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Manufacturing expands slightly: AiGroup
[b]Australia’s manufacturing sector slowed but remained in expansion mode for a fourth straight month in October, according to an industry survey.[/b]
The Australian Industry Group’s performance of manufacturing index fell 1.9 points to 50.2 in October. But the reading marked the longest run of expansionary readings since July 2010.
“While production lifted again, domestic sales and employment were lower and new orders were broadly unchanged,” said Ai Group chief executive Innes Willox.
He said the process of “broadening the base” of growth across the economy remains gradual and tentative.
“There is clearly scope for stimulatory measures to boost domestic activity,” he said.
A reading above 50 indicates expansion, while a reading below points to contraction.
“This month’s result is only very mildly positive, suggesting stability rather than meaningful growth across Australia’s manufacturing sectors,” AiGroup said.
Meanwhile, the food, beverages and tobacco sub-sector contracted for the first time in 17 months, falling to 49.7. This manufacturing sub-sector is Australia’s largest, accounting for more than a quarter of all manufacturing output and employment.
Among the seven activity subindexes, only exports and supplier deliveries were firmly positive in October.
The wages subindex increased by 2.7 points, with subdued annual wage growth likely reflecting declining demand for labour in the manufacturing industry, a stubborn unemployment rate and very low inflation.
Business Spectator, AAP
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Australia’s fundamentals robust enough to beat the recession odds
[b]The economy is a dangerous place — at least as perceived by some commentators. The list of tripping points that could push the economy into recession tallied by these commentators is long and varied. Some put recession odds as high as one-in-three. Even a Nobel laureate, Paul Krugman, has bought into the debate.[/b]
The reality is that Australia has clocked up 24 four years of continuous growth. The last recession was in the early 1990s. Events that were widely expected to deliver recession — the Asian financial crisis, the tech wreck, the global financial crisis — didn’t.
The old financial adage that past performance is no guarantee of future returns still holds good. But there are factors at work limiting recession risks. And some of the arguments for recession look weak on closer examination.
Policy settings are very accommodative and the automatic stabilisers are working. The Reserve Bank routinely notes that low interest rates are supporting borrowing and spending and that the availability of credit is not a constraint. The Australian dollar may have taken longer to adjust than expected. But monetary conditions overall are very stimulatory and consistent with a sizeable lift in economic growth momentum.
And policy firepower remains. Our interest rates are well above the near-zero settings in the major economies. They can be cut further. The budget is in deficit but debt is low and fiscal policy can be ramped up. The Aussie dollar would move lower still if a major China/global shock emerged.
The immediate growth concern is the mining construction downturn. The biggest construction boom in 150 years is over. And mining capex will drop by between 3.5 and 4 per cent of GDP by the time the cycle is complete. It is at least as big a drag on the economy as the feared US “fiscal cliff” was a few years ago. But the earlier boom will leave a legacy. The expansion in the mining capital stock is driving a new boom in resource exports. These exports will provide a cushion at the bottom of the mining capex cliff.
There is also a perception the capex cliff still lies in front of us. And that we will be swept off at any moment. The reality is that mining capex peaked at the end of 2012. The decline is about 2 per cent of GDP. On that metric we are about half way down the cliff.
And it is a case of so far, so good. Economic growth may not be as fast as we would like. But it remains comfortably in positive territory. Job losses are occurring. But they are being offset by job gains elsewhere. The unemployment rate looks to be peaking at just over 6 per cent — sooner and lower than many anticipated. Good old-fashioned Australian luck has helped. We have “exported” part of our problems. The capex boom came with a large import bill. As mining projects wind down, part of the pain is being exported to those countries that provided us with the necessary capital goods. On the jobs front, fly-in fly-out workers are losing their jobs in the Pilbara. But they are becoming unemployed in Sydney and Melbourne where they live. And that is where the job creation is occurring. We are also exporting part of the problem as those on 457 visas move on to the next big project and New Zealanders return home.
But we will need more than luck. We must transit to other forms of growth. Construction is the focus. And unfortunately the results are mixed. A residential construction boom is under way. But non-mining construction activity has remained limp. And the drop in public infrastructure spending in recent years is nothing less than disappointing.
