Friday, January 30, 2009

January front page - a data month

Earlier in January in Has Access Economics done Australia a grave disservice? - 1 I started an analysis of Australian economic performance. Events since then have intervened.

I remain of the view that Access did do us a grave disservice despite the gloomy discussion since. However, I have felt the need to do a more detailed check of data before writing any more. It is absolutely impossible to rely on reporting in the current climate.

I am keeping this post as the front page until the end of January. I am also going to bring up a series of past-dated posts based on the date of events. I feel the need to create a time based record to provide a proper base for subsequent analysis.

I don't know about you, but I get very confused, finding it difficult to maintain any form of stable equilibrium in the face of constant variability. I will provide summary details of the posts as they come up on this page.

Monday, January 19, 2009

Has Access Economics done Australia a grave disservice? - 1

Early this morning in a post on my personal blog, Is the Access Economics report right?, I noted the language used in the latest Access Economics report on the Australian economy.

I have a high opinion of Access. As I said in this morning's post, they have a better feel for the numbers. But this time as I listened to or read the coverage during the day I decided that they have really gone over the top in crafting their language to get major media impact. 

So let's look at some of the data. Because this is an opinion piece, I am not giving all the links. I am sure that my errors will be corrected.

The firm (Access Economics) says the Government's cash handouts to households will not be enough to save the retail sector from a bleak Christmas. ABC story 15 December 2008.

Back in December, Access suggested that this Christmas's retail sales would be bleak. They were not, going up slightly overall. In some parts of the country, Armidale is an example, retail sales set new records.

So far so good.

Let's turn to employment. This is a lagging indicator in that firms hang onto staff in the first instance, then let them go later if market conditions continue to worsen

The December stats from ABS essentially showed a steady unemployment rate. However, this average concealed a significant deterioration in that full time employment fell by almost 44,000, while the participation rate declined slightly.

No surprises here. We already knew job ads had declined sharply. But let's keep things in perspective. At a time of global crash it is a quite remarkable feat to hold the raw number steady.

So far so good.

Bank bad debts are rising, but our banks remain sound. The big banks have used the Government guarantee to raise something like $A60 billion on global markets. No major liquidity problem here.

Of greater interest, the regional banks who were expected to be the main users of the guarantee have made almost no use of it. They have not needed to because the rise in retail - mum and dad - deposits has been adequate to fund their lending.

In another qualitative sign,the banks are trying to sell loans on TV. Some at least want to lend.

So far so good.

Home building approvals, a leading indicator, have been in decline for twelve months, down 26 per cent. We knew that this sector was sick. No surprises there.

So let's look at the lending figures, an even more leading indicator. The November figures for housing finance for owner occupies dwellings showed an increase over the previous month of 0.4% in trend terms, 1.4% in seasonally adjusted terms.

Lending for personal consumption was down, and a bloody good thing too.

Commercial finance was down 1.6% in trend terms, a large 10.4% seasonally adjusted. No real surprises here. Business is reluctant to borrow just at present.

Still, in all, so far so good.

The Access Report apparently predicted that the current account deficit would rise from $A65 billion this financial year to $A100 billion next year as exports fell faster than imports.


Over the second half of calendar 2008, the balance on goods and services actually moved from a long term deficit to a surplus, the first for some time, providing us with a buffer.

If the newspaper reports are correct, then the Access numbers suggest that we will move from the current surplus to an average deficit of over $A8 billion per month. Yes, our commodity exports are falling, but $8 billion?

The most recent trade stats on merchandise imports show a 4% fall in original terms in December. We will just have to wait to see.

I hesitate to say so far so good. Certainly I thought that the previous turn-round was was much better  than so far so good.      

I don't have time to continue tonight. I will try to finish this post tomorrow.    

Saturday, January 10, 2009

Sales of Australian wine and brandy November 2008

The Australian Bureau of Statistics has released details of Australian wine sales for November.

The trend November domestic wine salesestimate for domestic sales of Australian produced wine by volume was 34.7 million litres in November 2008, a decrease of 0.5% from October 2008, down 3.3% from November 2007.

The chart shows domestic sales. Down, but relatively stable. 

The export position is a little different. Australia is now a major wine exporter. The chart below shows our wine exports by volume. You can see the huge increase over the last decade, the sharp down turn in recent times.exports Australian produced winent times.

The fall in the Australian dollar means an increase in the price of local imported wine, although the price of my Spanish tipple has yet to shift. However, falling export demand means that we Australian wine drinkers are going to get a local bonus in terms of lower prices.

