HomeThe Economy
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Re: The Economy
by Lee Fri Mar 29, 2013 8:45 am
I can agree with most of that.
The question of debt at the moment, though, is whether we should have incurred debt during the GFC. Both parties agreed that we should, but differed as to how much. I don't think anyone is saying we should have unchecked debt, but the necessary counterpoint to that is that taxes or revenue must increase and, as you say, and/or expenditure must be cut.
To achieve that, each side must do one or both of those things. The government will take away some tax breaks which favour higher income earners, while the Opposition has stated it will take away super benefits for low paid people, both amongst other things.
The super changes alone are a good topic and I look forward to discussing that.
The question of debt at the moment, though, is whether we should have incurred debt during the GFC. Both parties agreed that we should, but differed as to how much. I don't think anyone is saying we should have unchecked debt, but the necessary counterpoint to that is that taxes or revenue must increase and, as you say, and/or expenditure must be cut.
To achieve that, each side must do one or both of those things. The government will take away some tax breaks which favour higher income earners, while the Opposition has stated it will take away super benefits for low paid people, both amongst other things.
The super changes alone are a good topic and I look forward to discussing that.
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Re: The Economy
by Lee Fri Mar 29, 2013 10:28 am
Latest rating agency report on the Australian economy:
(Not reported in the media, doesn't fit the agenda).
March 28 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Australia's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'AAA'. The Outlooks on the ratings are Stable. The agency has also affirmed the Country Ceiling at 'AAA' and the Short-Term Foreign-Currency IDR at 'F1+'.
KEY RATING DRIVERS
The affirmation of Australia's sovereign ratings reflects the following factors:
- Australia is a high-income developed economy, has strong political, civil and social institutions and has a credible and transparent macroeconomic policy framework. Australia has built up the capacity to absorb shocks due to a combination of low public debt, a free floating exchange rate and liberal trade and labour markets, which allows the authorities to run strong countercyclical policies during downturns and the economy to adjust.
- Australia has remained one of the strongest performing economies in the 'AAA' universe since the global financial crisis began with real GDP rising 3.6% in 2012, up from 2.1% in 2011. In comparison, the 'AAA' peer rating group grew at 0.7% in 2012. The combination of strong demand for natural resources along with robust mining investment should continue to provide valuable support to the economy. Fitch forecasts real GDP to grow 2.5% and 2.8% in 2013 and 2014 respectively.
- The current boom in the mining sector, however, has not been without its challenges as the continued strength of the Australian dollar has led to strains in the non-mining sector. However, Australia's unemployment rate remains low, standing at 5.4% in February. Ultimately, the key longer-term challenge facing Australia is how the economy will respond when mining sector investment peaks and begins to turn down It is still too early to judge how the economy will perform once this stage is reached, however.
- The original goal to bring the Commonwealth/central government budget back to surplus in FY2012-13 (financial year ending 30 June 2013) will not be met due to recent volatility in commodity prices and a strong Australian dollar. Nonetheless, Fitch holds the view that the fiscal consolidation process has slowed down, not reversed course. Fitch estimates that the Commonwealth budget deficit could finish at about 1.5% of GDP in FY2012-13, compared to a shortfall of 3.0% of GDP in FY2011-12. Including the budgets of the states, Fitch estimates Australia's general government deficit will be about 2.5% of GDP in FY2012-13 (versus 4.4% in FY2011-12).
- Australia's external finances are a rating weakness compared with 'AAA' sovereign-rated peers. The current account deficit widened to 3.7% of GDP in 2012, compared to 2.2% of GDP in 2011. Furthermore, the current account could widen further as the terms of trade continue to moderate and the repatriation of profits by foreign investors increases. As a result, Australia's net external debt position, which stood at 51.3% of GDP in 2012, will remain well above the 'AAA' peer rating group median of 25.1% of GDP for a prolonged period.
- Fitch regards Australia's banks as among the strongest in the world on a stand-alone basis, despite their heavy reliance on wholesale funding markets. However, banks have made strides in reducing their reliance on short-term foreign funding, increasing their customer deposit base, and strengthening their liquidity positions. In addition, asset quality is healthy with the non-performing loan ratio below 2.0% at end-2012.
RATING SENSITIVITIES
The Stable Outlook reflects Fitch's assessment that downside risks to the 'AAA' rating are currently not material. Nonetheless, the following risk factors individually, or collectively, could trigger negative rating action:
- Large-scale problems in the banking sector, whether driven by a significant deterioration in asset quality (e.g. a sharp downturn in the housing market) or by a loss of access to international wholesale funding.
- A rapid and sustained decline in prices of Australia's key natural resources exports could have large knock-on effects for the economy and public finances. - Australia is facing a long-term adjustment challenge as the eventual end of the mining boom will place greater pressure on the non-mining sector's ability to raise its competitiveness and in turn support potential growth. Otherwise, Australia's unemployment rate could rise sharply and place sustained pressure on the public finances and the overall sovereign credit profile.
