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economic whispers « Previous | |Next »
November 8, 2005

Do hear the whispers?

The ones about the economy not doing that well? Discreet whispers about inflationary pressures pushing up prices in the economy? The louder ones about falling house prices. The persistent ones about falling wage rates from the Industrial Relations reforms.

I've heard them. I keep scanning the Australian Financial Review looking for some professional journalist to put the whispers together into some sort of economic scenario or narrative. I look in vain. I come across journalists reycling media releases from the Reserve Bank, or some talking head economist giving up-beat accounts about the economy, interest rates, job growth etc.

The talking heads are always so upbeat about the ever widening trade deficit, aren' t they. Have you noticed that they always overshoot in it getting better? Nor are they concerned that it stands at around $1.6 per month.

And these journalists mock us bloggers for being mere amateurs into vanity publishing and venting our spleen. But it is not hard to put the whispers together is it? Falling house prices eventually means the mortgage is worth more than the capital value of the house. Worsening working conditions mean increasaed difficulties in paying off the mortgage. That means some Australians are going to do it tough. What economists call belt-tightening.

It looks a realistic scenario to me. It's when we hit an economic slump, as we will, that the shift in bargaining power at the heart of Howard's IR bill will hit home. That's when the low-skill, low-cost road embodied in the IR bill will become much clearer.

There is a big picture narrative: it is the change from a domestic consumption to trade-and-investement-driven growth. But the change is not really happening because of exports. Its called a soft patch. Then we have all the upbeat talk about the mining boom coming on stream. That narrative is a Quarry Australia one isn't it. No worries mate. The good times will continue.

| Posted by Gary Sauer-Thompson at 7:08 AM | | Comments (7)
Comments

Comments

AAP released lengthy reports yesterday on the Reserve hinting at interest hikes if inflation edges over 3 per cent and how housing prices have slumped along the eastern sea board. Someone remarked in an editorial meeting how AAP's finance team was keeping such a close watch on fuel and housing prices and their impact on inflation. You must be looking in the wrong places.

Slatts,
I've also heard whispers about retail sales springing a leak as sales declined in department stores across the nation as consumers cut back on discretionary items to compensate for the rise in petrol prices.

It is putting all the whispers together to form a picture that interests me. Can you tell me where to look to find that?

Just post election - BIS Shrapnel released a forecast of a recession for 2006/07.

Vee,
We haven't moved into recession yet. However, I do notice that today's Australian Financial Review is carrying a warning from the Reserve Bank on interest rates.

It said that another increase in oil prices and and the acute shortage of workers could push inflation into the danger zone --around 3%.

So the RBA shifts into a tightening mode re monetary policy--policcy needs to be responsive to cahanges in demand and inflation pressures.

Another piece of the jigsaw.

This site, http://bigpicture.typepad.com/has been on my daily read list for a while. It has covered inflation in the US economy and the manouvrings of wall street to split out the inflationary areas of the economy and just quote "core inflation" - which is all the stuff that is suffering inflationary pressures.

Yeah I just saw a thing in Investigate about inflation saying pretty much the same thing...

Gary, Here is a chart of Walmart sales vs Petrol prices. It suggests that there may be a correlation between disposable income and petrol prices.

Queensland has lower petrol prices than NSW, so it could be tested on Au data to see if there is any correlation.