Qld: hot or not? My presentation at the Brisbane Club on Wednesday 6 February

It was a great day to give an economic outlook presentation, with RBA Governor Philip Lowe announcing a change in monetary policy guidance, from saying the next rate movement would most likely be up, to saying the cash rate may well go down rather than up.  I welcomed the announcement because, in addition to it being sensible given the discouraging indicators we’ve seen lately, it was consistent with the views I was expressing in my presentation. Thanks to Ross Elliott from APP Property and Infrastructure Specialists for hosting the seminar at the Brisbane Club I spoke at, along with Luke Dixon the head of Real Estate Research at AMP Capital. Ross seemed happy neither Luke nor I were “drinking the Kool-Aid”, and we were both measured and realistic about the economic outlook. You can download my presentation at this link:

Qld hot or not presentation 6 February 19

I started off by referring to recent disappointing indicators including the Suncorp-CCIQ Pulse business survey (see my post on the data) and the December 2018 retail trade data published yesterday by the ABS (see chart below). I also covered more positive indicators including international visitor expenditure and the coal price, now back over US $200/tonne for coking coal (see slide 8 in the presentation; thanks to QRC for the latest data).

Rplot_retail_monthly

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Breakfast with Keith De Lacy & me to discuss Beautiful One Day, Broke the Next

Former Queensland Treasurer Keith De Lacy AM and I will speak at an upcoming breakfast in West End, Brisbane on Wednesday 27 February at the Connor Court Book Room regarding my recently published book Beautiful One Day, Broke the Next: Queensland’s Public Finances since Sir Joh and Sir Leo. I’m very much looking forward to hearing more of Keith’s insights into Queensland’s fiscal history and our current situation. Keith made some great contributions to Queensland during his time as Goss government Treasurer (1989-1996), overseeing generally strict budget management and the corporatisation of government-owned businesses, among other achievements. Since that time, Keith has had a distinguished business career and is a former President of the Queensland division of the AICD.

If you’re interested in Queensland state politics or concerned about our current state finances, I expect you would get a lot out of this event in addition to an excellent cooked breakfast from one of West End’s fine cafes. You can book for the breakfast via Eventbrite:

Breakfast with Keith De Lacy and Gene Tunny

cover

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Thankfully Hayne recommendations are fairly benign – respected commentators have started panicking over economy

Many economists and finance commentators were concerned that the recommendations of the Hayne Royal Commission into banking would lead to further restrictions on credit availability with adverse consequences for the economy. Thankfully the recommendations seem pretty benign, nothing that the industry can’t adapt to, although many mortgage brokers may suffer a significant drop in earnings owning to the recommended removal of trailing commissions. I noticed that Shane Oliver from AMP is being quoted in the AFR that he doesn’t expect the Royal Commission recommendations would lead to any further restrictions on credit availability. We can be thankful for that given the continuing decline in residential building approvals in December 2018 (e.g. see plots below based on the latest ABS estimates released today), which has alarmed at least one highly regarded commentator, Pete Wargent, who in his post today Building approvals point to recession? astutely observed:

No way to dress this up, with the leading indicators of both money growth and building approvals pointing towards weaker or even recessionary conditions over the period ahead (Australia can often dodge technical recessions due to its population growth, but let’s face it, these are quite dire indicators).

Regarding the Royal Commission, you may be interested in my colleague Nick Behrens’s observations on its relevance to small businesses:

QEAS response to the Financial Services Royal Commission

I’d also recommend you listen to CCIQ spokesman Dan Petrie’s insightful and entertaining remarks to Steve Austin on his 612 ABC Brisbane Drive program this afternoon (from around 1:10:35). Dan notes how hard it is for small businesses to get finance from banks unless business owners mortgage their own properties. He suggests, with his tongue only partly in his cheek, that it may be easier and cheaper for many small businesses to get finance from Hong Kong than in Australia. Excellent commentary Dan.

Rplot_residential_approvals_Dec18

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Suncorp-CCIQ Pulse Survey confirms decline in business confidence

Pulse_Dec18

In my wrap up of last week (see my previous post) I noted that I expected the latest Suncorp-CCIQ Pulse Survey would be discouraging and would counter the optimism of Deloitte Access Economics’s recent business outlook which was cited approvingly by Deputy Premier-Treasurer Jackie Trad. The survey results (see chart above) have been released today and they are generally as I expected. The CCIQ media release reads:

Political and economic uncertainty has seen business confidence in Queensland fall to a four year low in the December quarter of the latest Suncorp-CCIQ Business Pulse Survey.

