Introduction
#Australia #GDP #Recession
Economists are predicting another reduction in Australia GDP growth this quarter. Let's see if the RBA forecasts are incorrect once again?
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Video
Australia's GDP looks to take another hit let's have a look.
Hello.
Everyone I'm foreign hyzer and welcome to another episode of hisis says, I've got my ever-faithful Stein of coffee power me through the day and I thought we'd have a look at this article from ABC News about Australia's GDP set to take another hit let's have a look first Before.
We jump into the article just about what our GDP is sitting at so GDP stands for gross domestic product.
And the website I brought up here is trading economics.
It is a very useful website.
If you want to find out any stats or information about any country, I quite like it.
So the gross domestic product in Australia was worth one thousand four hundred.
And thirty two point two billion u.s.
dollars in 2018, the gross domestic product value in Australia represents two point, three, one percent of the world economy.
Okay.
So just think about that guys, we're two point, three, one percent of the world economy, I think, we're doing pretty good for a little colony on the edge of civilization, GDP in Australia averaged, four hundred and thirty five point one, two, US billion from 1960 until 2018 reaching an all-time high of one thousand five hundred.
And seventy six point two US dollar billion in 2013 and a record low of eighteen point, six billion in 1960.
So you can see here with the figure from 2018 we're in 1432 and let's.
Go five years.
Okay, ten years let's, see what the max data is so that's.
The max data you can see we shot, you know up.
And it tends to shoot down from I wonder.
What year that is, mmm, except 2008, it's kind of funny with the scales.
Probably in a half year in half one thing.
That's of concern is when we're looking at these figures when we're looking at these figures.
And this is a quote from Matt berry.
Now in 2016, 67% of Australia's GDP growth.
So the growth came from the cities of Sydney and Melbourne where both state and federal government has done everything.
They can to fuel a runaway housing market.
The small area from Sydney CBD to Macquarie Park is in the middle of an apartment building frenzy contributed 24% of the country's entire GDP growth in 2016.
And this is a quote from an article that Matt Barry wrote and I suggest you have a look at it.
I've got the link for down the bottom.
There it's quite concerning.
Just how much of the GDP growth in 2016 came from a residential development, boom, an apartment.
So keep that in mind when we're looking at this article, because even though previously today, I spoke about the, you know, auction hovels that are going for millions of dollars in Sydney, where essentially people are buying land and junk.
So yes, so GDP to take another step down, but how low will it go? You reckon we can hit the 1960s level, again, I say that half jokingly half scared.
Let us know what you think guys to para fight to paraphrase rampaging, Roy, Slevin and HG Nielsen who in turn paraphrased Mark, Twain on whiskey.
Sometimes too much data is barely enough this week.
The economy eco economic pointed heads will be swimming in a torrent of numbers climaxing with Wednesday's, release of the June quarter national accounts after poor construction and investment figures last week, any hope of a reasonable GDP growth.
Number is pinned on second quarter company, profits and Tuesday's net exports and government spending data.
What do you reckon guys? What do you think I'm? Not confident I, not come to maybe I'm reading too much news ahead of this week's GDP partials.
The consensus view is economic growth of just 0.5% over the quarter.
One point four percent over the year that would put economic growth in line with the GFC target of one point.
Four percent recorded in the third quarter of 20 2009, bugger-all the GFC is a trough, not target so we're replicating.
The previous global financial crisis.
Are, we remember, we haven't gotten recession yet we're in a per capita recession.
But not an actual recession it's, quite a step down from the already insipid 1.8 percent in the previous quarter and well below the RBA's forecast.
So if the RBA can't forecast, the economy accurately and they're using monetary money, modern monetary policy to control this I mean.
Why does anyone have any confidence in any of the forecasting that they put forward or any of the decisions they're making seriously.
However, it might also be optimistic.
Okay.
Anz.
Not rat wrote, not renowned as the gloomiest house in on the street can only come up with 0.2% over the quarter, which would see annual growth dip to one point.