Thursday, January 08, 2009

Australia's trade performance - November 2008

In Australia's improving trade performance - October 2008 statistics I commented on the remarkable turn-round in Australia's trade position, a move from deficit to surplus, at just the time Australia needed it.

The Australian Bureau of Statistics has just released new trade figures. How did Australia go?

The table below sets out seasonally adjusted exports and imports in $A million.

If you compare the numbers with the previous table you will see that they vary. This happens because of subsequent adjustments by ABS. I must say that the number of variations surprised me.

Month Exports Imports Balance
September 17,765 19,919 -2,154
October 17,251 20,268 -3,017
November 18,318 20,569 -2,251
December 18,822 20,646 -1,828
January 19,514 21,795 -2,282
February 18,742 21,819 -3,076
March 19,960 22,153 -2,493
April 21,659 21,980 -321
May 22,224 23,249 -1,025
June 23,320 23,099 220
July 23,556 23,965 -409
August 24,736 23,375 1,361
September 26,105 24,994 1,111
October 27,934 24,974 2,960
November 26,932 25,484 1,448

The pattern is similar to that outlined in my last report, with the balance of trade going into surplus at just the time we needed it to do so. That said, and as you might expect, the seasonally adjusted figures do show a weakening in Australia's trade position.

Imports continued to rise, while exports declined.

As an indicator of the effect of the global downturn, if we look at the original data, exports of non-agglomerated iron ore declined by 24% in volume terms, while prices were down 3%. Exports of metallurgical coal decreased 15% by volume, although here prices were up by 8%.

The following table shows Australia's trade performance in financial year terms, original data. Figures are in $ million. 

Year Exports imports Balance
2005-06 196,274 210,794 -14,520
2006-07 215,696 228,452 -12,757
2007-08 234,418 255,372 -20,954

You can see that we have had a fair size deficit. This compares with a surplus in the first five months of this financial year of $4,590 million. A substantial turn around.

The effect of the global downturn on our balance of trade position depends upon the net effect on imports and exports.

As you can see from the iron ore and coal examples, export volumes have already dropped sharply. This is reflected in mining lay-offs. We can also expect price falls.

On the other side of the ledger, we can also expect some fall in imports.  

It all depends upon the scale of the two effects taking exchange rate movements into account.

Take the 07-08 figures and assume that the dollar value of exports drops by a third. The trade deficit would blow out by $78 billion. This would be unsustainable. The exchange rate would decline to the point that exports and imports were once again in something approaching balance.  

Australian building approvals November 2008

ABS statistics released today suggest that In November the total number of dwellings approved in Australia fell by 4.2 per cent as compared to October in trend terms. More importantly, the total number of dwelling units approved was down 26.1 from 0November 2007.

The chart shows the pattern in both trend and seasonally adjusted terms.

The important point to note is that the downward trend was in place long before the global financial crisis.

I make this point because of the tendency to blame every piece of bad economic data on the global crisis.  

Wednesday, January 07, 2009

Australian retail sales - November 2008

Trend data retail sales November 08 According to the Australian Bureau of Statistics, Australian retail sales in November (trend estimates) were $18.4231 billion, up 0.1% on the previous month, up 1.9% on November 2007.

The attached graph shows that the rate of growth in retail sales weakened steadily over 2007-2008 before recovering somewhat.


In terms of the detail, ABS notes that the food retailing industry had a period of weak growth from November 2007 through to April 2008, followed by seven months of moderate or strong growth. Other retailing had four months of moderate trend growth. All other industries have had a decline in the trend estimate for at least three months with:

  • Department stores and Clothing and soft good retailing, three months of decline in the trend estimate preceded by four months of either no change or weak growth in the trend estimate
  • Household good retailing, six months of decline in the trend estimate preceded by three months of weak growth in the trend estimate
  • Cafes, restaurants and takeaway food services, a decline in the trend estimate for 13 months.

You can see why firms like department store David Jones have experienced a degree of trouble.


The trend estimate has been in decline in New South Wales for ten months. No surprise there.

Western Australia had a decline in the trend estimate in November 2008 after no change in the trend estimate in October preceded by two months of weak trend growth. Queensland, South Australia and Tasmania have had three, two and three months of weak trend growth respectively. Victoria (five months) and the Australian Capital Territory (three months) have had moderate growth. The Northern Territory has had seven months of strong growth.