Australia GDP falls most in 20 years!!!

Discussion in 'Wall St. News' started by S2007S, Jun 1, 2011.

  1. S2007S


    If you are a bull this is the best news you can actually read, the worse the news out of the US and throughout the world the higher the markets push, so it doesn't matter how bad the news is, just keep buying until one day maybe in 4 or 5 years reality finally sets in and markets finally sell off 58% in a year or 2 until then Bubble ben bernanke will keep the US markets from falling by continuing the prop job of the weak economy.

    Australia First-Quarter GDP Logs Biggest Fall in 20 Years
    Reuters | May 31, 2011 | 11:10 PM EDT

    Australia's economy shrank 1.2 percent in the first quarter, suffering its biggest decline in 20 years, after extensive flooding hit coal exports, but a once-in-a-lifetime mining boom is expected to help growth bounce back quickly this year.

    Data on Wednesday showed annual growth in gross domestic product (GDP) slowed to a tepid 1.0 percent, down from 2.7 percent. The results were in line with an updated Reuters poll on Tuesday after a report showed net exports subtracted a record 2.4 percentage points from growth.

    Damage from the flooding and Cyclone Yasi came at a time when rising utility and fuel prices were already crimping household spending and a strong local dollar was taking a toll on trade-exposed industries such as manufacturing and tourism.

    Add to that the effect of earthquakes in Japan and New Zealand, the nation's major trading partners, and it's not surprising to see the economy going into reverse gear.

    "The economy has hit a temporary pot hole courtesy of the natural disasters this year," said Besa Deda, chief economist at St George Bank.

    "We are looking for the economy to recover as this year progresses, as a rebound in coal exports occurs and we get a boost from construction and the upswing from capex deepens."

    The data also showed the real value of goods and services produced amounted to A$1.3 trillion for the year to March, or A$58,091 for every man, woman and child in the nation of 22.6 million.

    The Australian dollar [ AUD= 1.0746 +0.009 (+0.84%) ] rose nearly half a cent to $1.0737, relieved the contraction was not as dire as some had predicted. However, it remained well below a 29-year peak of $1.1012 set a month ago.

    Interbank bill futures slipped, but still implied no chance of an interest rate hike in June and just a 50-50 prospect of a quarter point tightening by October.

    "I think the RBA are unlikely to raise rates in June, but the bad headline number really hides the strength of the economy. The strength of domestic demand in particular tells me that the RBA needs to slow demand down," said Matthew Johnson, senior economist at UBS.

    Temporary Blip

    The RBA has already said it would look past the weather-induced slowdown in growth when setting monetary policy, believing the effects will be temporary.

    Indeed, coal exports have showed signs of recovering in March, helping push the nation's trade balance back into surplus and analysts polled by Reuters expect data on Thursday will show the surplus growing to A$2.0 billion in April from A$1.74 billion as the recovery continues.

    Solid demand from Asia has led to huge price increases for coal and iron ore — Australia's two biggest exports — helping lift the country's terms of trade to the highest in over a century.

    Wednesday's data showed the terms of trade, or the ratio of export to import prices, rose a further 5.8 percent in the first quarter to be a huge 22.4 percent higher for the year. This is set to increase in the second quarter to a fresh record high.

    Australian miners have received higher contract prices for the June quarter with iron ore contract prices estimated to have been set 23 percent higher than the March quarter and coking coal contracts 45 percent higher.

    That in turn is fuelling a massive expansion in mining investment, which should support growth for years to come. Data last week showed mining firms plan to spend A$51.3 billion for the year to June and a record A$83.3 billion for 2011/12 — 6.4 percent of Australia's A$1.3 trillion in GDP.

    Mining investment is already more than double the historic average at 4 percent of Australia's GDP, and the RBA now sees that rising to over 6 percent by 2012/13.

    This investment boom is already straining the supply of skilled labor. The economy is close to full employment with a jobless rate at just 4.9 percent, a situation the RBA is closely watching.

    The RBA expects the economy will expand at a rapid 4.25 percent for all of 2011 and grow around 3.75 percent for the next two years. It said a few weeks ago that rates will have to go up to keep a lid on inflation.

    "We are still picking two more RBA hikes this year, one in June or July and the second in September," said Joaquin Vespignani, economist at Barclays Capital.
  2. Roark


    Doesn't matter because of this in the article: "We are still picking two more RBA hikes this year, one in June or July and the second in September," said Joaquin Vespignani, economist at Barclays Capital.

    That means AUD will continue to be very strong against USD and JPY as no rate hikes are expected this year in either the US or Japan.
  3. We in Australia are no strangers to bullshit statistics.
    Remember we have 5% unemployment rate yet the economy shrank 1.2 %! Figure that one out!
    A storm, the weather, is enough to send our GDP plummetting.
    The RBA has sent the east coast into recession because it sees danger of 'inflation'.

    I think there are other forces at work....
  4. It's the final act.
  5. high dollar is desired.

    buy AUD sell AUD banks ?
  6. Overnight cash rate at nearly 5%. Inflation at 3.5%.

    negative GDP.

    Property values have fallen 1.2% supposedly.

    I think much more!

    Australian banks are nowhere near the 'Great Financial Shape' they supposedly are.

    Westpac (WBC:AX) and Suncorp (SUN:AX) are greatly exposed to an East Coast property collapse which definately is on the cards.

    Socially the place is a mess. Dogs breakfast.

    Good short, NOTHING else.
  7. benwm


    Hi Alex

    Any good blogs or webs sites you use to follow the Australian economy?

  8. zdreg


    there are always bumps in the road but you still get there if you take the right road.

