by Stephen Roberts | Jun 30, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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The Australian economy is entering the trickiest part of its rebalancing phase to more than offset falling mining investment spending and contained government spending with stronger spending by households eventually promoting a lift in non-mining business investment spending too. If this rebalancing occurs, and throwing in some help from stronger exports too, economic growth should settle in to a 3-4% annual GDP growth groove in 2015, helping to whittle down the unemployment rate over the next year or two which, in turn, should help to underpin even more household spending and business investment spending. Getting this virtuous growth cycle to fire up is largely dependent on how well household spending lifts over the remainder of 2014 and the omens on that front have become mixed. The problem is that household income growth has been and is likely to remain soft. If households are to spend more freely, it can only really happen if they are prepared to save a smaller proportion of their income.
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by Stephen Roberts | Jun 23, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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Our monthly roundup of global and local economic data and events indicates a more mixed-strength economic picture than in May. Winter-weather damage to the US economy was more severe in Q1 than recognized previously, but the recovery since appears more pronounced than thought likely earlier. The slow-down in the pace of economic growth in China appears to be basing, but the unwinding of excesses in the residential property seem likely to present a protracted headwind to growth. In Europe, the economic recovery remains fragile, although some important economies such as Germany and the United Kingdom are performing relatively well. The European Central Bank showed that it is prepared to respond to the soft outlook and eased its policy settings at its June meeting including lowering its deposit rate to -0.10%. Concerns about developments in the Ukraine took a back seat as a rising threat to stability in Iraq and the Middle East took hold with some potential to elevate oil prices.
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by Stephen Roberts | Jun 16, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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Since mid-April we have adjusted our view twice about how the RBA will change the cash rate over the next 12 months or so, but it unlikely we will make further changes over the next few months. The first change to our rate view occurred after the lower-than-expected Q1 CPI release in late April. Prior to the CPI release we had expected a third consecutive high-side quarterly inflation report which when combined with evidence of rapidly reviving household spending would have led most likely to the RBA hiking the cash rate in August, just after the Q2 CPI report which we also expected to be quite high. The lower-than-expected Q1 CPI report was in late April sufficient for us to make the first change to our cash rate forecasts – to delay the start of the rate hiking cycle probably by three months until November, shortly after the Q3 CPI release in Late October.
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