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.    

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