    Australia's promise
    The next Golden State
    With a bit of self-belief, Australia could become a model nation
    May 26th 2011 | from the print edition

    IMAGINE a country of about 25m people, democratic, tolerant, welcoming to immigrants, socially harmonious, politically stable and economically successful; good beaches too. It sounds like California 30 years ago, but it is not: it is Australia today. Yet Australia could become a sort of California—and perhaps a still more successful version of the Golden State.

    It already has a successful economy, which unlike California’s has avoided recession since 1991, and a political system that generally serves it well. It is benefiting from a resources bonanza that brings it quantities of money for doing no more than scraping up minerals and shipping them to Asia. It is the most pleasant rich country to live in, reports a survey this week by the OECD. And, since Asia’s appetite for iron ore, coal, natural gas and mutton shows no signs of abating, the bonanza seems set to continue for a while, even if it is downgraded to some lesser form of boom (see article). However, as our special report in this issue makes clear, the country’s economic success owes much less to recent windfalls than to policies applied over the 20 years before 2003. Textbook economics and sound management have truly worked wonders.

    A flash in the pan?

    Australians must now decide what sort of country they want their children to live in. They can enjoy their prosperity, squander what they do not consume and wait to see what the future brings; or they can actively set about creating the sort of society that other nations envy and want to emulate. California, for many people still the state of the future, may hold some lessons. Its history also includes a gold rush, an energy boom and the development of a thriving farm sector. It went on to reap the economic benefits of an excellent higher-education system and the knowledge industries this spawned. If Australia is to fulfil its promise, it too will have to unlock the full potential of its citizens’ brain power.

    Australia cannot, of course, do exactly what California did (eg, create an aerospace industry and send the bill to the Pentagon). Nor would it want to: thanks to its addiction to ballot initiatives, Californian politics is a mess. But it could do more to develop the sort of open, dynamic and creative society that California has epitomised, drawing waves of energetic immigrants not just from other parts of America but from all over the world. Such societies, the ones in which young and enterprising people want to live, cannot be conjured up overnight by a single agent, least of all by government. They are created by the alchemy of artists, entrepreneurs, philanthropists, civic institutions and governments coming together in the right combination at the right moment. And for Australia, economically strong as never before, this is surely such a moment.

    Watch our video-guide to Australia's past, present and future, or listen to an interview with the author of this Special Report
    What then is needed to get the alchemy going? Though government should not seek to direct the chemistry, it should create the conditions for it. That means ensuring that the economy remains open, flexible and resilient, capable, in other words, of getting through harder times when the boom is over (a sovereign-wealth fund would help). It means maintaining a high rate of immigration (which started to fall two years ago). It means, above all, fostering a sense of self-confidence among the people at large to bring about the mix of civic pride, philanthropy and financial investment that so often underpins the success of places like California.

    Many Australians do not seem to appreciate that they live in an unusually successful country. Accustomed to unbroken economic expansion—many are too young to remember recession—they are inclined to complain about house prices, 5% unemployment or the problems that a high exchange rate causes manufacturing and several other industries. Some Australians talk big but actually think small, and politicians may be the worst offenders. They are often reluctant to get out in front in policymaking—on climate change, for instance—preferring to follow what bigger countries do. In the quest for a carbon policy, both the main parties have chopped and changed their minds, and their leaders, leaving voters divided and bemused. There can be little doubt that if America could come to a decision on the topic, Australia would soon follow suit.

    Its current political leaders, with notable exceptions, are perhaps the least impressive feature of today’s Australia. Just when their country has the chance to become influential in the world, they appear introverted and unable to see the big picture. Little legislation of consequence has been passed since 2003. A labour-market reform introduced by the Liberals was partly repealed by Labor. A proposed tax on the mining companies was badly mishandled (also by Labor), leading to a much feebler one. All attempts at a climate-change bill have failed. The prime minister, Labor’s Julia Gillard, admits she is unmoved by foreign policy. The leader of the opposition, Tony Abbott, takes his cue from America’s tea-party movement, by fighting a carbon tax with a “people’s revolt” in which little is heard apart from personal insults. Instead of pointing to the great benefits of immigration—population growth is responsible for about two-fifths of the increase in real GDP in the past 40 years—the two parties pander shamelessly to xenophobic fears about asylum-seekers washing up in boats.

    …or a golden future?

    None of this will get Australians to take pride in their achievements and build on them. Better themes for politicians would be their plans to develop first-class universities, nourish the arts, promote urban design and stimulate new industries in anything from alternative energy to desalinating water. All these are under way, but few are surging ahead. Though the country’s best-known building is an opera house, for example, the arts have yet to receive as much official patronage as they deserve. However, the most useful policy to pursue would be education, especially tertiary education. Australia’s universities, like its wine, are decent and dependable, but seldom excellent. Yet educated workers are essential for an economy competitive in services as well as minerals. First, however, Aussies need a bit more self-belief. After that perhaps will come the zest and confidence of an Antipodean California.

    from the print edition | Leaders
  9. Does this mean Steve Keen is right!?!
  10. Steve Keen has been right big time in the past (with the odd well publicised rush to the head forcing him to walk up Mt Kosciosko!) and will continue to be right I expect.

    'Daily Reckoning' is VERY good too. You must check it out.

    Our Reserve Bank of Australia are bigger cheerleaders than Greenspan and Co. They make him look rather placid really!)

    They said yesterday the economy will roar back in the 2nd quarter.

    I'm watching them fail again in their forecasts regularly.

    Their forecasts ALWAYS make the news, however when they are wrong NEVER makes the news.

    We are a little like the USA in June 2007.
    #10     Jun 1, 2011