KEY ASSUMPTIONS
- Fitch's forecasts for the general government balance and debt levels are based on the assumption that the Australian authorities remain committed to sound fiscal management as highlighted in the Charter of Budget Honesty Act.
- The global economic environment remains conducive for global trade and investment flows. In particular Fitch assumes commodity prices do not suffer a sharp correction and that China, which has become a key destination for Australian exports, does not experience a sudden "hard landing".
- Australia's high level of political stability and governance is maintained, which supports the country's attractive business climate.
(Not reported in the media, doesn't fit the agenda).
March 28 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Australia's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'AAA'. The Outlooks on the ratings are Stable. The agency has also affirmed the Country Ceiling at 'AAA' and the Short-Term Foreign-Currency IDR at 'F1+'.
KEY RATING DRIVERS
The affirmation of Australia's sovereign ratings reflects the following factors:
- Australia is a high-income developed economy, has strong political, civil and social institutions and has a credible and transparent macroeconomic policy framework. Australia has built up the capacity to absorb shocks due to a combination of low public debt, a free floating exchange rate and liberal trade and labour markets, which allows the authorities to run strong countercyclical policies during downturns and the economy to adjust.
- Australia has remained one of the strongest performing economies in the 'AAA' universe since the global financial crisis began with real GDP rising 3.6% in 2012, up from 2.1% in 2011. In comparison, the 'AAA' peer rating group grew at 0.7% in 2012. The combination of strong demand for natural resources along with robust mining investment should continue to provide valuable support to the economy. Fitch forecasts real GDP to grow 2.5% and 2.8% in 2013 and 2014 respectively.
- The current boom in the mining sector, however, has not been without its challenges as the continued strength of the Australian dollar has led to strains in the non-mining sector. However, Australia's unemployment rate remains low, standing at 5.4% in February. Ultimately, the key longer-term challenge facing Australia is how the economy will respond when mining sector investment peaks and begins to turn down It is still too early to judge how the economy will perform once this stage is reached, however.
- The original goal to bring the Commonwealth/central government budget back to surplus in FY2012-13 (financial year ending 30 June 2013) will not be met due to recent volatility in commodity prices and a strong Australian dollar. Nonetheless, Fitch holds the view that the fiscal consolidation process has slowed down, not reversed course. Fitch estimates that the Commonwealth budget deficit could finish at about 1.5% of GDP in FY2012-13, compared to a shortfall of 3.0% of GDP in FY2011-12. Including the budgets of the states, Fitch estimates Australia's general government deficit will be about 2.5% of GDP in FY2012-13 (versus 4.4% in FY2011-12).
- Australia's external finances are a rating weakness compared with 'AAA' sovereign-rated peers. The current account deficit widened to 3.7% of GDP in 2012, compared to 2.2% of GDP in 2011. Furthermore, the current account could widen further as the terms of trade continue to moderate and the repatriation of profits by foreign investors increases. As a result, Australia's net external debt position, which stood at 51.3% of GDP in 2012, will remain well above the 'AAA' peer rating group median of 25.1% of GDP for a prolonged period.
- Fitch regards Australia's banks as among the strongest in the world on a stand-alone basis, despite their heavy reliance on wholesale funding markets. However, banks have made strides in reducing their reliance on short-term foreign funding, increasing their customer deposit base, and strengthening their liquidity positions. In addition, asset quality is healthy with the non-performing loan ratio below 2.0% at end-2012.
RATING SENSITIVITIES
The Stable Outlook reflects Fitch's assessment that downside risks to the 'AAA' rating are currently not material. Nonetheless, the following risk factors individually, or collectively, could trigger negative rating action:
- Large-scale problems in the banking sector, whether driven by a significant deterioration in asset quality (e.g. a sharp downturn in the housing market) or by a loss of access to international wholesale funding.
- A rapid and sustained decline in prices of Australia's key natural resources exports could have large knock-on effects for the economy and public finances. - Australia is facing a long-term adjustment challenge as the eventual end of the mining boom will place greater pressure on the non-mining sector's ability to raise its competitiveness and in turn support potential growth. Otherwise, Australia's unemployment rate could rise sharply and place sustained pressure on the public finances and the overall sovereign credit profile.
KEY ASSUMPTIONS
- Fitch's forecasts for the general government balance and debt levels are based on the assumption that the Australian authorities remain committed to sound fiscal management as highlighted in the Charter of Budget Honesty Act.
- The global economic environment remains conducive for global trade and investment flows. In particular Fitch assumes commodity prices do not suffer a sharp correction and that China, which has become a key destination for Australian exports, does not experience a sudden "hard landing".