One percent.
Pulling to one side, the fourth quarter of 2000, where GDP growth was hammered by the introduction of the GST 1.1 percent? Will be the lowest reading since the early 90s? So here you've got year on year and quarter on quarter growth so here's a year on year there you go.
Remember that the recession Australia had to have in the nineties so where are we trending? Guys? Where is it trending so remarkable collapse? Three months ago, I am said was in step with the 0.5% club.
The collapse in GDP is remarkable and it's felicity Emmet said, no, how is it remarkable it's happened in the past it's happened in the past? I mean, look there you go.
Mm, oh, why am I riding him with blue on black? Yeah, I'll.
Do green.
Yeah, yeah.
Yeah.
Yeah.
There you have.
So we had a little bump there so was that we need two quarters.
So that was technically recession there two quarters.
So in quarter, two last year, GDP growth was running above three percent business conditions were only just off the all-time highs and growth and consumer spending was accelerating consumer spending housing construction and business.
Investment have all slowed more sharply than was anticipated.
And we anticipated.
Well, yes, perhaps that's an issue with your modelling.
We expected this is due to a combination of disappointing household, income growth, non-existent household, income, growth, it's, actually gone negative and I will link to that.
Video I'm just going to write down the time here that I did where our living standard and our disposable income is declining guys falling house prices, the wealth effect and I'm certainly created by the global economic backdrop, Trump tweets.
Well, you can't model that in that's, the problem when anyone makes these predictions, you can't model in the unknown.
So with regards to the environmental concerns that Greta and her followers, have they can't model in a disaster or an or just a bunch of volcano erupting, and that can have tremendous impacts on everything.
You can kind of negate everything that they're doing.
So.
And you've got to remember all all these here, particularly from the climate change radicals that want to have drastic economic changes that will have impact on cost of living impact on quality of life.
Just look at the energy cost for people in South Australia.
Okay, guys, you know, nothing is free.
Nothing gets free, I know, I know, the Socialists want to think everything's free in the government is gives it to you.
But someone else always has to pay for one environmental policy.
Here.
Someone else is going to pay for it with a decline in the quality of life over there it's just that simple it's, just that simple.
There is balance you'll, get it and it's suffering.
I need a coffee.
Okay in keeping with the cycle of these things, the RBI board meets the day before the GDP numbers drops.
The bedding is rates will will be on hold at 1%, CoreLogic publishes, the August house price index on Monday with strong auction results in Sydney and Melbourne forecasters see prices rise above 1 percent.
Nationally July, retail, sales Tuesday will be keenly watched.
They are tipped to have increased, but it's slower paced than June as the full impact of the tax.
And two rate cuts will not have flown through to consumers pockets by them really really well.
We'll see we will see what happens.
The July trade balance should be.
Another booming surplus up about 8 billion it's been like that on the trade front for a while so much.
So that the net trade surplus of above 20 billion in the June quarter is likely to have more than offset the net income deficit and delivered the first quarterly current account surplus since 1975, really, really.
Let me have a look at that will bring up the observatory of economic complexity.
And we can see here our trade balance I'm, just gonna bring it to full screen.
So I can look at it over here 2015.
And then we have a slight trade deficit.
There 2007, because you know, red is the exports blue is the import or no exports readily or imports blue or imports, no, no I'm, getting a confused lose what we're exporting as of 2017 Australia had a positive trade balance of 44 billion and net exports as compared to their trade balance in 1995, where they had a negative trade balance of 1.17 billion in net exports.
So 95 we had a negative down here since whatever the rate is above 99.
We had between 2003 to 2007 and just recently 2015.
So, okay, sure more than okay.
So we'll, keep you on, but why so miserable on some estimates, including the Bank of England, global interest rates have never been lower.
The BOE chart, charted the rise and fall of rates over 5,000 years.
So it's a fair period of, oh, no.
They didn't.
They did not over 5,000 haven't been doing it for 5,000 years.
