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I am more positive about Australia than I have ever been. We are in a great position at the moment. On the economy, despite the domestic challenges, we are delivering the jobs, and importantly it is going to get better this year.
Falling commodity prices This should be a familiar story to most Australians by now. This was mainly driven by higher bulk commodity prices, including iron ore and coking coal, which are key inputs in the production of steel, driven by strong demand growth from China. This resulted in a massive investment boom to increase capacity, much of which recently has coming online.
That Australian growth may outstrip global supply reflects an expectation that higher cost producers elsewhere will reduce production. Department of Industry and Science Consequently, supply growth, including from Australia, has been weighing on commodity prices.
China last year imported around two-thirds of globally traded iron ore, and growth in the Chinese economy has been slowing. Growth in fixed asset investment, which contributes to demand for crude steel, has declined, with the Chinese housing sector weak. Chinese crude steel production is down a year from ago, and while the Department of Industry and Science forecast that growth will return, it will be much more modest.
Forecasts are from Department of Industry and Science What this means is that the recent falls in the terms of trade reflect both supply and demand-side factors. They considerably impinge upon Federal Government revenues, most directly through company tax receipts.
Looking forward, in the next financial year LNG exports will grow substantially as expansions in capacity become productive, supporting overall output growth.
Rising unemployment Outside of the resources sector, growth in the Australian economy appears to be soft. While overall output growth grew by a moderately below-trend 2. Alternatively, domestic final demand growth, which excludes both net exports and inventories, was weak 1.
ABS This soft output growth outside of the resources sector, together with resources companies reducing jobs, has resulted in the unemployment rate gradually increasing to 6. This is higher than estimates of the non-accelerating inflation rate of unemployment - the level of the unemployment rate consistent with unchanged inflation - although such estimates are inherently uncertain.
Nonetheless, this signals that the economy is currently operating beneath its capacity. The under-utilisation rate — which also takes into account people working fewer hours than they desire — paints an even softer picture.
ABS So, considerable slack exists in the labour market. This is restraining growth in wages, and therefore inflation. But low wages growth also acts to restrain disposable income and hence consumption growth. Consumer sentiment, as measured by the Westpac-Melbourne Institute survey, is presently is below average.
ABS Sectors outside the resources sector There is evidence that some sectors of the economy are moving out from the shadow of the resources sector.
In particular, residential construction has been growing strongly, with rising dwelling approvals suggesting that this will continue. Australian Bureau of Statistics But as residential investment is only a small share of the overall economy, its contribution to overall growth is insufficient to offset the falls in mining investment.
Growth in service exports has also improved, mainly reflecting tourism and education. Service exports are the second largest component of Australian exports, but are considerably smaller than resource exports. Historically the real exchange rate a measure of competitiveness and the terms of trade have tended to move together over the medium term.
Here, there are mixed signals that businesses are ready to invest. Business credit growth, a timely indicator of the state of the business sector, has picked up, but remains subdued.
The ABS Capital Expenditure survey capex asks businesses about their investment intentions and provides another important signal about the outlook. For the mining sector, the capex survey points to sizeable falls in nominal mining investment both this financial year and next.Our summer in Victoria has been pretty cool.
We noticed that on the weather forecast on the ABC News at 7pm the last three days the forecast temp for MEL for next Sunday has changed from 23 to 22 to Exchange rates play a key role in the relationships between individual economies within the context of the global economy, as all trade and financial flows between nations are mediated through exchange rates.
With respect to Australia, the foreign exchange rate is simply the price at which. By floating the dollar, the Reserve Bank gave up any ability to control the amount of cash in money markets and thus influence the dollar’s exchange rate.
However, by the mids there was so much cash in global markets that the RBA was losing its capacity to regulate the exchange rate anyway. JASSA. JASSA: The Finsia Journal of Applied Finance, is a peer reviewed journal that publishes the latest technical analysis and cutting edge research in finance..
Contribute an article to JASSA. The main drivers of Australian imports are therefore likely to be Australian incomes, prices of imported goods relative to domestically produced goods, and gradual changes to the structure of the Australian economy and changes in tastes.
27/09/ Sorry no Thursday update. 26/09/ Sorry for the very late Wednesday update. The th Ariane 5 launch, with Horizons 3e & Azerspace 2/Intelsat 38 satellites was early Wednesday morning.