Australian Economic News

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Services sector jobs growth surges
AAP JULY 29, 2015 3:28PM

The services sector looks set to rival housing as the star performer of the Australian economy thanks to the lower exchange rate.

There have been more than 200,000 jobs created in Australia in the past 12 months and close to 100,000 of them have been in health care and professional and scientific industries.

The next best performer has been tourism related businesses, such as accommodation, recreation, and transport.

JP Morgan economist Tom Kennedy said to surge in services sector jobs has help the unemployment rate drop to 6 per cent from 6.2 per cent at the beginning of the year.

“The healthy performance of the labour market is even more surprising given the lacklustre pace of economic growth,” he said.

Mr Kennedy said a key driver for the sector was the fall in the Australian dollar, which has dropped almost US10c since the beginning of the year, making it cheaper for people to visit Australia.

“The slide in the exchange rate has contributed to a steady rebound in inbound tourism, as evidenced by the upturn in services exports,” he said.

Figures released by the federal government today showed that there was an 8 per cent increase in international visitors in the 12 months to March, with New Zealanders and Chinese leading the way.

They spent a record $32.5 billion, which boosted tourism revenue by 10 per cent.

Tourism Australia managing director John O’Sullivan said that China was very important to Australian tourism and was the fastest growing market, with spending up 25 per cent in the 12 months to March.

“Today’s figures confirm China to be the engine room of growth — the highest value inbound market,” he said.

Mr O’Sullivan is also expecting there will be a bounce in the number of visitors from the US and Japan as their economies recover and the falling Australian dollar makes a trip here cheaper. “We’re already experiencing a very strong bounce-back in the US, off the back of strong economic recovery in the US,” he said.

Mr Kennedy said employment growth in the services sector was important as the mining boom wound down, retail spending stays sluggish and, surprisingly, employment in construction grows slowly.

“Employment growth in the construction sector has been unimpressive, with just 20,000 jobs added since mid-2014,” he said.

“This is somewhat surprising given the rise in construction activity in recent years, particularly in the residential sector where annual building approvals are close to all-time highs.”

Mr Kennedy said a possible explanation for this that job shedding in mining industry construction had been offset by improved hiring in the broader economy.

[greengiraffe]

The new $470,000 488 GTB Ferrari sells out as confidence soars among affluent Australians
Date
July 29, 2015 - 7:56PM

Simon Evans
Senior Reporter

The Ferrari 488 GTB: Demand has been accelerating as confidence levels rise among small-to-medium-sized business owners.
The chief executive of Ferrari Australasia says confidence levels among the affluent in Australia are back to where they were before the global financial crisis.

High-net worth individuals are clambering over themselves to snare the latest model Ferrari, the 488 GTB, which will sell for $469,888, with two years of stock already pre-sold in Australia even before the first car hits the streets in December.

Herbert Appleroth says the average age of Ferrari owners in Australia is decreasing and is now at 48 years old, with demand accelerating as confidence levels rise among small-to-medium-sized business owners.

The Ferrari 488 GTB: Demand has been accelerating as confidence levels rise among small-to-medium-sized business owners.
The Ferrari 488 GTB: Demand has been accelerating as confidence levels rise among small-to-medium-sized business owners.
"We haven't seen this level of demand since 2007," Mr Appleroth says. The 488 GTB was officially launched to the Australian market in Sydney on Wednesday.

He attributes it to the soaring residential property prices in Sydney and Melbourne, a steady sharemarket which has made solid gains despite the wobbles over commodity prices, Greece bail-outs and a downturn in Chinese stock prices, and the rising stream of dividends as ASX-listed companies pay out record levels of profits to shareholders who are annoyed at measly returns from cash. The wealthy were doing very well.

"I have a pretty good idea of confidence levels among our client base and I can tell you it's pretty strong," he says.

Ferrari generally sells between 110 and 115 vehicles in Australia annually, but in the first six months of calendar 2015 it has sold 93 vehicles, he says.

Mr Appleroth's great-grandfather, Bert Appleroth, was a Sydney tram conductor who set up a business in 1917 which became Aeroplane Jelly, one of Australia's food icons alongside Vegemite. He says it is sole traders and successful business people who buy Ferraris, rather than chief executives of the large sharemarket-listed companies.

He says the steady unemployment rate nationally in Australia has prompted a renewed demand from sole traders who want to reward themselves after building up a business. They were reluctant to do that in the past few years when there was large amounts of restructuring and people losing their jobs.

"When you're letting people go, it's not the coolest thing to be seen driving a Ferrari," he says. "There's been a period of abstinence since the GFC".

But that has passed, and the pent-up demand from buyers with two years' worth of stock pre-sold, was evidence of the change in sentiment.