They just looked back at different ones and some banks, didn't even exist.
Elam.
What the hell are we talking about here? What 3,000 years beasts? I mean, come on guys, you didn't have monitor you didn't have anyway.
Anyway, both long and short rates have sunk lower since the chart below was composed last year.
The only time when rates were nearly so low was during the global depression of the 1930s, a period of chronic economic misery.
I mean, yeah, 5000 years.
Yeah, they've got interest rates from from then from 3000 BC, I mean, come on guy who that what the hell are we kidding here, you're comparing a fiat current currency system with, you know, gold and silver based systems back here, sure, well, maybe they need to look at that.
Maybe they look at what about that let's bring back some of the debt to Belize that they used to have in ancient civilizations, ancient times there's a lot.
We can learn from the ancients guys.
So the misery index this.
This will be cheery, I'm, definitely having a coffee.
So how does the current historic era of low rates line up in terms of economic misery on an objective economic measure there's, an argument that things aren't so gloomy in the 1970s, US economist, Arthur Okun developed a misery index to study the twin evils of high inflation and high unemployment that were ravaging developed economies at the time at its simplest.
The misery index is the sum of the unemployment rate.
And the inflation rate, the higher index, the worse, the economic fundamentals and therefore the public welfare currently the misery index across the ten biggest economies is in the basem*nt.
Pardon me driven down by very low levels of both inflation and unemployment.
Oh, that's.
Good Bank of America, Merrill, Lynch, currency, strategist at an Josias bamba' Kiedis says, looking at the misery index current fundamentals.
Do not justify the aggressive rate cuts from the g10 central banks.
His preferred measurement measure of economic misery is a bit more advanced than the old unemployment.
Plus inflation method factoring in existing interest rate settings as well as economic growth, compared to long-term trends, although global growth has weakened an inflation is below the target in most g10 economies.
Monetary policies are already loose.
Unemployment at a historical low level and wages are increasing in most cases, not in Australia.
The Fed has been at the forefront of the latest round of cuts, despite US gdp growth being relatively solid.
And certainly in line with expectations.
Unemployment holding at 50 allows an inflation being around the target level, or even above it.
In some measures global risks have increased.
But monetary policy may not be the best way to address them in some cases.
He argued.
Well, yes, dr.
bamboo Cardus view is that the risks that monetary policy is trying to address a primarily the result of policy failures in other areas, which more central banking easing is unlikely to fix.
I think that's an accurate point there.
I mean, they really can't do anything about it.
Can they such risks include trade tensions between the US and a number of other countries, the limitation of Germans export-driven growth model.
And the failure of the country to implement fiscal is stimulus political risks and unsustainable fiscal policies in Italy.
And the risk of a No Deal breaks.
It central bank easing may actually allow such policy mistakes to continue or even worse than he want.
If there is one, if there is one of g10 central bank, which has room to cut and still have an impact.
It may be the RBA really, really with only 1% left on the boa ml misery index.
Only the Canadian currency is in a more miserable state than Australia.
The index is load for all g10.
No matter what dr.
van vakidis said, it is slightly higher for AUD because of the relatively higher unemployment.
But also because of the policy rate being 1%, instead of its or a percent or even negative in other countries, you know what I'd like to invent a new misery index and rather than combining unemployment I would like to add underemployment to it that would be interesting I think that would be a smarter way to look at it, particularly with just the current gig economy that we have, or the fact that people are being employed by third party, contracting firms so markets, perhaps having exhausted themselves after running in and out of the exits in response to the oscillating nature of White House communications on trade Wall Street traders took a breather on Friday and went nowhere.
The asx200 having gained zero point I saw at one point, five percent or twenty eight billion in the interest of balancing the scary experience headlines in recent times also looks set to take a breather to start the week.
So Friday's, mom, my cousin Friday closed.
Yeah.
Well ASX was up 1.5.
The dollar was at 67 point for you a sense.
Dow Jones was 0.2.
