23Jun

Craig James – the Australian economy – where 2 now?

Craig James – CBA Commsec’s Economist Presented at the CBA Innovation Forum for SME’s on Monday 17 June 2013. A passionate speaker, with a sense of humour!  

The state of play 

  • Business is currently quiet, and people are waiting for the election.
  • Why the wait ?– the reality is that the government is run by bureaucrat’s, and  financial decisions (interest rates etc) by the reserve bank.
  • Massive growth going to come from India and China – we are well placed. 
  • Its not all about mining… services, education, tourism, health and infrastructure will continue to drive the economy.

Why are we glum?

  •  Election
  •  Bad perceived Political Leadership
  • We are going through “stuff”  – changing from internet and mobile – changing way we shop – retailers are changing the way we are buying
  •  High $ and Australia being expensive compared to rest of world – people are going overseas on holidays – tourism has been suffering
  • People have not been lending/ borrowing as much – banking will possibly not be as profitable as in the past

In Australia we are doing ok

We are one of 11 countries with a AAA rating
5.5% unemployment
2.5% inflation

State of our State Economies

Strength of states compared by 8 indicators including retail/infrastructure/ Mining/agriculture

  • Mining – WA/NT – growth
  • Manufacturing/Finance/ Services – ACT NSW Vic – maintaining
  • Agriculture – SA and Tasmania – going backwards 

What about NSW?

  • NSW growing faster than in past 12 years
  • Unemployment different in different parts
    • Inner West 3.5
    • Northwest 6%
    • Centrals West 6%

Asset Classes in Australia

Property

Home process are doing ok. Sydney  and WA increasing by 4% against an average of 2%


Sharemarket

  • Volume deceasing
  • USA growing
  • A$ profits increasing
  •  Returns matter
  •  Fully franked dividends – bode well for increase in shareemarket
  • People and funds are sitting on a lot of cash , waiting for things to stabilize
  • Interest rates low
  • A$ – now 95c – expected to go to 85c

Forecast

  • Aussie economy positioned well for growth on a number of levels
  •  Confidence in economy will change from negative to positive (perception)
  •  Agriculture – prime position to take place with
  •  Growth will come from building our infrastructure
  •  Increase in Services – growth of tourism and services – with a view to increased exports
  • Growth of China and India – (on our doorstep) see Hans Rosling’s video on (a brilliant video of the rise of China and India). http://bsivc.blogspot.com.au/2013/06/hans-rowling-rise-of-india-and-chinas.html
  • USA is coming off low base of the GFC – Ben Bernancke looking to stop the growth – will possibly increase interest rates, USA$ will increase –

The Numbers

Economy                  2- 3%
Inflation                    2- 3%
Unemployment         5- 6%
Res Property             2- 3%
Sharemarket              5,200
A$                             92 – 95c
Once the election is out of the road – nothing will be holding us back….. bottom line – we are bullish!!

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