looking like a pro-environment pollie, who could also add up, so our finances could be fixed the ‘green way’.
To the non-extreme conservatives, he looked like he could win elections, while Tony was not great at inspiring such a diverse nation. The extreme right loved him but the in-the-middle Coalition voters didn’t think he could win another election, even against Bill Shorten!
So this is why we face the MYEFO today, with our crazy media nearly gloating that we could cop a credit-ratings downgrade, after Treasurer Scott Morrison outlines the Mid-year Economic and Fiscal Outlook (MYEFO!) today.
This attempts to tell us how the Government thinks the economy is going and how their budgeting is progressing, which was outlined in their May Budget. If it looks crook, the AAA-rating could go.
Some critics dismiss the bounce-back in commodity prices, which is help to the Budget’s bottom line. They point to the 0.5% contraction of growth in the September quarter as a problem for the Treasurer in keeping the rating.
That said, a part of that contraction was a fall in government spending, which the likes of credit rating agencies want! And it comes when the IMF thinks Australia, like other economies, should actually spend more on infrastructure.
How important is the rating? It does make borrowing overseas more expensive but it wouldn’t mean a massive rise in interest rates. The biggest impacts could be on confidence (following all the bad press) and then on the political popularity of the Governent.
Economists, such as Paul Dales of Capital Economics, think a downgrade is only a matter of time. For people like him to be wrong, we’d need the economy to grow strongly in December, see some better wages growth and a comeback in business investment.
I hope the agencies play a wait-and-see game so confidence isn’t damaged but if they do slug us, it has to be a wake up call for Malcolm Turnbull to get on the front foot and start fighting the people responsible for this downgrade.
Quoted in the SMH, Dales explained what’s wrong with us and why the credit agencies could be down on us.
"Governments around the world have been faced with the lowest borrowing costs in a couple of generations and they've not done anything with it. Especially a country like Australia whose fiscal situation isn't that dire," Mr Dales said. "It should have seen the opportunity."
Therefore, it’s not so much our poor state of our finances but a lack of opportunity to fix them effectively, because of the damn nincompoops in Parliament and the people who put them there!
This is why we need a special leader, who can win over these diverse and disparate groups and then get some really good policies passed in Canberra.
Malcolm has to spend Christmas learning to be that man or else Master Feng’s prediction that Tony Abbott has an 80% chance of being PM again will become a 100% chance!
And unless Tony changes too, one day we’ll be talking about a PM Bill Shorten, with higher interest rates.
As Winston Churchill once brilliantly observed: “The best argument against democracy is a five minute conversation with the average voter.”
Friday, December 16, 2016
Take this name down — Damien Boey from Credit Suisse — as he’ll either be a genius or the opposite! He has tipped the Reserve Bank might have to CUT interest rates three times, because we are over-borrowed!
More on that later.
There was another story on our jobs report, which needs some clarification. These stories are both newsworthy but I think they were mishandled by a number of news outlets. In case you’re a victim of the world of click bait and the journalistic mantra that “if it bleeds it leads”, here’s an objective account of the two stories.
Let’s start with the employment numbers, which, of course, are called the unemployment numbers by much of the media. Many news operations look at the number of jobs lost, more than what were created.
Now remember, these job numbers were important for confidence after that bad September economic growth number of minus 0.5%.
Yesterday, I showed that we’ve had 14 good economic stories versus three bad data drops for the December quarter. I also worked out that some of the bad news delivered in the December quarter was for information on the September quarter, because data often comes in late.
If this was a bad reading on jobs, it could mean the December quarter could be another negative economic growth number, which would mean that we’re in a technical recession!
Some news outlets led with 'unemployment rose from 5.6% to 5.7%,' as you’d expect. But it wasn’t the whole story.
So what happened?
- Employment was up 39,100 in November but, over the year, the employment growth was 0.7%, which is the weakest in two years.
- However, the full-time growth over the past two months is the largest back-to-back rise since March 2011.
- Underemployment was down from 8.7% to 8.3%.
- Unemployment did rise from 5.6% to 5.7% but this was because the participation rate rose. And that’s often a good sign for the economy, with people confident enough to look for work.
- Queensland had some promising employment signs, which was a welcome development.
Despite this pretty good news on the full-time jobs front, the St. George economics team thinks the RBA could cut rates again.
And while on the subject of rate cuts, Damien Boey thinks the RBA could cut three times in the relatively near future.
He’s not alone, with NAB’s chief economist, Alan Oster, not ruling out two more cuts. And Macquarie has held that view for some time, though I haven’t see their latest rate prediction.
Economists can change their tips without a blink but I think it’s important for business and consumer confidence, so I take their calls fairly seriously.
Damien thinks Australian households are over borrowed. However, by cutting interest rates, the RBA can actually avoid too many debtors getting into repayment problems. It effectively lowers the cost of debt and would provide relief for anyone over-extended.
It comes at a time when bond market interest rates are rising and most economists think the RBA is on hold with rates but the next move is up in 2018.
Much of Damien’s analysis rests on something called the output gap, which looks at the actual output or GDP of the economy versus its maximum potential output.
This gap can be open for debate but the RBA and other economists look at the same information and they’re not seeing what Damien is prophesizing.
I don't always run with the majority but I’m backing the RBA (and a whole team of great economists) on this one. I think the full-time employment story is a precursor to an improving economy helped by the Trump impact on US and world economic growth, a lower Aussie dollar — it’s 73.65 US cents this morning — and the higher commodity prices we’ve seen since early this year.
I’m giving the negative tales on jobs and rates the “bah humbug” rating ahead of Christmas but I won’t dismiss these outcomes as totally out of hand, so watch this space.
By the way, here’s one take on those job numbers from Savanth Sebastian at CommSec:
“The outlook is certainly more encouraging. Job vacancies are holding near 4-year highs, in addition anecdotal evidence suggests activity levels amongst the business sector is lifting. The strength in commodity prices is also a positive and may be behind the strength in Queensland jobs growth. Almost 39,000 new jobs were created across the Queensland economy in November. It is still early days but the latest result is certainly more upbeat.”
Let’s hope Savanth’s right and Damien is wrong.