Positive Signs

Federal Treasurer Scott Morrison reported that the economy increased strongly in the June quarter (plus 0.8%) compared to the previous quarter (0.3%) and he believes better days are ahead.

At the same time though wage growth remains low (2.1% for the year) and over the past five quarters gross disposable income has only moved up at 0.5 percent. Morrison said wage growth will remain constrained until company profits and productivity increase (source: news.com.au).

“Companies have to make money to be able to pay more.”

Morrison admitted there is real pain felt by sections of the business sector but said the signs of growth are present. He argued for a further cut to corporate tax.

Australia’s economy is the only one in the world to experience 26 years without recession. In comparison, the USA has only enjoyed uninterrupted growth for eight years.

Reserve Bank governor Philip Lowe echoed the sentiment for a gradual pick up in economic growth over the coming 12 months. However, wages will remain pretty much the same as they are now and household debt will increase.

Commonwealth Bank chief economist Michael Blythe said another year of “masterly inactivity” is expected.

The Australian Financial Review reported that the economy is in better shape that the start of the year but it is not strong. At 1.8% growth, this is the lowest figure seen since 2009.

AIG measures manufacturing every month across seven sub sectors and announces the PMI index. Figures below 50 show contraction. 50 and over indicate expansion. The figure in August was 59.8. Up from 56 in July. It marked 11 consecutive months of growth in manufacturing. The PMI averaged 50 points between 2001-2017.

When compared to the rest of the world Australia looks good. We’re on par with Germany and the Netherlands, and ahead of the UK (56), France (55), Canada (54), Japan (52), USA (52), India (51), China (51) and South Korea (49). The highest ranking goes to Switzerland on 61.