Ferrari has five dealers, one in each of the mainland capital cities, and there is now a two-year wait until 2017 for one of the new 488 GTB models.

He says if the Australian dollar falls against the euro, then the company will have to look at increasing the price of the vehicle.

[greengiraffe]

BlackRock sees ‘risks’ for Australian economy
DAVID ROGERS THE AUSTRALIAN JULY 30, 2015 12:00AM

BlackRock says the Australian dollar could drop to US65c in the next six months on diminishing interest rate support as the US nears the end of its zero interest rate policy and Australia continues to cut as commodity prices weaken amid a slowdown in China.

The world’s biggest asset manager is downbeat on Australia’s economic prospects amid a slump in resources sector investment and commodity prices after a once-in-a-century boom.

“Given the view that we have about the economy … I do think there is a risk that things get worse,” said Stephen Millar, BlackRock’s head of Australian fixed interest.

“I’m not saying recession … but it could be that growth is a bit under 2.5 per cent (and) you might well see the RBA, reluctantly perhaps, cut rates, and that will be particularly so if these macroprudential measures work.”

Fair value for the dollar was about US70c, but the currency could fall to the mid-to-high US60c region in six-to-nine months, Mr Miller added.

His remarks came as new analysis from the International Monetary Fund suggested the dollar might have even further to fall to catch up with the slump in commodity prices.

In its latest overview of external balances, IMF staff said the fall in Australia’s real relative exchange rate, which accounts for inflation across countries, had further to fall.

“It is 15 per cent above its average over the last 30 years and looks relatively high when set against the fall in the terms of trade,” IMF staff said in their 2015 External Sector Report on Individual Economy Assessments.

“Taking into account factors, including the attractiveness of highly rated Australian assets, staff assesses the real exchange rate to be 0-15 per cent above the level implied by medium-term fundamentals and desirable policy settings.”

Despite a need for fiscal repair, Mr Miller said: “I don’t see any of the ratings agencies moving quickly to reduce Australia’s AAA credit rating” and that the country’s public debt metrics were “still pretty sound on an international comparison basis”.

Barring particularly adverse developments in China or Australia’s housing market, the AAA credit rating would “probably remain intact”, he added.

But he has “a highly circumspect view” on the commodities that Australia produces.

Not only is China’s growth slowing “probably consistent with a soft landing”, its transition to consumption-led growth would mean its economy becomes less commodity intensive, and “given the supply response we have seen, I think that’s going to mean that commodity prices, certainly as far as Australia is concerned, remain under pressure.”

On the domestic housing market, he said: “There is emerging some reticence to buy on the part of households … Australian authorities are seeking to put a bit more emphasis on some macroprudential measures, so housing is problematic.

“We are getting a good volume response from our exports, but where we get to is domestic demand in real terms is running around 1 per cent and it’s very difficult to see it getting much above that, given what’s in prospect for business investment.”

The dollar hit a six-year low of US72.57c this week, down about 35 per cent from a record high of US110.81c achieved at the height of the resources boom.

Official interest rates have been cut 10 times to a record low of 2 per cent since then in an attempt to stimulate the economy and lower the exchange rate as commodity prices slumped.

Iron ore — Australia’s most valuable export — has fallen 70 per cent, hitting a decade low of $US44.59 a tonne this month.

BlackRock has $US4.72 trillion ($6.4 trillion) worth of assets under management.

[greengiraffe]

Housing boom helps lift services sector
JOHN CONROY BUSINESS SPECTATOR AUGUST 05, 2015 10:18AM

The services sector in Australia has expanded for a second straight month as the strong housing market helps support activity, according to a leading performance survey.

The Australian Industry Group performance of services index rose 2.9 points to 54.1 in July, the highest level since February last year.

The result built on June’s strong reading of 51.2, which was an improvement of 1.6 points on a contractionary May.

A reading above 50 indicates expansion, while a reading below points to contraction.

Ai Group said the index result pointed to a modest growth in demand for goods and services over the last four months.

“Conditions across the services sectors have been generally positive or steady in 2015,” it said.

The group said a stronger housing market, low interest rates and the lower dollar were supporting activity.

It also said some businesses were attributing the lift to small business measures in the May federal budget.

All of the five activity subindexes expanded in the month, with services businesses increasing their stock levels for the first time in 14 months.

The finance and insurance sub-sectors led the improvement, expanding for a seventh straight month, while retail trade rose for a fifth consecutive month.

The wholesale trade sector sub-sector expanded for the first time since late 2011.

Ai Group added that a weak economic outlook was still constraining demand for some sub-sectors, with five out of nine categories contracting in the month.

