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Let’s face it, this week’s data drop was a shocker and increased the chance of the Reserve Bank cutting interest rates again on Cup Day or even before, if next month’s stats telling us about the economy’s health don’t pick up.

That said, there is reason to give the economy a chance to benefit from two interest rate cuts, soon-to-be-delivered tax rebates, a minimum wage rise and other pluses like the dollar around 70 US cents. Sometimes you have to give an economy (and the people who live, consume and work in it) time to be influenced by the stimulants thrown at them by governments, overseas customers for our exports and the RBA.

As I pointed out yesterday, consumer confidence and business confidence readings were disappointing but I’m sure the RBA’s Dr Phil Lowe would want to wait for a few months before pronouncing that the body economic is in a deathly, un-recovering state.

However, there was some good news. Let me share that with you in case you’re negatively affected by the negative news. Here goes:

• While the value of owner-occupier home loans fell by 2.7% in May, with investment loans down 1.7% (in seasonally-adjusted terms) the share of first-home buyers in the home lending market hit a near 7-year high of 28.6%. (Also this was May when the Bill Shorten effect on property was still operational, with his negative gearing and capital gains tax promised changes.)

• While the Westpac measure of consumer confidence dropped, the same survey revealed that the ‘time to buy a dwelling’ index rose by 5.4% to 123.2 points in July – the highest level in four years.

• The ANZ consumer survey told us the measure of family finances compared with a year ago (‘current finances’) rose by 3.7% to +13 points – the highest level in five months. 

• The monthly reading of labour costs out of the NAB business survey grew at a 1.5% quarterly rate in June – the strongest growth rate in eight years. This is an overdue good sign for wage rises.

• The NAB survey also said that business conditions, which tells you what business is saying about what it’s like in the shop, the office, the factory, etc., rose  from 1.2 to 3.4.

Let’s hope this is an omen for the future.

• ANZ job advertisements rose by 4.6% in June - the biggest monthly gain in 18 months.

• The national average retail unleaded petrol price has fallen by 3.4% to 140.5 cents a litre over the year to July 7.

CommSec’s Craig James joined me in the optimists’ club by pointing out that “on the wealth side of the equation, Aussie shares (S&P/ASX200 Index) are up by nearly 6% over the past year – not far off 11½-year highs. And property prices in Sydney and Melbourne are showing tentative signs of stabilisation after falling for around two years.”

Economies can confound even the experts but I’ve learnt over the years that they can be slow to react to good and bad news, so I’m sticking to my view that a second-half rebound is probable. I guess the stock market that’s up 21% year-to-date is agreeing with me!

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Published: Friday, July 12, 2019


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