Here is this month’s regular Q&A column contributed by Greg McKenna, the Markets & Economics Correspondent for Business Insider Australia.
On Thursday Greg McKenna attended the Goldman’s Global Macro Conference in Sydney. He wrote about the key topics that came out of the conference on Business Insider Australia yesterday.
There were numerous things that came out of the conference, not least of which that the RBA may raise rates in the not too distant future. We thought Greg’s article was very timely and worth sharing with our readers. To read the full story head over to Business Insider Australia.
Let’s hear from Greg:
At Goldman’s global macro conference in Sydney this morning, Toohey told the audience the economy continues to face some important challenges in the year, and years, ahead.
Many of those challenges are well known but Toohey’s presentation differed from consensus in three key areas.
On Australia’s business investment outlook, Toohey told the audience he couldn’t quite understand why consensus and the Australian Treasury’s expectation for private sector investment are so optimistic. His own, which he said simply reflect what the CapEx survey from the Australian Bureau of statistics show, are for much bigger falls.
To highlight his point Toohey said the CapEx survey “has always been a reliable indicator” of what companies will actually do with their investments in the year ahead.
Toohey is also skeptical about the employment outlook.
He highlighted that part of RBA governor Stevens’s positive take on the domestic economy in his statement after the board meeting this month was based on the strength of the employment market. But Toohey expects employment growth to “normalise” in the months ahead on a number of factors including the rotation in the survey participants, which the ABS itself has said increased the overall employment picture.
He also said published employment figures from the ABS had diverged markedly from those implied by the employment sub-index of the NAB’s business survey.
These two factors, weaker CapEx than forecast and the normalisation of employment, combined with the global outlook mean that “the odds are high that policy accommodation is not yet finished” from the RBA.
Greg McKenna is an economist, trader and adviser. He runs his own consultancy and writes for Business Insider Australia. You can find him on Twitter @gregorymckenna or at www.gregmckenna.com.au