Non-mining capex and infrastructure spending may have disappointed for now. But some parts of the economic story that weren’t in the transition narrative may surprise on the upside. Non-resource exports and the consumer may fill in some of the hole.
The number of exporters doesn’t normally vary much from year to year. But there was a significant spike in the 2014 financial year. The spike is all the more interesting because it occurred at a time when the Australian dollar was still strong. The larger part of the drop in the currency has happened since then and should push the export trend along.
It seems the Australian dollar was not as big a restraint on the economy as policymakers feared. Non-resource exports may surprise on the upside.
Weak income growth and changed household attitudes to spending/saving/borrowing were expected to weigh on consumer spending. But an array of forces is improving the consumer backdrop. There is a spending flow through from building new homes; there is a wealth effect from higher house prices, the lower dollar is redirecting some spending back onshore and lower petrol prices are boosting spending power. Consumer spending may surprise on the upside.
An expanding group of middle-income consumers in Asia is providing further opportunities. These new consumers want larger and better quality housing, more and better quality food, consumer durables, education services, and more holidays. Education and tourism already rank in Australia’s top five exports. Asian demographics also involve an ageing population. And older consumers have certain needs: notably health and financial services. These are well developed sectors in the Australian economy.
Australia’s experience in these areas means we are well placed to take advantage. The opportunities are there for those who want to take them.
Michael Blythe is the chief economist and managing
director of economics at the Commonwealth Bank of Australia.
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04-11-2015, 08:01 PM
(This post was last modified: 04-11-2015, 08:06 PM by greengiraffe.)
Services account for 70 per cent of Australia's gross domestic product and 80 per cent of jobs, versus mining with 10 per cent of GDP and just 2 per cent of jobs.
China is already Australia's largest market for its services exports, with China accounting for around $8 billion, or 14 per cent of services exports in 2014.
Australian tourism, education, agriculture - new export opportunities in China?
DateNovember 4, 2015 - 3:20PM
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Jamie Freed
Senior Reporter
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There's more to export than coal: A Tourism Australia promotion in a Shanghai shopping mall. Photo: Dave Tacon
Australia has a major opportunity to offer exports to China beyond its traditional role as a quarry. But it can only take advantage if it adopts the right policies for the more competitive services sectors, according to HSBC.
HSBC chief economist Australia and New Zealand Paul Bloxham believes that as China shifts its economy from an investment-led model to become more consumer-driven, there will be big opportunities for Australia to benefit in sectors like tourism, education and agriculture.
"The global perception of Australia is [that] Australia is just a big mine and that with resources prices having fallen and the commodities prices under pressure Australia is going to have a hard time," Mr Bloxham said after releasing a 40-page report on Australia's next opportunities in China on Wednesday.
"We are more optimistic. Australia is more than that. Australia is a big services economy...and there is a pick-up going on in the service exports space."
Services account for 70 per cent of Australia's gross domestic product and 80 per cent of jobs, versus mining with 10 per cent of GDP and just 2 per cent of jobs.
China is already Australia's largest market for its services exports, with China accounting for around $8 billion, or 14 per cent of services exports in 2014.
Mr Bloxham said it was important for Australia to take advantage of growing exports from services, now that commodities prices have fallen, although he acknowledged there would be challenges.
"Australia has a clear competitive advantage in producing resources and a less clear advantage in producing services and agricultural products," he said.
"We need to do more to improve our infrastructure, tax system, competition policy and education policies to improve our competitiveness and productivity."
Chinese visitors
The HSBC report said in the tourism sector, Australia's share of the outbound Chinese market should increase beyond the current 0.8 per cent in the coming years supported by rising middle class incomes, a lower Australian dollar and growing population links between the countries driving more Chinese to visit friends and relatives in Australia.
On Monday, the government forecaster Tourism Research Australia predicted the number of Chinese visitors to Australia would overtake New Zealanders to become our top market within the next five years.
HSBC noted Chinese holidaymakers were the biggest spenders per night of any nationality, but they only spent an average of nine nights in Australia compared with the average of 25 for all nationalities.
