Some good news in the numbers

There’s so much data coming across desk these days its hard to determine the trend line. In Australia it always seems to carry the theme that ‘we’ll all be ruined’. But this may not be the case.

It’s always that the dollar is too high, property is out of control, petrol is too expensive, and wages are too low. But if you step back you can see that a lot of those numbers bode well for the economy. Some have been brought about by the strange twists in the political landscape which sees property developer/reality TV star in Donald Trump about to become president of the United States. 

Subsequently US rates are expected to rise and therefore the Aussie dollar has been falling, from testing US78c to below US75, helped along by fears of a trade war between China and the US. If that doesn’t happen then local exporters get a leg up on world markets, especially mining and energy stocks which have seen commodity prices jump off the bottom over the past 12 months. This is also good news for repairing the Federal Government deficit via the tax system. 

Petrol prices are falling again despite the best efforts of the Arabs and the Russians to put a floor under the price. Lower petrol prices translate into lower inputs for business and more spending power for consumers. And while consumer spending has been sluggish this year it looks like we’re heading into a good Christmas with the Commonwealth Banks Business Sales Index rising in trend terms in October. 

Can consumers shake off mid-year slump and save Christmas?

If interest rates stay low and people shake off the mid-year slump that featured around the Federal election the broader retail market should be happy.

Of course wages aren’t going up, which has everyone moaning, but that’s good for business inputs and it’s obviously not stopping spending with inflation at its lowest level in years and employment remaining pretty steady at 5.6 per cent. 

That figure may get ramped up as more businesses look for efficiencies via mergers, acquisitions and restructuring.

The two worrying factors in the economy are the continuing problem of getting revenue savings measures through the two houses of government and a growing weakness in apartment/construction market. At the moment it’s really only the property speculators who are feeling the heat as the easy capital gains dry up, but if higher US interest rates spread to Down Under then the mortgage belt could feel some strain. 

That’s why I hear the banks keep continuing to stress test their mortgage market exposure. Good luck

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