The Chamber of Commerce and Industry Queensland (CCIQ) notes that sentiment around Australia’s economic conditions had declined as Christmas sales fell short of forecasts.

Economic sentiment in Queensland dropped 5.1 points from the September quarter to a level of 40.7 on a seasonally adjusted basis.  There was a further decline in confidence in the national economic outlook, which dropped 6.6 points to a level of 42.4.

These figures don’t necessarily change my outlook for modest growth in the state economy over 2019, as the figures are not unexpected, and at least tourism and mining are bright spots, and health and social assistance services will continue to expand, particularly with the NDIS roll out. See my posts:

Upcoming QMCA breakfast presentation on the Qld economic outlook

Qld Infrastructure pipeline not gushing

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QEW video – the week that was: 27-Jan to 2-Feb-19

First, my thoughts and prayers are with the people of Townsville and North Queensland in this challenging time of heavy rain and flooding. Second, below is a slide show (with commentary) I’ve recorded on the economic news of the last week, including Deloitte Access Economics’s optimistic economic outlook for Queensland, strong US jobs growth, and continuing low inflation in Australia which is contributing to speculation about an interest rate reduction later this year.

You can book for the upcoming Queensland Major Contractors Association breakfast I mention in the video here:

QMCA February breakfast event

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Lessons from the GFC symposium at Griffith’s Ship Inn Function Centre on 7 March

In this final week of January ten years ago, the fifth floor of the Treasury Building in Canberra was a hive of activity. Hard-working Treasury officials, including me, were putting together the 2009 Updated Economic and Fiscal Outlook in which the massive $42 billion second stimulus package, the Nation Building and Jobs Plan, was revealed. The UEFO was released the following week, on the 3rd of February 2009.

As I once explained in an interview with 612 ABC Brisbane’s Steve Austin, the rapid deterioration in Australia’s economic outlook in the December quarter of 2008 meant an updated budget outlook was necessary and needed to be prepared urgently. As a practical matter, the government urgently needed to start borrowing large sums of money to meet its massive funding requirement. It needed an updated economic and fiscal outlook to justify all the additional borrowing. And it would have needed this even if it didn’t enact a huge economic stimulus package. The deterioration in forecast revenues would have driven the budget into deficit anyway.

The urgency with which the February 2009 UEFO was put together meant Treasury and Finance were unable to finalise and publish balance sheet and hence total borrowing estimates.* I still recall that, at the UEFO launch and media lock up at Parliament House, I had to tell a relatively senior journalist that, nonetheless, he could get a reasonable idea of how much the debt would increase if he added up all the deficits reported in the fiscal outlook. It had been a long time since journalists had had to report on a federal budget deficit, and I suspect many of them didn’t know what a deficit really meant!

Metaphorically, I was in the engine room during the crisis. Someone who was on the ship’s bridge was PM Rudd’s economic adviser, Dr Andrew Charlton, now of AlphaBeta, who will be speaking at an upcoming event I’m very much looking forward to, the joint ESA (Qld)-Griffith Asia Institute:

Symposium on lessons from the global financial crisis

The symposium will be held on Thursday 7 March at the Ship Inn Function Centre.** Joining Andrew Charlton will be Griffith Economics Professor Tony Makin, who has been one of the leading critics of the Rudd government’s stimulus packages. I can’t wait to hear the debate which will no doubt ensue. Also, John Simon, the head of research at the RBA, and other distinguished economists will present their views on lessons from the crisis.

I’ve heard the symposium is at least half booked, so please register soon if you’re interested. Note that, while the symposium is being held on the top floor of the Ship Inn, you will need to enter via the adjoining Griffith University building, on the right side of the Ship Inn (see photo below; credit to Jennifer Tunny).

hdr 3a

*In my biased view, Treasury and Finance are filled with the cream of the federal public service, but the complexity of producing national financial statements across the huge beast that is the Australian government cannot be over-estimated.

**I am a current Vice President of the Economic Society of Australia (Qld).

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Keynes’s Economic Consequences of the Peace in its centennial year

I recorded this video yesterday morning on some possible reading/re-reading for the Australia Day long weekend: John Maynard Keynes’s Economic Consequences of the Peace, now in its centennial year. You can find the book’s full text online. The book was published in the UK in late 1919 but in the United States in 1920, which is why the publication date is often given as 1920. Keynes’s preface to the book is dated November 1919.

Regarding books directly relevant to Australia Day, I’d recommend Rob Mundle’s The First Fleet and Michael Pembroke’s Arthur Phillip: Sailor, Mercenary, Governor, Spy.

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