"Anything to encourage more tourism or longer stays is helpful," Mr Bloxham said. "It is something Australian policymakers need to be more focused on."
In education, international student enrolments had fallen when the Australian dollar was above parity with the US dollars, but numbers returned to their previous peak in the first half of 2015 driven by record numbers of Chinese students.
HSBC said the priority from a policy perspective should be to ensure universities had top reputations, as that was highly important in attracting Chinese students.
In the agricultural sector, Mr Bloxham said Chinese demand for meat and dairy products would continue to grow as its citizens became wealthier. But he said consolidation tended to make the agricultural sector more productive and more of it was needed in Australia, even though it was politically unpopular.
"Policies that don't discourage consolidation would be more helpful," he said. "Regulations are getting in the way of improving our competitiveness."
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The seven charts giving the RBA confidence
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/a/9/4/4/image.related.afrArticleLead.620x350.gkqh8i.png/1446555851373.jpg[/img]Seven graphs highlight the main reasons the bank's economists have become more optimistic in recent months.Louie Douvis
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by Jacob Greber
A new split has opened between how the Reserve Bank of Australia sees the future and the implied pessimism of financial markets and economists anticipating more official interest rate cuts.
Tuesday's non-event board meeting and the decidedly more positive commentary from Reserve Bank governor Glenn Stevens strongly suggests the bank doesn't see the need for further monetary policy stimulus.
Yet at the same time financial markets are still fully pricing in a rate cut in the first quarter of 2016.
Seven graphs, buried throughout more than 30 pages of economic snap-shots published by the Reserve Bank on Wednesday in its regular chart pack, highlight the main reasons the bank's economists have become more optimistic in recent months.
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By contrast, economists tipping another cut are effectively making a short-term bet that another disaster is about to strike China or the US.
While it's clear that the Reserve Bank's confidence is a long, long way from exuberance, the upgrade in sentiment at the central bank may be best characterised as an emerging sense of hope that the economy will slowly grind its way towards health over the next two years.
The first chart, based on National Australia Bank's regular business survey, shows conditions across the economy – whether it be wages, orders, capacity utilisation or the currency – are not that far away from being at record highs and certainly well above average.
PERHAPS YOU SHOULDN'T BE IN BUSINESS
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This is good news, from the Reserve Bank's point of view because it suggests companies have every reason to invest, hire and spend. If you can't make a buck now, perhaps you shouldn't be in business.
Closely related, are charts showing business and consumer confidence are very much hovering around historic averages.
This helps feed much to the Reserve Bank's "glass half-full" view of the economy. Households and businesses are a long way from negative or pessimistic territory. So why would they need additional interest rate cuts?
The third graph effectively answers the question thrown up by the previous two; will the fertile ground provided by current business conditions and healthy sentiment trigger fresh investment that offsets the drag caused by the fading resources boom.
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It shows capital spending across the non-mining sectors of the economy may be edging higher. While such capital spending will not replace the extraordinary level of mining investment of the past decade, non-mining dollars spent tend to produce more lasting jobs around the nation.
The fourth graph suggests this may already be happening. ANZ Bank's job advertisements have been rising for the best part of the past two years and show few signs of slowing.
Reserve Bank economists believe this is a key part of why the jobless rate hasn't continued rising from its current level of just above 6 per cent, despite gross domestic product growth grinding along at below trend.
Graph number five shows where the jobs are being created. Household and business services are the standouts, easily eclipsing mining and manufacturing.
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The last two graphs – rising export volumes and the falling Australian dollar – will help the national income story improve despite weakness in commodity prices.
Taken in aggregate, the seven graphs imply many of the preconditions are now in place for an upswing. A point the Reserve Bank has been making ever more frequently of late.
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Reserve Bank affirms easing bias, but no rush to cut rates
- JAMES GLYNN
- DOW JONES
- NOVEMBER 05, 2015 9:22AM
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RBA Governor Glenn Stevens says a rebalancing of the economy is underway. Source: AAP
[b]Reserve Bank Governor Glenn Stevens says if interest rates have to change again soon it will almost certainly need to be a cut, but he indicated that policy makers are in no rush to deliver lower rates just yet.[/b]
In a speech to academics in Melbourne, Mr Stevens added that recent increases in mortgage lending by major banks won’t force the RBA into cutting interest rates.
