There may be worries about global growth and the health of US financial markets but here in Australia its been a surprisingly upbeat week: sunny in fact.
The economy is going well, retail sales are humming (a bit too fast for some), business and consumer confidence has recovered strongly from the battering at the hands of oil and petrol prices in the middle months of 2006, the resources boom shows no sign of tiring, the Chinese and Japanese economies are surging.
Inflation is a bit too high for comfort, wages growth is at the top end of the limit of around 4 per cent a year, our terms of trade are improving and personal income continues to rise.
The only concern is for problems among the no doc/low doc mortgage borrowers and some credit card debt.
Compared to the gloom around in the September quarter and towards the end of the year, the turnaround has been remarkable.
It seems like we have rebounded strongly but in fact it’s been a small but noticeable uplift.
It’s the change in confidence that’s made the difference, and now for the impact on the broader stockmarket.
With all the reservations expressed last month by Reserve Bank Governor, Glenn Stevens in the first Monetary Policy Statement of the year and then before the Housing of Reps. Standing Committee on Finance and the Economy, it’s clear the Australian economy is galloping along very nicely.
So after the upbeat figures on confidence and the second tentative signs of a recovery in housing finance, yesterday’s labour force figures for February were a bit of the same stuff.
Some economists however worry that another month with 22,000 jobs created (293,000 in the year to February) sends a flashing warning signal to the RBA.
There was lots of chat about capacity constraints, wages dangers, inflation and underestimating a rate rise but this is not New Zealand with its unbalanced economy, with surging house prices and an ‘easy money regime’ that again drew the ire of Dr Ian Bollard, head of the NZ Reserve Bank, in a speech yesterday.
The February labour force figures show that employment rose 22,000 in the month after falling a revised 4,800 in January.
With more people actively looking for work, the unemployment rate edged up to 4.6 per cent from the 4.5 per cent it had hovered at for the past few months.
The number of full-time jobs rose 20,700 last month while part-time employment edged up 1,300. Around 10.4 million people were employed.
The participation rate, which measures the labour force as a percentage of the population aged over 15, gained 0.1 percentage point to 64.9 per cent.
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Meanwhile figures from the Reserve Bank show that credit card debt fell in January as consumers did their usual trick of reining in spending in the aftermath of Christmas and the after Christmas sales, and repaid some of what they owed.
The RBA figures show that credit card debt of Australians totalled $38.393 billion in January, down from the $38.989 billion in December.
Actual purchases for the month fell to $14.705 billion in the month, from $16.095 billion while repayments rose to $16.962 billion, from $16.580 billion.
Over the year from January 2006 to January this year total credit card debt jumped 14.2 per cent, from $33.548 billion to $38.393 billion and purchases rose a similar amount of the year.
In the year to January 2007 the Australian Bureau of Stats put said retail sales rose 7.2 per cent in dollar terms, so credit card debt rose at around double that rate.
Retail sales in January rose 0.9 per cent in seasonally adjusted terms, the highest for some months as consumers adjusted to lower petrol prices, another factor that has driven the improvement in sentiment.
Activity in Australia is more balanced at the moment than across the Tasman.
We should expect more upgrades from corporates like the one we saw yesterday from Qantas.
Several banks have already delivered and some analysts have also lifted Telstra’s earnings forecasts and ratings.
