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Strong exports boost Queensland’s economy

February 23, 2010

Queensland’s economy grew by one per cent in the September quarter, driven by a boost in exports. Exports grew by 3.8 per cent over the quarter, despite the fact that business investment declined. The figures are one of several others that point to continued economic recovery in Queensland’s economy, which relies significantly on its mining sector. Last month’s figures demonstrate the sixth consecutive month of job creation, bringing Queensland’s level of unemployment to 5.8 per cent – higher than the national unemployment rate of 5.3 per cent. Another economic issue that has been of concern to Queensland is the level of public sector wages, which have been growing at between 4 and 8 per cent per year. The Australian Industry Group (AIG) has recommended that public sector wage growth be contained to 1 per cent growth every year, which could create up to $3.6 billion in total savings. The AIG has then recommended that this additional revenue be used to offset a cut in business taxes throughout the state, in the hope that lower taxes for businesses will spur further economic development.

Economists suggest that US economy on track for sustained growth

February 22, 2010

The US – the world’s largest economy – is on track to achieve sustained levels of economic growth over the next two years, according to a survey of economists. In particular, an improving outlook for businesses and the labour market has led to the higher levels of confidence in the US economy after it suffered the worst recession since the Great Depression of the 1930s. As a result, total Gross Domestic Product (GDP) is forecast to grow at 3.1 per cent over the four quarters of 2010. Additionally, business investment is expected to increase by a significant 7.2 per cent – substantially higher than the 4.2 per cent increase predicted earlier in November 2009. Furthermore, the US is expected to grow by the same amount – 3.1 per cent – during 2011. The survey was conducted by the National Association for Business Economics (NABE) and represents the viewpoints of a panel of 48 professional economic forecasters.

Australian economy to boom in latter part of the decade

February 22, 2010

According to forecasting company BIS Shrapnel Ltd, Australia’s economy will grow over the next two years before moving into a boom-phase in the latter part of the decade on the back of rising business investment. According to the forecaster, Australia’s Gross Domestic Product (GDP) will rise by 2.7 per cent in the twelve months through June 2010, followed by a 3 per cent rise in 2011 and a 3.8 per cent rise over the subsequent two years. In contrast, Australia’s economy grew by 0.6 per cent in the year to 2009. Specifically, a surge in housing construction and government investment in schools, roads and other infrastructure will help to promote economic growth. However, BIS Shrapnel also suggests that inflationary pressures will continue to increase over the next three to four years as continued economic growth in China and India fuels Australia’s mining exports. Consequently, BIS Shrapnel believes that interest rates will increase by at least another two percentage points over the next three to four years. Australia’s current cash rate is 3.75 per cent.

Reserve Bank says that rates must rise in the future

February 19, 2010

Reserve Bank Governor Glenn Stevens has confirmed that interest rates will rise as Australia’s economic performance continues to strengthen. The concern is that inflationary pressures will rise to unacceptable levels if aggregate demand in the Australian economy continues to increase strongly. The Reserve Bank’s cash rate currently sits at 3.75 per cent – up from the ‘emergency’ levels of 3 per cent which were adopted during the global financial crisis in attempts to ward off a domestic recession. While the Reserve Bank has confirmed that further interest rate increases are a virtual certainty, economists have not taken this to mean that a series of imminent, consecutive increases will occur in the months ahead. Rather, most economists believe that further tightening of monetary policy will occur in a more gradual fashion.

Reserve Bank claims that unemployment has peaked

February 18, 2010

Reserve Bank Governor Glenn Stevens has claimed that unemployment in the domestic economy has peaked at less than six per cent – significantly lower than many had forecast during the worst of the global recession during 2007-2009. The government initially forecast that unemployment would peak at 8.5 per cent, later revising their forecasts to 6.75 per cent. This month, however, unemployment dropped to a recent low of 5.3 per cent – down from 5.5 per cent in the previous month, despite predictions of a rise in the unemployment rate to 5.6 per cent. Given Australia’s resilient economic performance, the role of the Reserve Bank has shifted from one of crisis management to one of managing Australia’s economic recovery in a sustainable manner. According to Stevens, while many advanced economies suffered their worst recession since World War II, Australia probably suffered its smallest.

Australian economy experiences fastest rebound in growth in 40 years

February 17, 2010

The continuing economic recovery underway in the Australian economy represents Australia’s fastest rebound in economic activity since the mid 1970s, when similar economic uncertainty gripped the country. The figures used are a part of an index released by the Westpac Banking Group. Similarly, official data released by the Reserve Bank have shown that roughly 200,000 jobs have been created in the economy since August 2009, helping to bring Australia’s unemployment rate to a recent low of just 5.3 per cent.