And while recent inflation is no impediment to the RBA cutting interest rates, Mr Stevens said a rebalancing of the economy was underway, adding that current interest rate settings were supporting that process.
“It would be good if the growth was a bit stronger, but nonetheless over the past year the non-mining side of the economy has generated respectable growth in employment,” he said
“The rebalancing is occurring. It isn’t as seamless as it would be in an ideal world, but we don’t live in such a world,” Mr Stevens added.
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Mr Stevens reinforced the central bank’s easing bias saying: “Were a change to monetary policy to be required in the near term, it would almost certainly be an easing, not a tightening.”
The RBA left interest rates on hold on Tuesday at a record low 2.0 per cent, dashing the forecasts of many economists that it would cut rates to bolster flagging growth.
Mr Stevens said after the meeting on Tuesday that low inflation provided scope for the RBA to cut again, but also told financial markets that he sees evidence of improvement in the economy.
Mr Stevens also brushed aside concerns that recent increases in mortgage interest rates would put pressure on the RBA to lower interest rates as confidence dropped as growth slowed.
The major banks announced increases to their variable mortgage interest rates last months, blaming regulator demands for the need to hold more capital as the trigger.
“While such an outcome is perhaps conceivable, given the starting point and all the above considerations, it seems to me a bit of a leap to draw that conclusion,” Mr Stevens said.
“At this point, then, my preliminary assessment is that the macroeconomic effect of these actions in themselves may not be large. It is one part of a much bigger and evolving landscape. Nonetheless, the Reserve Bank Board will keep this matter, and that broader landscape, under careful review,” he added.
Dow Jones
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Job ads climb for third month
- AAP
- NOVEMBER 09, 2015 11:54AM
[b]Australian job advertisements have risen for the third consecutive month, with overall economic activity expected to remain solid for at least the next year.[/b]
The number of job ads on the internet and in newspapers edged up 0.4 per cent in October, building on September’s 3.8 per cent gain. Job ads in the 12 months to October rose 12.1 per cent, seasonally adjusted figures from ANZ show.
ANZ chief economist Warren Hogan said non-mining industries were being supported by the falling Australian dollar, low interest rates and the housing boom.
“In particular, many services industries are experiencing relatively strong demand, and these industries are typically quite labour-intensive,” he said.
Mr Hogan said despite ongoing sharp falls in resources investment and commodity price declines, the overall economy was tracking well and is expected to remain reasonably solid over the next 12 to 18 months.
Labour market conditions should remain sound near term, with chances the jobless rate could decrease slightly.
“But the strength of support to labour-intensive sectors is likely to wane in the first half of 2016, resulting in a softening in jobs growth and no obvious inroads into unemployment,” he said. “Our view remains that this will ultimately prove too uncomfortable for the RBA and a little more monetary policy support will be provided by mid-2016.”
The Reserve Bank will meet in December to announce its final cash rate decision for 2015, after leaving rates on hold at the record low of two per cent last week.
Newspaper job ads jumped 3 per cent in October, but were down 15.3 per cent compared with a year ago.
Internet job ads rose 0.3 per cent in the month and were 12.9 per cent higher over the year.
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China’s Singles Day shopping frenzy clears Aussie shelves
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Clare Matthews, founder of the Sydney-based VitaMan company, in Hong Kong for the sales festival. Picture: Michael Perini Source: News Corp Australia
[b]The world’s biggest retail event, China’s Singles Day, has reaped record-busting sales for participating Australian brands, with some products selling out before the 24-hour shopping frenzy officially kicked off.[/b]
Grocery wholesaler Metcash sold out of several top-selling lines within minutes of the sale’s televised launch at 12am yesterday, having opened its Chinese flagship online store less than a month ago to sell Australian pantry staples such as Weet-Bix, Tim Tams and honey.
Australia Post’s store also reported strong activity, with shoppers snapping up bargains on health supplements, wine, cosmetics and milk products, including infant formula, which has been selling fast in local supermarkets in recent weeks.
