It's a Good News Week for the Australian Economy

It's a Good News Week for the Australian Economy

Firstly, we had Australian unemployment falling just a touch more to 5.7%. Which, while it suggests the RBA will remain on hold with a distant next move to be a hike in a year or so, the positive impact this will have on buyer sentiment more than outweighs any rate stability risk. I say rate stability risk because we all know the official rate should have been at 1.5% for quite some time now, rather than 2.00%. The RBA remains behind the curve as they say.

There is also the continuing hope in Australia of a double dissolution election in fast approaching July. This would really get the property mark booming! It would remove a great deal of uncertainty while confirming the legitimacy of the Turnbull government.

Yet, perhaps the biggest news of all is out of China!

While a lot of people talk about China’s growth being at its slowest in 25 years, they neglect to mention that China’s economy is a whopping 30 times bigger now, than it was back then. So having grown 30 fold, this week’s release of GDP data for the first quarter at a huge +6.7% is mighty impressive. Yes, it is at the margin, just 0.1% slower than the fourth quarter of last year, but it is still a very big number and a truly strong performance.

There is also the prospect that it may well be the lowest number we see for this year. As I expect some upward acceleration in economic growth, albeit modest given the already high level, for the rest of 2016.

Supporting this view, recent monthly data for both manufacturing and the services sector have actually seen quite sharp spikes higher in activity.

Also released with the GDP data were Retail Sales up 10.5%, Industrial Output accelerating at 6.8%, and Fixed Asset Investment was a huge 10.7%. This last number suggests an ongoing, very powerful economic environment indeed.

As you can see from the above data, those who have been pointing to China being in trouble have been completely wrong. In a nutshell, the reality is one where people are still under-invested, in what is a remarkably prosperous period in history -lead by China! With Australia being a major beneficiary.

Chinese property investment in Australia is likely to continue to accelerate sharply. Best we all try to stay ahead of them? Especially as the local economy is at least stable at the moment, and most probably improving. There is plenty of upside potential, with any recent slow-down in property price gains having very likely already run its course.

Clifford Bennett International Economist

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