Wednesday brought our latest update on how the economy was growing, and it covered the three months ending on June 30 — the last day of the financial year.
The figure before this one was better than expected with the March quarter coming in at 0.9 per cent.
This took the annual growth to 2.3 per cent, which is disappointing as we need 3 per cent plus growth to help the unemployment rate fall.
However, there is a trick with these numbers that should not be ignored, and its something which the Yanks definitely take notice.
You see, the 2.3 per cent growth number is so much a history or in the past indicator that it really does not make much sense for the future.
You can see with the March quarter at 0.9 per cent, it means the nine months before was a weak 1.4 per cent result.
This covered the period where Joe Hockey’s first Budget was held up in the Senate and a lot of the economic growth at that time was really created more under the last months of Labor.
Elections always hurt investment and growth and so the economy was already slowing. Joe’s hard Budget, that saw much of it not passed, along with the political impasse, did not help confidence and growth.
I argued at the time that Joe should throw the Treasurer’s guide book which says play it tough with your first Budget and then go easier with the Budget closer to the next election, out the window.
That said, the March 0.9 per cent figure was a good one, though a fair bit came from exports. The Yanks, however, would take a number like that and annualise it by multiplying it by four.
They then would say the economy was growing at a 3.6 per cent rate, which is a great number and potentially very positive for job creation.
Coming into Wednesday’s number for June quarter growth, the experts were saying expect annual growth around 0.4 to 0.6 per cent, taking the annual rate to 2.2 to 2.4 per cent.
Unfortunately the seasonally adjusted number was 0.2 per cent, taking annual growth to 2 per cent while the trend figure is better at 0.5 per cent or 2.2 per cent annually.
But remember these tell a story that ended two months ago and we are now into September.
Small business boost?
Looking at the company reporting results for the half year to June 30, there was not a lot of great news, but the retailers did show some good signs.
Joe’s May Budget with the $20,000 immediate tax write-off was singled out as a significant positive, so the growth number should have benefitted from this initiative. But was it enough?
That said, the benefit from this is more likely to show up in the September figures.
In fact an MYOB survey said the sector liked the Budget offering but many small business operators would not instantly go out and exploit the tax carrot.
The good news
Ahead of this growth number I went looking for good news to justify optimism for our economy going forward and this is what I came up with:
• Interest rates are historically low and bound to stay there.
• The Oz dollar has fallen from 82 US cents in May to 71 US cents now and we grow faster on a lower dollar.
• Over the financial year, capital city house prices were up 9.8 per cent but Sydney was up 16.2 per cent, Melbourne 10.2 per cent, Brisbane 3.4 per cent, Adelaide 4.5 per cent, Hobart 0.9 per cent, Canberra 2.4 per cent and Perth lost ground by 0.9 per cent. But all up most Australians who own homes were wealthier.
• The most recent investment figures showed there was the biggest lift in investment plans in five years.
• Investment outside of mining hit $72.4 billion in 2014-15, which was the best result in three years.
• Car sales are at a 19-month high.
• Average wages were up only 2.3 per cent but inflation is under 2 per cent so real wages are actually rising.
• Consumer confidence as measured by Westpac and the Melbourne Institute rose 7.9 per cent to 99.5 so optimists are now nearly on par with pessimists and that’s a big improvement in August.
• NAB business confidence was at 8 in June and fell to 4 in July but there were Greek and China concerns over the month.
• After reading the above numbers the NAB economics team have raised their 2015/16 economic growth numbers to 2.8 per cent and 3.2 per cent for the year after.
I would have loved to have seen a better than expected number but I was not highly hopeful, though I expect the three months to September to give me more positive signs that our economy is on the mend.
No bad vibes needed
On Tuesday the Reserve Bank expressed optimism about our growth rates being on the improve and the labour market being a nice surprise.
Of course, this growth number won’t help the job market and that’s a pity.
My only hope is that the media does not go too negative on the number, because with stock markets volatile, we don’t need excessive and unnecessarily bad vibes.
And I’d say the Prime Minister and the Treasurer don’t need them either ahead of the Canning by-election!