Previously unheard of outside of China, Singles Day, which falls on November 11 each year, dates back to the mid-1990s when a group of university students bought themselves gifts to celebrate their single status.
The unofficial holiday was transformed into a day-long shopping extravaganza six years ago when e-commerce giant Alibaba jumped on the bandwagon by offering steep discounts on popular goods sold on its website.
Last year, Singles Day, which is marketed as the 11.11 Global Shopping Festival, netted the group 57 billion yuan ($12.7bn) in sales. That record was smashed about midday yesterday.
CarePlus Australia, which sells Australian-made food and healthcare products on Alibaba’s Tmall Global site, was also on track for a record result, having racked up its previous year’s seven million yuan in sales by 4pm. With the after-dinner shopping rush still to come, CarePlus managing director Patrick Liu said he was pleased with the result so far.
“We have already sold out of many lines,” Mr Liu told The Australian. “Actually there is some very interesting data coming through, and we are seeing that it’s not only the products that we have been promoting that have been selling well.
“That says to us that Chinese consumers are building up a strong trust for our brand, spending time browsing our site, and for Australia-made products overall.”
One of the store’s bestsellers was NatureVale Outback Organic Honey, which was promoted in a televised pre-sale show that also featured Hollywood celebrities Kevin Spacey and Daniel Craig.
Within an hour of a video featuring Australian beekeeper Shaun Sykes screening, more than 2000 jars of honey were ordered from the CarePlus site.
Healthcare giant Blackmores, which has its own Tmall Global site and whose products are sold via several other online retailers, experienced a rush on many of its vitamins and supplements, with several lines selling out a week in advance after the company was chosen by Alibaba to take part in a pre-event marketing push.
Raymond Chan, the company’s deputy managing director for Asia, said the Singles Day campaign had been a massive undertaking, with the promotional period having kicked off last month.
“As we establish the Blackmores brand in China, our presence in the Double 11 festival is an important milestone to build our profile with consumers and grow sales,” Mr Chan said.
Clare Matthews, founder of the Sydney-based VitaMan brand that counts soccer star Tim Cahill as an investor, was yesterday participating in the Singles Day sale for the first time.
She said China, with its emerging middle class driving a boom in consumption, was a huge opportunity for the company.
“Chinese men are very interested in skincare,” Ms Matthews said.
“They want to look masculine and for them that means a polished and professional look, with great skin and hair.
“There’s also a large population of men over there who are desperate to find a partner and they’re very into image.”
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Jobless rate falls to 5.9pc in October
David Rogers
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Markets Editor
Sydney
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“Heroes of the economy.” Scott Morrison lauds newly-employed workers and their bosses. Source: AAP
[b]Australia’s official unemployment rate dropped to 5.9 per cent in October as employment surged, beating economists’ expectations by a wide margin.[/b]
The figure was well below the 6.2 per cent figure in September, official data from the Australian Bureau of Statistics showed.
Markets had forecast no change in unemployment.
Unemployment was last at 5.9 per cent in May and has not been below that level since a reading of 5.8 per cent in November 2013.
The number of people employed overall soared by 58,600 in the month, well above market expectations of a 15,000 rise. The number of unemployed people shrank by 33,400.
Fulltime employment rose jumped by 40,000 and part-time jobs rose 18,600.
The Australian dollar rallied from around US70.65 cents to US71.31c after the data was released, as the market pared back expectations of another cut in official interest rates.
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The participation rate, which refers to the number of people either employed or are actively looking for work, rose to 65.0 per cent from 64.9 per cent in September. The rate is still lower than the 65.1 per cent level in July, when it was at its highest point for two-and-a-half years.
The increase in fulltime employment was led by a robust recovery in eastern states such as New South Wales and Victoria, which are less exposed to a slowdown in mining investment than other states like Western Australia.
October’s increase in employment was also driven by a strong rise in fulltime employed males, up 33,500, while female part-time employment rose 24,000.
The trend rate for unemployment, which strips out month-to-month volatility, held steady at 6.1 per cent in October, after it was revised lower from the month prior.
