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Economic growth slows to 0.5 per cent in June quarter; Inventory build double actual GDP growth
Topic Started: 3 Sep 2014, 09:42 PM (1,025 Views)
Ned Flanders
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The good bits:
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The Australian economy grew a mere 0.5 per cent in the June quarter as a steep fall in export values and weak capital expenditure crimped national output.

"Changes in inventories contributed 0.9 percentage points to GDP growth. This was offset by a negative 0.9 percentage point contribution to growth from net exports."

The terms of trade, which measures the value of Australia's exports against the cost of imports, declined 4.1 per cent during the quarter.

Real gross domestic income dropped by 0.3 per cent during the June quarter as a result of the decline in terms of trade.

Read more: http://www.smh.com.au/business/the-economy/economic-growth-slows-to-05-per-cent-in-june-quarter-20140903-10bp5n.html#ixzz3CFRHuoVM



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Will
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Now if population growth was 0.5 puss cent during this time, that would explain why you haven't noticed an increase in your living standards.
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Lef-tee
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Of importance is the fact that without the big bounce back in inventory growth in the June-quarter, Australia would have been heading for recession. That contribution (see below) is not likely to sustain itself next quarter and so the future outlook is weak.


Quote:
 
Of importance is the fact that without the big bounce back in inventory growth in the June-quarter, Australia would have been heading for recession. That contribution (see below) is not likely to sustain itself next quarter and so the future outlook is weak.

The fragility of the growth path arises because there is no real signs of growth in any sector other than mining, and clearly net exports are now dragging on economic growth.


Link here

It's looking more and more likely that if government simply cannot bring itself to spend to drive growth, we will need to go to effective ZIRP. The level of it's effectiveness is uncertain and represents the very last bullet left in the chamber of the monetary policy gun but it seems likely to me that is where we are heading.
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JanesAddiction
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Lef-tee
4 Sep 2014, 06:58 AM
It's looking more and more likely that if government simply cannot bring itself to spend to drive growth, we will need to go to effective ZIRP. The level of it's effectiveness is uncertain and represents the very last bullet left in the chamber of the monetary policy gun but it seems likely to me that is where we are heading.
I think we were always heading there. The hoped for US recovery hasn't materialised and China has reached the limit of stimulus/credit easing in compensation. On the one hand, ff the government loses it's AAA credit rating, then money market spreads will increase by about 40-70 basis points, which means mortgage rates will head back up unless the RBA cuts the cash rate by a similar amount. On the other hand, if government wont borrow, then the RBA has to force the private sector to do so.

Hi ho, hi ho, it's off to ZIRP we go ...
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Dr Watson
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JanesAddiction
4 Sep 2014, 08:56 AM
Hi ho, hi ho, it's off to ZIRP we go ...
What will ZIRP mean for house prices?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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peter fraser
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Lef-tee
4 Sep 2014, 06:58 AM





Link here

It's looking more and more likely that if government simply cannot bring itself to spend to drive growth, we will need to go to effective ZIRP. The level of it's effectiveness is uncertain and represents the very last bullet left in the chamber of the monetary policy gun but it seems likely to me that is where we are heading.
The government is hell bent on saving money at a time when it should be building the nation.

Hopeless.
Dr Watson
4 Sep 2014, 09:09 AM
What will ZIRP mean for house prices?
Up because of the lower rates, but down because of the unemployment and slower spending by the public. It just depends on which force is the greater.

I have been lucky enough to have the opportunity to speak with a lot of people who lived through the great depression. Those who lost their employment had a very bad time, but those who held their jobs survived very well. Wage growth didn't happen but prices were lower, interest rates were lower, and getting work done or buying assets came at a much lower cost. The depression created winners and losers.

I was looking at the 30 year rates in the USA last night, they are around 4.1% at the moment. In Australia ING will lend as low as 4.63% variable so although our rates are variable they are only just above the preferred product rates in the USA. If the RBA reduced the OCR to just 0.5% I don't think you will get borrowing rates 2% lower than they are now, but they will be lower.
Edited by peter fraser, 4 Sep 2014, 09:28 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Fitzy
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It is the arrogance and the lack of intellect that is truly depressing. I do not think that housing speculation is something that needs encouragement given recent examples offshore. Given the foreign ownership and the rampant Dutch disease an additional tax on mining not drafted by the industry was a good idea to ameliorate some of the damage. The total disregard of the prospects of our young people to advance themselves and everyone else by innovation is a total disgrace. The general betrayal and abuse of trust when high office is demeaned to nothing more than a conduit for the policy imperatives of our foreign masters, is an affront to the electorate and the values of a true parliamentary democracy.

This is not what we deserve. Not that big Julie and Mr. Swan were any better. When independence, courage and judgment were required in the negotiation of the tax it was sorely lacking. The vision of the so called elites extend to Australia being no more than a sandpit for foreigners, and a haven for paper shufflers. Any constructive enterprise or innovation is crushed without mercy.

I don’t think that those who voted them in thought they would be as bad as they are. The short sighted trashing of social support, the population ponzi, the 457s, the sacking of the scientists, the lack of support for innovative startups sap optimism from tomorrow’s leaders. Many of these lessons were learned in the 1930s to be forgotten 80 years later. Throw in branch stacking, primeval work practices, and union thuggery, the rent seekers have inherited the earth.
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Ollie
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Yesterday’s national accounts release for the June quarter confirmed that Australia’s FIRE economy – Finance, Insurance and Rental, Hiring & Real Estate Services – continues to grow from strength to strength, rising to a new record high 11.1% share of the Australian economy.

In fact, since financial markets were first deregulated in the mid-1980s, the FIRE economy has grown at nearly twice the pace of the rest of the economy.

The situation is even more extreme if Rental, Hiring & Real Estate Services is removed from the mix, with the Finance and Insurance sector growing at well over double the pace of the rest of the economy since deregulation,, although is share of the economy (8.3%) is a whisker off the all-time high reached in the March quarter.

Anyone seeking an explanation as to why Australia’s FIRE economy has expanded so briskly only has to view the below chart, which shows Australian house prices decoupling from rents at roughly the same time as the FIRE economy’s growth decoupled from the rest of the economy (of course compulsory superannuation has also contributed).

In short, the deregulation of the financial sector ignited credit growth, most of which has been channeled into housing at the expense of business, inflating Australian home values in the process.

A key ingredient behind the surge in credit growth, house prices, and the FIRE economy’s growing share has been the explosion of property investors, whose absolute size and share has risen inexorably over the past two decades, and exploded over the past year, of course assisted by Australia’s peculiar tax laws (e.g. negative gearing).

And with overall housing credit growth expanding at 6.5% in the year to July 2014 – faster than nominal GDP (3.3%) – the FIRE economy is set to continue pushing to new highs.

Like Frankenstein’s monster, the financial sector, which once acted merely as an enabler of the productive economy, is now pulling its master’s strings, killing killing-off the productive economy in the process.
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Lef-tee
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Quote:
 
The government is hell bent on saving money at a time when it should be building the nation.

Hopeless


Yes, it's crazy isn't it? And they've seen what austerity achieves with Europe being a great example.
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Dr Watson
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Deficit spending worked well in Greece, didn't it?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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