Euro footsie was up.
0.3, modernise, Brent.
Oil was negative 1.1.
Gold was down.
Why didn't have silver on here? Well, not everyone's a silver bug that gets Friday's rally helped drag the ASX into the black over the week.
But it still dropped 3% over a month dominated by the release of corporate Australia's, full-year results and rising unease of global prospects, it's, difficult to apportion blame.
But neither theme was overly positive.
So we've got the self reporting season, depending on your taste.
The reporting season was either lung quench like a bit soft, rich, Reds egg, partly good, a party I need to look I've.
Just learned yesterday.
What spirit animal means I'd, frankly, think it means a lot of the Kenzi ins in Chicago school and modern monetary it's need to learn the Austrian school.
If they seem to think it's all voodoo magic people's, you know, opinions and emotions in economic decisions, just shows, you just shows you the fundamental flaws in their methodology.
So Morgan, Stanley, strategist, Chris, Nichol said, the result, season coughed up one of the weaker growth outcomes for some time and looking ahead, the prospects were more drought, downdraft and uplift for 2020.
Morgan Stanley's key observations included earnings beats two misses were below expectations revenue growth was below expectations with 10 percent of companies exceeding forecasts and 18 percent fallen short healthcare, industrials, telecom and Infotech on average performed strongly in terms of market reaction or miners and consumer staples disappointed the most of companies that provided earnings guidance only 18% provided up grades for next year, compared to 39% going down of the ego.
Dividends were broadly in line with estimates, although - disappointment and financials gave more positive surprises.
The current stimulus has certainly subsidized some of the downsides from a domestic perspective, but to give a credible recovery in motion.
We continue to call for additional stimulus.
And not just rate cuts.
Mr.
Nicholl said, here we go, I know, all I know has just suffered its worst month on record with prices dropping above about 30 percent.
Okay, we can see that in the chart here, that's a big concern, considering how much of our exports are iron ore in Australia.
There are a number of factors, increasing suppliers, Brazil reenters, the market falling profitability in the Chinese steel mills and concerned about the slowing global economy.
Iosef is the biggest lost veteran.
Ubs analyst, Glyn Laco*ck said that despite the unprecedented volatility this year prices may be stabilizing record, Chinese style, steel output in the first half of the year has been principal in keeping prices at elevated levels and fundamentals tight is it topping out, though, potentially dr.
law, God's law, Cox said, official output in July slowed while traders steel imagery has lifted and rebar construction steel and hot, rolled coil manufacturing steel prices.
Have slipped.
Trade war.
Headwinds have dampened short-term sentiment.
But we maintain that any prospective Chinese stimulus will favour bulk such as iron ore and call over base.
Metals.
Ubs house view is iron ore ore is oversold.
And its fourth quarter price forecast at u.s.
$90 per ton.
Well above the current spot price of 82 or 85 per ton, really let me just jump to trading economics to see what the current price is right now and we'll jump to commodities iron ore at the time that I'm reading this is sitting at a 6.5 that's going up a little bit there.
You go.
Okay.
Oh well, it's going up.
A tiny fraction going to 2020.
Doctor, law, colic says, the market will come back into balance.
And the price will slide down to the UVs, long-term target of 55, a ton, that's that's, a big drop that's.
A fair trek down, but still offering a pretty hefty margin for the miners or production costs of around $15 a ton.
So, and then we've got the calendar of events that are happening.
And at sea house prices on Monday, profit, inventories manufacturing surveys Tuesday.
You've got the RBA decision.
Public demand and exports current accounts and retail sales Wednesday is the GDP Thursday, the trade balance and Friday deconstruction survey.
So guys that's kind of an overview of the gross domestic product and the economy here in Australia.
How do you think it'll go in equally positive? Yeah, do you think that a lot of the reaction that we're getting from analysts is because they're too young to remember the last time we were in recession, it's kind of what I'm thinking anyway, guys, thanks for watching like share and subscribe and I'll.
See you next time.