On a trend basis, Australia’s employment has increased by 260,500 over the last year, which has led to an increased employment-to-population ratio of 61.1 per cent in October, up from 60.6 per cent a year ago, the ABS said.
Australia’s unemployment rate has been somewhat elevated since the end of the mining boom, but hasn’t risen as much this year as the Reserve Bank of Australiapreviously warned.
The central bank has become increasingly confident about the outlook for the jobs market and recently revised down its forecast for the unemployment rate to a range of 6.0 to 6.25 per cent for the next year, before declining gradually by the end of 2017.
In New South Wales, the jobless rate fell to 5.5pc in October from 5.8pc in September. In Victoria, it decreased to 5.6pc from 6.3pc. In Western Australia, the unemployment rate rose to 6.4pc from 6.1pc.
Treasurer Scott Morrison commended the newly-employed workers and their bosses as “the heroes of the economy”.
“The government’s plan, our platform, is all about securing stronger growth and more jobs in our economy and to see those results is particularly pleasing for those who are benefiting from that employment,” Mr Morrison said in Canberra.
“The best thing that we can achieve together as a country, is to give people the opportunity of employment because when you’re in a job, you have greater control over your own future, the choices you want to make, the support that you want to provide as a family.”
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Can cabbages to Korea cover for coal’s comedown?
Rowan Callick
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Asia Pacific Editor
Melbourne
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Source: TheAustralian
[b]The South Korea story offers a salutary warning against expectations that Australia’s bright new free-trade agreements will turn around our slumping export figures any time soon.[/b]
But it also showcases the fearlessness of Australian exporters — whose sales of cabbages and cauliflowers to the famous home of kimchi soared by 7944 per cent in the first half of this year.
Early data from the South Korea FTA, the first of the succession of deals concluded by Trade Minister Andrew Robb and his team of trade negotiators, shows that while producers have rapidly seized their new opportunities, especially in agribusiness, the bottom line for Australian exports remains in decline. For the value of iron ore and coal, especially, within the trade profile with South Korea — half the value of all exports — is such that it will take years for other sales to bulk up sufficiently to compensate.
The same story applies to our other big export markets except the US. Those commodities accounted last year for 42 per cent of our exports to Japan, 58 per cent to India, and an astounding 65 per cent of our sales to China. In the first half of this year, iron ore receipts from sales to South Korea were 34 per cent down, to $2.25 billion — a fall of $1.2bn.
The good news is that the big rises in exports following the South Korea FTA, representing the most impressive increases across the board, comprise $1bn.
Some of the agricultural successes are attributable not just to the FTA but at least as much to a shift in South Korea’s import risk assessments, essentially the quarantine process, which formerly delayed accepting products for years.
This provides a huge boost, which surely is also driving a rise in jobs, especially in regional Australia.
Yet those combined revenues — not just the levels of increase but the entire sales — still fall $200m short of the drop in value of Australia’s iron ore exports alone to South Korea in the same six months.
For South Korea, car sales rose about 20 per cent in the first half-year of the FTA, providing a strong proof of the value of such deals to an electorate that remains only partially convinced of their value even though the country is the leading FTA member in the region — hence its holding back, so far, from the Trans-Pacific Partnership.
South Korea has signed and ratified 12 FTAs, including with the US and the EU. It has signed four more that are awaiting ratification, including with Japan and New Zealand. A further seven are under negotiation.
Investment provides a further challenge, and opportunity.
The US Commerce Department says “the Korean government’s attitude towards foreign direct investment is positive, and senior policymakers realise the value of foreign direct investment”.
South Korea attracted $7.6bn FDI in 2010, but this more than doubled by last year, when it received $16bn.
But the department adds, in a cautionary note, that “foreign investment in South Korea is still at times hindered by insufficient regulatory transparency, including inconsistent and sudden changes in interpretation of regulations, as well as underdeveloped corporate governance, high labour costs, an inflexible labour system, and significant economic domination by large conglomerates, or chaebol”.
The finance sector presents challenges for investors because of the compliance costs. An average of about 1940 reports are required annually compared with just 80 in Australia.
