Why the Slow Economic Recovery?

The Vagaries of Financial UncertaintyExactly why have industrial companies around the world been slow to recover? And why did everything look so promising … and then suddenly, seem to grind to a halt?

Perhaps some insight into this dilemma was provided by the IMF’s recent World Economic Outlook.

According to Oliver Blanchard (its chief economist), there are the dual influences of a slowdown in advanced Western economies; and the overall financial uncertainty.

During the GFC, companies allowed their inventories to run down. Then, with a hint of global recovery, those same companies began replacing their depleted inventory levels. [Read more…]

Let’s Stop The Doom & Gloom! How About Some Good News?

For the past few weeks, the world’s media seems to have been dominated by two unfolding dramas:

  1. The extraordinary and rather amateur performance in Washington, as the US government lurched towards potential default.
  2. The concerning spike in euro-region yields, against the backdrop of their apparently insoluble sovereign debt issues.

However, as Amy Auster reported in Saturday’s Financial Review, there was also a really positive development last week (certainly for Australia), which seems to have simply “snuck under the radar”. [Read more…]

The Australian Office Scene

Last Friday, I attended the annual Commercial & Industrial Economic Forecast Luncheon.

And Dr Frank Gelber (director of BIS Shrapnel) kindly provided is perspective on the Australian economy and the Melbourne Commercial property market — looking forward for the next 5 to 6 years.

Probably the most pleasing aspect was … that his views will were pretty much in line with what I’ve been telling you here, for the past six months or so … [Read more…]

Is the End of the World Near?

Black Swan Events
With Australia having weathered the global financial crisis, we are now having to cope with the potential after-effects of:

  • The European sovereign debt crisis;
  • The earthquake & tsunami in Japan, with the subsequent nuclear fallout;
  • The Libyan crisis; and locally …
  • Extensive flooding in Queensland and Victoria.

Given all of these so-called “Black Swan” events occurring so close together, certain pundits appear to be jumping to the wrong conclusions.

They are ignoring the fundamentals; and simply encouraging a knee-jerk reaction — driven more by sentiment and (supposedly) an attempt to avoid risk.

Right now, many investment decisions are being based upon incomplete, and often incorrect, information. And this is also being inflamed by sensational headlines in the media.

The Tragedies are Real

Without question, the human pain and suffering in these disasters is beyond a full comprehension — whether it be in Japan, NZ, Libya, Queensland or Victoria.

However, history would suggest the adverse economic effects will be comparatively small and temporary.

In all these circumstances, there may be some short-term decline. But the subsequent rebuilding efforts tend to provide an economic boost, well beyond what would have otherwise occurred.

You only have to look at the Victorian bushfire tragedy of several years ago. As truly devastating as that was … the Victorian economy now leads the rest of Australia in so many areas — both economically and in its relative population growth, compared with other states.

With Japan, its $200 billion rebuilding program will consume an enormous volume of steel — and therefore, create huge demand for Australian iron ore and coking coal. Not to mention, the design and construction opportunities for Australian firms.

Bottom Line: Just step back, and view the fundamentals clearly.

While China remains an important influence, the recent disasters in New Zealand and Japan will also actually impact very favourably upon the Australian economy AND the Commercial property market.

Your competitive advantage will be found in buying Commercial property … while others seem to be frozen to the spot.

Retail Property Facing Challenges

Retail challenges.

Having weathered the recent rate increases, consumer confidence seems to have risen just a measly 0.3% during November — according to the latest Westpac/Melbourne Institute consumer sentiment index.

Households still appear to prefer paying down debt, rather than spending — with Australia’s saving level hovering around a record 10.5% of its disposable income.
[Read more…]

September Growth Figures
Just a Pothole in the Road

Growth will continue.

Growth will continue.

Relax, it hasn’t all come to an end.

Sure, the Australian economy may have grown by only 0.2% in the September quarter. And retail sales might have actually fallen by 1.1% for October.

However, the overwhelming consensus is that this is merely an aberration.

And the underlying growth projections remain very favourable — with the full effect of the mining boom having resumed, due to be felt by mid-2011.
[Read more…]

Will They … or Won’t They?



Last month, the RBA left rates on hold — because of what it saw as mixed signals within the Australian economy.

And the rising $A is certainly making its job easier, by generally cooling activity.

Work Allocation

Work Allocation

Growth within the Construction industry appears to have fallen to its lowest level in 18 years. Although turnover for mining and processing plants has once again returned to its path of upward growth.
[Read more…]