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Reserve Bank cuts growth forecasts
JAMES GLYNN DOW JONES AUGUST 07, 2015 11:50AM

Slower-than-expected population growth in Australia is playing havoc with forecasts for the economy.

The Reserve Bank of Australia today revised lower its expected path for unemployment, saying the jobless rate is set to remain little changed for the next 18 months, instead of drifting higher as earlier predicted.

It also revised lower its forecasts for GDP growth in 2016. It now sees the economy growing by 2.5 per cent to 3.5 per cent, compared with a forecast in May of 2.75 per cent to 3.75 per cent.

In a quarterly statement on monetary policy, the RBA said that as the economy had slowed after a decade-long mining boom, net immigration had also been slower than forecast, as skilled workers returned to countries such as New Zealand seeking better opportunities.

The drain on population growth has meant the RBA has had to recalibrate assumptions about the economy on a number of fronts.

The RBA assumes the reduced level of net immigration will persist for two years, in part because labour market conditions in Australia are expected to remain weaker than those in other countries.

Unemployment has been ranging between 6 per cent and 6.3 per cent for some months, defying the RBA’s expectations that it would move closer to 6.5 per cent.

But as uncertainty about the forecasts has grown, the RBA said it was also seeing improvement in the economy overall.

“Survey measures of business conditions are clearly above average, businesses have been hiring more labour and the unemployment rate is slightly lower than had been expected,” it said.

The level of the Australian dollar was no longer a major headwind for the economy as it adjusted to weaker commodity prices, it said.

“The further depreciation of the exchange rate will provide some assistance with the adjustment of the economy to lower terms of trade,” it added.

The Australian dollar has fallen by around 20 per cent against the US dollar in the last year. While this fall has been welcomed by the RBA, the currency’s fall has lagged even bigger declines in commodity prices like iron ore and coal.

Still, the economy will confront challenges in the year ahead in the shape of soft economic growth, and interest rates will need to remain low.

[BlueKelah]

Australia’s unemployment rate rises to 6.3 per cent in July as more chase jobs

[greengiraffe]

Don't you worry lah... the whole world is quite sick... even Singapore's unemployment is on the edge otherwise u think why PAP is so keen to ride on LKY's sentiment even though quite frankly IMHO track record can't carry on forever in the new world order...

Like I say any deflationary outlook will only accelerate everyone's wealth into the grave...

Australia’s unemployment rate rises to 6.3 per cent in July as more chase jobs

[BlueKelah]

Banks suffer on horror day on share market

The biggest one day fall in more than three years has wiped about $44 billion from the share market's value.

The big four banks were the main reason for the massive plunge, with ANZ enduring its worst session in almost seven years after tapping investors for $2.5 billion.

The S&P/ASX200 index dropped 2.4 per cent, or 135 points, its biggest fall since May 2012

[greengiraffe]

http://www.valuebuddies.com/thread-5859-...#pid117727

No worries mate... this is more a sector specific news. Well capitalised banks can only be good for a healthy economy. Moreover, Aussie banks have outperformed due to the chase for yield and hence the latest mkt reaction should be viewed as healthy...

Banks suffer on horror day on share market

The biggest one day fall in more than three years has wiped about $44 billion from the share market's value.

The big four banks were the main reason for the massive plunge, with ANZ enduring its worst session in almost seven years after tapping investors for $2.5 billion.

The S&P/ASX200 index dropped 2.4 per cent, or 135 points, its biggest fall since May 2012

[greengiraffe]

Consumer confidence bounces in August
JOHN CONROY THE AUSTRALIAN AUGUST 12, 2015 11:16AM

Australian consumer sentiment has bounced back after worries surrounding the Greek debt crisis and the collapse of China’s sharemarket receded.

The Westpac-Melbourne Institute survey of consumer sentiment lifted 7.8 per cent in August to 99.5 points — far offsetting July’s 3.2 per cent decline which had put it at a seven-month low in optimism.

Westpac senior economist Bill Evans said the size of the rebound — which saw all components of the index increase — was “surprising”.

“This is a very surprising result. Movements of the index of this magnitude are unusual and generally associated with highly significant events such as interest rate moves or Commonwealth budgets,” he said.

“There is no comparable event they may have triggered this response although the solution may lie with international issues and housing.”

Mr Evans said confidence was boosted on the expectation of more interest rate cuts and a decline in the media coverage of events in Greece and China.

But the index remains below 100 — the level where pessimists outnumber optimists — and has printed below 100 for 16 of the last 18 months.

Mr Evans said he expected the confidence lift to waver in coming months “particularly given a resurgence of concerns around China and the evidence last week that the unemployment rate lifted to 6.3 per cent,” he said.