Nevertheless, during the past two years Australia-based, non-bank finance house the Pepper Group has established a successful business there focusing on mortgage lending and auto parts. The ANZ bank is there, substantially for trade finance, as is Westpac subsidiary Hastings, and Challenger is looking at the market.
Macquarie has scored outstanding successes, where it is now the country’s leading foreign asset owner — in a country whose pension funds are huge, with $1.6 trillion under management.
The government’s sovereign wealth fund, the Korea Investment Corporation, is starting to consider a substantial foray into Australia.
Steelmaker Posco — the single biggest customer for any Australian product, which buys massive amounts of iron ore and metallurgical coal — has shed four underperforming assets in Australia but retains 10 substantial investments, including 12.5 per cent of Gina Rinehart’s vast new Roy Hill mine. Posco is focusing on its high-quality steel to differentiate it from cheaper Chinese competitors washing through the market.
The gas relationship with South Korea also is intensifying.
Samsung Heavy Industries is building the world’s largest floating object for Shell to use at the Browse basin, off Broome — 500m long and weighing 600,000 tonnes.
Woodside is drilling for gas and oil off the Korean coast. And South Korean company Kogas is a 15 per cent partner in the Gladstone liquefied natural gas plant in Queensland, which is just starting to produce.
The hardware connections between South Korea and Australia remain stronger than the softer service sector collaborations where the FTA does open up fresh opportunities.
They need to be pursued. And South Korea is seeking to lure greater Australian involvement by stapling on the many other free-trade gates it opens. One area of particularly strong possibility is to persuade Korean investors and industrialists to use Australia as a manufacturing base for food exports to China.
Located between the world’s second and third economies, South Korea presents itself as the gateway to almost everywhere. Standard & Poor’s chief Asia-Pacific economist Paul Gruenwald views it as presenting the best prospects in the region, among the countries that have already reached a level of economic maturity, to maintain steady growth.
For most Australian businesses it’s a new frontier whose potential is palpable, from the accompanying list of soaring sales, providing a platform to build on to escape the consequences of souring mineral sales.
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Slow wages growth here to stay
- GARRY SHILSON-JOSLING
- AAP
- NOVEMBER 18, 2015 3:35PM
[b]Wages growth has slowed to a crawl despite a pick-up in jobs growth, an unusual state of affairs that could surprise economists by persisting for longer than expected.[/b]
Wage rates in the September quarter were just 2.3 per cent higher than a year earlier, according to the Australian Bureau of Statistics today.
That was the slowest pace since the bureau first published this measure in 1997.
Wage rates may have grown more slowly for brief intervals before that but, judging by average income data from the national accounts, that seems unlikely to have happened any time since at least the 1960s.
But employment growth has accelerated, leading to the understandable conclusion that as employers compete for a dwindling number of available workers, wages growth will follow suit with the usual delay of six months or so.
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But there are reasons to suspect wages growth may stay dormant for longer.
While jobs growth over the past year was strong, with 315,000 added to the ranks of the employed, it took the preceding three and a quarter years to generate the same rise.
The result of that earlier period of stagnation is an unemployment rate that, even after a drop to 5.9 per cent in October, is still well above the 5.1 per cent average for the decade before this year.
The difference works out to an extra 100,000 or so unemployed and they will act as a brake on wages inflation despite the faster pace of employment growth.
And then there are longer-run changes in the nature of the jobs market.
In terms of their impact on total wages growth, unions are a spent force.
Casual and short-term employment is more common than it was, employers are more willing to jettison workers to cut costs and workers are more willing to stay put rather than seek out greener pastures.
And on top of all that there’s the Reserve Bank of Australia, which gets the jitters any time wages growth threatens to pick up.
Over 22 years since the RBA’s inflation target was unveiled, workers have become used to the idea that wages growth only 2 per cent or so faster than the record low just seen would be hammered down with a series of interest rate rises.
In other words, the RBA has spent the past two decades ramming home the message that workers shouldn’t expect hefty pay rises, and it has succeeded.
This all adds up to less bargaining power for wage earners and a lack of confidence that it could be used with effect.
Combined with above-normal unemployment — what the RBA would call “excess capacity” — that points to a more extended period of slow wages growth than recent strong jobs growth might suggest.
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