Federal Government considering new tax breaks for banks

January 16, 2010

The Federal Government is considering the implementation of new tax advantages for international banks, as well as the reduction of regulations for financial institutions, in order to promote Australia as a regional financial centre and attract greater international investment. The recommendations were contained in a report recently prepared by a panel of senior financial executives and supported by Treasury officials. Among other initiatives, the report calls for the abolition of any taxes on the interest income that foreign banks earn from their Australian branches. Already, Australia’s financial institutions have been commended for weathering the global financial crisis significantly better than their US and European counterparts. If implemented, the tax breaks and reduced regulatory burden for financial institutions would go against the broader international trend to raise taxes on banks in an effort to curb the so-called ‘excesses’ of the financial industry which have been blamed for precipitating the financial crisis. Indeed, the release of the report comes just as US President Barack Obama has announced a $US90 billion tax on the US banking system in an effort to recoup losses faced when US taxpayer funds were used to bail out fragile financial institutions. The tax breaks are also being touted by some as a means to allow Australia to continue financing its consistent Current Account Deficit (CAD). Presently, financial service exports are only a fraction of Australia’s finance industry and account for just 3 per cent of the total value added by Australia’s financial sector.

Impressive employment figures confirm Australia’s rapid recovery

January 14, 2010

The latest figures released by the ABS show that unemployment has fallen for a second consecutive month to an eight-month low of 5.5 per cent in December – down from 5.6 per cent in November. More impressive is that increases in employment are increasingly being seen in full-time – and not just part-time – positions. The better-than-expected unemployment figures present a stark contrast to earlier predictions handed out in the Federal Government’s 2009-10 budget. In the budget, Treasury economists forecasted that unemployment would continue to rise until the end of 2010 and would peak at 8.5 per cent in the December quarter of 2010 and remain there until the June quarter of 2011. However, a combination of stimulus measures by both the Federal Government and the Reserve Bank (via a dramatic cut in interest rates) helped to stave off a domestic recession and stabilize the banking industry. As a consequence, the Federal Government downgraded its peak-unemployment forecast from 8.5 per cent to 6.75 per cent in its mid-year review of the Budget in 2009. So far, however, unemployment seems to have only peaked at 5.8 per cent in June 2009. However, strong employment figures represent a potential increase in aggregate demand and will encourage the Reserve Bank to lift interest rates at its next meeting in February. Already, the faster-than-expected economic recovery has prompted the Reserve Bank to increase interest rates three times to currently sit at 3.75 per cent to ensure that the economy does not ‘overheat’ during its rapid recovery.

China overtakes Germany to become the world’s largest exporter

January 11, 2010

New reports have confirmed that China has overtaken Germany to become the largest exporter of goods and services in the world. The data comes soon after confirmations that China had overtaken the US to become the world’s largest automotive market and that it is forecast to overtake Japan in 2010 to become the world’s second largest economy. China’s state media claimed that the country’s total exports had increased by 17.7 per cent in December in comparison to one year earlier. While the news signals continued positivity with respect to China’s economic performance, it is likely to galvanise China’s international competitors to demand that it devalue its currency, the yuan. Many countries, such as the US, have accused China of deliberately devaluing its currency in order to make its goods more internationally competitive. Nevertheless, just as China’s exports have recorded impressive growth, the total level of Chinese imports also witnessed a dramatic surge by a larger-than-expected 55.9 per cent, bringing the country’s total trade surplus down to $18.4 billion.

Increased job advertisements spells positive news for domestic employment

January 11, 2010

The total number of job advertisements published on the internet and in national newspapers increased by over 6 per cent in December, according to a recent survey conduct by ANZ. The figure represents the survey’s second consecutive rise after job advertisements increased by 5.2 per cent in November, suggesting that national employers are becoming increasingly willing to hire workers once more. Specifically, newspaper job ads increased by 11.6 per cent over the month, while internet ads increased by 5.6 per cent. The biggest increase was in the Northern Territory where job advertisements increased by 62 per cent, followed by a 13.9 per cent increase in NSW. The increase in job advertisements is likely to downplay any expectations of any substantial increase in Australia’s unemployment rate in the near term, and points to continued economic recovery in Australia. Previously, many economists and government officials had predicted that Australia’s unemployment rate would cross the 6 per cent threshold – however, the continuing streak of positive news in Australia’s labour market have cast significant doubt over these earlier predictions.

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