Australia’s Olympic Performance – Just Brilliant


How good is Australia – not just with its economic performance, but even with its terrific results in the Olympics.

As at the end of Friday, 3 August, here are a few facts:

Australia, in terms of population, 52nd biggest country in the world.

Total medals:  8th

Gold:  Equal 19th

Silver:  4th

Bronze:  Equal 10th.

Keep going team!

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Not a Media Release from the RBA: 7 August Interest Rate Cut


Not a Media Release

Number 2012-XXX
Date 7 August 2012
Embargo For Immediate Release

Not a Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to reduce the cash rate by 25 basis points to 3.25 per cent.

Growth in the world economy has moderated in recent months and as a result, there are expectations for further monetary policy easings across most of the world.  Recent indicators continue to suggest weakening in Europe and a further slowing in the pace of growth in China. Conditions in other parts of Asia remain firm, although the ongoing trend is unclear and could be dampened by the effects of slower growth outside the region. The United States recovery has recently faltered with a moderation in growth in the most recent period.  This global weakness is showing up in on-going falls in commodity prices, which will help to reduce inflation and providing scope for some countries to ease macroeconomic policies. A climate related rise in grains prices, while significant, will be temporary.  Australia’s terms of trade are falling and given current global economic trends, more falls are expected over the medium term.

Financial markets remain fickle and sovereign bond yields in many credit worthy countries are at record lows.  In other countries, yields have increased to levels that, if sustained, would threaten the borrowing capabilities of countries that currently have the most acute fiscal concerns.  In some instances, sovereign bond yields are negative which reflects economic concerns and potentially disinflation risks.  Share markets have remained volatile.

In Australia, recent data suggest that the economy continued to grow at a solid pace.  Some of this pick up is welcome given emerging capacity is some parts of the economy that was driven by a protracted period of sub-trend growth.  Labour market conditions are firm, although the forward indicators for job creation point to softer conditions in the near term.  The rate of unemployment remains relatively low.

The June quarter consumer price index was broadly as expected by the Bank and it showed inflation falling to close to multi-decade lows.  With global influences and the on-going strength in the Australian dollar exchange rate, there is a material risk that inflation will remain anchored near or below the bottom of the target band, at least in the near term.  Over the coming one to two years, and abstracting from the effects of the carbon price, inflation is expected to be consistent with the target.

Interest rates for borrowers remain a little below their medium-term averages.  While business credit has increased in recent months, housing and personal credit growth has slowed to near record lows.  Consumer deleveraging is continuing in an orderly fashion.  House prices are exhibiting some short-term variability, but remain a little below the level seen at the start of the year. The exchange rate has risen strongly in recent months, despite the balance of global economic risks tilting to the downside and even though commodity prices have now materially weakened.  The Bank will continue to monitor trends in the Australian dollar and its impact on inflation and the economy.

As a result of recent decisions of the Board to reduce the cash rate, including today, monetary policy is now moderately expansionary. The Board will continue to monitor global economic and financial market trends and will set monetary policy with a view to maintaining inflation in the 2 to 3 per cent band over the medium term.

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The Fraser Government’s $117 billion Debt Explosion


When Malcolm Fraser became Prime Minister in November 1975, the Government sector had net financial assets – that is, there was negative net government debt equal to 2.7% of GDP.  Making an allowance for the lag of the new government to change policies, there was still negative net debt of 0.4% of GDP in 1975-76.

The Fraser Government, with John Howard as Treasurer for the bulk of that time, ended its time in office with net government debt equal to 7.5% of GDP in 1983-84.

With GDP in Australia expected to be approximately $1,558 billion in 2012-13, this level of debt is equal to around $117 billion in today’s dollar terms.

Mr Abbott recently said “prudent fiscal management is in the Coalition’s DNA”.  The facts suggest otherwise.

See Table 3 in the link for details.




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Since the carbon tax started: Edition 4


There has been a little more information in market variables in the past few days and I have updated the full list below.  Soon we will see a raft of post-carbon tax economic data which I will included in future updates.

This is the fourth edition of Since The Carbon Tax Started in which a range of market and economic indicators are examined in the context of the introduction of the carbon tax on 1 July 2012.   The post is a simple factually based report and at the moment draws no conclusions on causality, correlations or linkages between the carbon price starting and movements in the various indicators.

Here is the latest.

Indicator Change since end June 2012
Market Indicators


Official cash rate

No change

Australian dollar (vs USD)


10 year govt bond yield

+0.13 percentage points



    Change in market cap of ASX

+$47 billion

Economic Indicators


RP Data house prices


      Change in Housing Wealth

+$24 billion

Westpac index of Consumer sentiment




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Australia’s best economic fundamentals since 1964


The current economic data in Australia are about as good as one could expect to see.

Australia has GDP growth of 4.3%, at the same time inflation is running at 1.3%, at the same time the unemployment rate is below 5.5% (5.2% to be precise), at the same time mortgage interest rates are below 7% (6.85% for the standard variable rate).

Delving into the various data bases to try to match up a time when Australia’s GDP growth was 4% or more, inflation was 1.5% or less, the unemployment rate was 5.5% or less and the standard variable mortgage interest rates was 7% or less, and I came up with March quarter 1964.

That was a few months after the assassination of JFK; Robert Menzies was Prime Minister; Arthur Calwell was Leader of the Opposition; the Beatles visited Australia; and Donald Horne’s The Lucky Country was first published.

Clearly it’s been a long time since Australia has enjoyed these current economic fundamentals.  It’s great news that we should celebrate and enjoy.

One massively inspiring fact is that in 1964, Australia’s per capita GDP (US$ terms) was $2,250.  In 2012, the IMF estimate it will be $69,000, an increase of more than 2,600%.  We are a very rich country.

If over the next 3 or 5 or 10 years, Australia can sustain GDP growth of 3.25%, inflation at 2.5% (the RBA target), have the unemployment rate near 5% and have housing affordability assisted by reasonable levels for interest rates, we’ll be doing exceptionally well.

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