- Australia's high level of political stability and governance is maintained, which supports the country's attractive business climate.
Lee- Join date : 2011-12-05
Posts : 7519
Location : Talking footy
My club :
Re: The Economy
by Chambo Off To Work We Go Sat Mar 30, 2013 10:41 am
The Dominator wrote:Chambo Off To Work We Go wrote:I am afaid TD you are losing us average people in the courtroom debate of tripping up posters on specific issues.
If this is supposed to be a points scoring match between yourself and R&B, then please say so, so I can tune out.
If it is supposed to be a debate on the state of the economy then I might be interested to keep following.
Yes it takes 2 to tango, but I am afraid you are losing me.
Quite happy to add to the debate Chambo which my original post was trying to do.
An interesting discussion about debt here, especially considering the problems debt caused in the world economy in very recent history. Have we already forgotten that problem, or do we just ignore history and allow ourselves to repeat it?
So, the recent posts say that Australia's debt is 9.2% of our GDP and the argument appears to be that it is not a problem because that debt is a fraction of that of other countries.
Let's simplify it in 2 ways:
1. Someone smokes 9.2 cigarettes per day instead of the 150 cigarettes that someone else smokes per day. We are perfectly healthy because they smoke 150 per day and we dont? My point is I do not agree with the argument that our debt levels are OK simply because other countries have more debt.
2. Was the debt of these other countries ever 9.2% of GDP? I think so? These countries must have done nothing, or not enough, about their debt problem. Other countries are where they are because they allowed their debt to blow out and must now take austerity measures when they should be spending. At what point do we realise that we are following in their shoes and address the issue?
I do not agree with incurring unchecked debt. I do not agree with spending money now, based upon forward projections of new income. Let's earn it before we spend it. Are not the Mining Tax and Olympic Dam expansion good examples of how this procedure flawed? How long before we max out this credit card and have to get a new one to spend more including having to pay the interest on the original?
So, to the question: "Do you prefer raised taxes or mass sackings. It's one or the other. Can't reduce debt any other way." You dont need mass sackings to cut spending. That argument is used by both sides to avoid the necessary cuts to spending. I think most people, especially South Australians, have wised up to that little scam.
Purely my opinion of course, and I do concede that I don't particularly like debt.
No, I understood the discussion and your cigarette analogy quite well.
But the problem with subjects like this is that it is perfectly acceptable to rebut someone else's argument when done fairly. But the 'losing me' reference was mainly in relation to whether I want to continue reading this thread, when either or any party gets aggrieved and cites being "attacked" or "abused" or whatever. It changes the tenor of the debate and makes it personal. These subjects are emotive, and therefore, all posters need to understand, that being a bit precious, does detract from what has actually been, a good debate.
From my perspective there has been little to really get in a huff about on this thread and if the debate is to continue in a worthwhile sense, the analogy of 'playing the ball' is a good one. Too often have I seen on other forums, good discussion obliterated with people wanting to just score points for themselves. Maybe my phrasing of that above was not correct, so perhaps forget about that.
But I like this site for its ability to have debates like this one. I really hope that it can continue in the right spirit.
Chambo Off To Work We Go- Join date : 2012-02-03
Posts : 3234
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Re: The Economy
by Lee Mon Apr 01, 2013 12:41 pm
Sunrise's take on this, with Michael Pascoe.
I'm pretty sure he's an independent commentator.
"Our economy is the world champion and the media have told lies!" is a summary.
More and more vindication.
I'm pretty sure he's an independent commentator.
"Our economy is the world champion and the media have told lies!" is a summary.
More and more vindication.
Last edited by redandblack on Mon Apr 01, 2013 1:47 pm; edited 1 time in total
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bayman- Join date : 2012-02-05
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Re: The Economy
by bayman Mon Apr 01, 2013 1:03 pm
bayman wrote:redandblack wrote:Hope you backed the free-scoring Bloods, Bayman
i took a multi with West, Norwood & Eagles all to win for a $236.54 result
two down one to go
i agree, no problems with 'my' economy at the moment
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Re: The Economy
by Lee Tue May 28, 2013 2:33 pm
For those wanting reporting other than News Ltd, The Guardian has now started in Australia.
Here's an excellent article on the economy.
http://www.guardian.co.uk/business/grogonomics/2013/may/28/australia-economy-myths-gfc
Five myths of the Australian economy
It's far from smooth sailing ahead, but much of the gloomy talk is little more than scaremongering
Here's an excellent article on the economy.
http://www.guardian.co.uk/business/grogonomics/2013/may/28/australia-economy-myths-gfc
Five myths of the Australian economy
It's far from smooth sailing ahead, but much of the gloomy talk is little more than scaremongering
Lee- Join date : 2011-12-05
Posts : 7519
Location : Talking footy
My club :
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