The GDP print last week wasn’t amazing… but was actually pretty good according to these guys.
There was nothing in last week’s GDP numbers that made me think that property’s run wouldn’t continue.
I mean, the numbers weren’t stellar, but they weren’t bad either.
They painted a picture of an economy that’s still growing at a reasonable pace, albeit more slowly than my generation might be used to.
But in the broader scheme of things, with economies all over the world struggling to find second gear, our two most important trading partners locked in a trade war, and now 28-years without recession, you’d have to say it’s actually a pretty good result.
And to be honest, given where I thought we might be about 12-months ago, I’d say we’ve come through things pretty well.
What’s more, there’s still plenty of scope for the economy to receive policy support if it needs it, while the more ominous storm clouds seem to have passed without incident.
The way I see it, there are seven factors that are going to support economic growth going forward. I see them like seven little dwarves, dancing around the economy’s pretty blue skirt.
Let’s do a roll call. The Seven Dwarves are:
1. Cutty: The RBA has cut twice in recent months and it looks like another one is probably on the way – possibly as early as next month. At the same time, the Coalition is pushing on with their agenda to cut taxes. Both of these will support growth in the short term.
2. Escapey – Over the past 12-months people have been worried that the cyclical pause in the property market might gather momentum into a serious correction. This hasn’t happened, and given momentum in the market right now, doesn’t look like a near-term possibility. When prices hold up, that supports people’s wealth and spending, which is also a positive for the economy.
3. Spendy: Infrastructure spending is currently booming, and thanks to strong trade data, and the budget is on path towards surplus. That gives the government lots of spending firepower if it needs it. That’s a good thing.
4. Dollars: With the US so far have the run of things in the trade war with China, the US dollar is appreciating, which means the Australian dollar looks to be going lower. That’s actually good news for us, particularly our exporters.
5. Investy: The business investment outlook is slowly improving. Ok, “very slowly” if we’re honest, but businesses have the cash on hand, and lending rates are low, so there’s nothing holding business investment back.
6: Exporty: Australia has a current account surplus, thanks to a mini-commodities boom. That puts us in an strong external position – there’s not going to be a run on the currency, and investor confidence in Australia is going to remain high. You couldn’t ask for more on this front really.
7. Poppy: Population growth remains strong, which supports consumer demand in particular (as well as housing demand).
They’re my seven dwarves. On their own, they might not be all that much to look at. But put them together and you have the makings of a serious tail wind.
The economy still has challenges. It always does. And growth could always be stronger.
But this is a pretty good result. Don’t let anyone tell you any different.