Business Update – August09
Many are predicting Australia is heading away from recession and showing every indication of recovery, with the country in better shape than its counterparts.
The cost of living is heading upwards; however, it is rising at its slowest rate for 10 years, with the big decrease in the cost of fruit and vegetables and overseas travel. These figures saw another interest rate cut put on hold, as the Reserve Bank saw no reason to interfere with the cost of borrowings. The Australian Bureau of Statistics reported an annual inflation rate of 1.5 percent, down from 2.5 percent previously.
Economist with the ANZ Bank, Riki Polygenis said; “The figures were consistent with the Reserve Bank of Australia’s expectations, leaving the central bank ‘little imperative’ to cut interest rates. It looks like any further rate cut is less likely, as there has been a reduction in the risk to the economy.”
Adding to the opinions was Craig James, chief economist from CommSec, who said the inflation rate had fallen well below the Reserve Bank’s target of 2-3 percent.
“But with underlying inflation still uncomfortably high, the Reserve Bank will tread warily on future rate cuts, especially given its more optimistic view on prospects for economic recovery,” James said.
Fruit prices crashed, being down 7.6 percent in the three months to the end of June, while vegetable prices fared not much better, going down 6.9 percent.
Australians are turning their backs on overseas holidays and accommodation, being down 3.4 percent. On a brighter note, Australians had turned to domestic touring and holidays, a factor that has seen the industry increase 10% compared to the last twelve months.
However, where there are decreases there are always increases, with the largest rising cost being in furniture. Other price rises included petrol, hospital and medical services, with rents also climbing.
CommSec has predicted the annual rate of inflation will fall below one percent later in 2009, the lowest result in 11 years. This is a key measure of Australian business conditions, which jumped to its best level in nine months in June, with sales and forward orders leading to a record improvement in employment intentions.
Property prices across Australia have bounced back against all the odds to turn in solid gains in the final quarter of the financial year. House prices climbed an average 3.64 percent in the three months to the end of June, while apartments recorded an average 3.9 percent price rise across the nation, according to latest Residex market data. The strong run in the final quarter, driven by low interest rates and many Government incentives, helped recoup earlier losses – with Perth the only capital city to suffer notable losses on a yearly basis. House prices in Canberra climbed 1.36 percent in the year to the end of June, Adelaide prices grew 1.61 percent, Melbourne prices rose 2.69 percent and Darwin recorded a stunning 14.81 percent jump. Sydney and Brisbane house prices were almost flat at 0.79 percent and -0.06 percent respectively.
The Manning Valley and Great Lakes regions are also experiencing a steady flow of sales, with banks and lending institutions still being kept busy.
The stock market has rallied nicely recently, another good indicator that confidence is returning to investors and the economic outlook is heading away from the gloom we had six months ago.
With Australia showing good signs of economic recovery, one of the major players, South Korea has seen its economy roar back to life in the second quarter to put up its best quarterly performance in more than five years.
This performance added to recent evidence that other Asian economies are turning the corner and are past their worst point of the current global financial downturn.
China unveiled excellent growth figures for its economy, with 7.9 per cent growth in the second quarter from the previous year and accelerating from growth of 6.1 per cent in the first quarter.
The State Government continues to fumble its way through the year, adding new programs and expenditure on what seems to be a daily basis. All these projects are for Sydney and its outer suburbs while rural New South Wales continues to be ignored with new infrastructure and or job programs.
The Chambers of Commerce have had most of their ideas and proposals hit the brick wall as they attempt to assist business and regions grow. People want to move to the country, but they have no incentive, with limited opportunities for employment.
Surely this a major signal to the State Governments to instigate employment programs to move people from the city to the country. This movement would assist in reducing the over crowding in cities. Maybe it is time to argue for a re-introduction of a decentralistion project similar to the NSW Government’s program in the 70s and 80s. We have the environment, lifestyle and plenty of room to accommodate the migrants from the city.
Congratulations to the Greater Taree City Council for taking the bold step of seeking funding to upgrade the Taree airport. The airport is a vital link for many services for the Great Lakes and Manning Valley and its residents, so well done – the region needs an airport to expand and provide vital services.