A big test today for the Australian Bureau of Statistics and its new look labour force survey: it will have to pick up a rise in jobs loss and a rise in the unemployment rate for the statistics to remain credible.
The ANZ bank joined a string of employers from Qantas, to Southern Pacific Tyres, to Dons Smallgoods and the National Australia Bank and Fairfax in revealing plans to cut jobs.
Some of those losses have happened (from Allco for example and miners CBH and Perilya) while some are coming in the next few months. The story, however, is that job losses are happening, but so far not showing up in the official figures.
Economists however are expecting anet 5,000 jobs were added last month, which is very much at odds with the anecdotal reports.
We had more evidence yesterday that the economy is slowing as demand for money and finance remains slow, even though there was a pick up in the way consumers feel about the economy at the moment.
Consumer sentiment rose sharply in September on the back of a small fall in petrol prices, but especially the Reserve Bank’s first rate cut in seven years.
The latest Westpac-Melbourne Institute survey shows consumer sentiment rose 7% in September to 92.2 points from 86.2 points in August, the second consecutive improvement in the index but still below the 100 point mark separating pessimists from optimists.
The survey was done after the RBA cut rates a week ago yesterday, so the improvement is understandable. But while the index rose, it’s still 20.3% below where it stood one year ago when the economy was firmer, growth stronger and $$US100 a barrel oil only a forecast from the odd analyst, let alone $US147 a barrel oil.
Last month’s improvement mirrors that noted yesterday in business confidence by the National Bank in its August survey.
It perked up, but is still very low. The NAB and other analysts now suggest that there is a stabilising of confidence levels for both business and consumers, even though inflation remains high and won’t ease for longer than expected, and the economy is still slowing
Westpac’s head of economics, Bill Evans said in a statement accompanying the report that the fall "is a direct response to the decision by the Reserve Bank to cut their overnight cash rate by 0.25 per cent and the swift response by the banks to reduce their variable mortgage rates by a similar amount".
The combined 16.7% August/September increase was the third largest two-month increase in the past 10 years and the sixth largest since the survey began in the mid-1970s.
"However, despite this fortuitous run of positive news the index is 7.8 per cent below the 100 level indicating that pessimists still significantly outnumber optimists," Mr Evans said.
This is the eighth month in a row where pessimists have held the upper hand, and for longer than the economic slowdowns in 1995 and 2001.
"However, it pales in comparison with the recession years of 1989-1993 when we had 57 consecutive months where pessimists dominated," Mr Evans said.
That weak dollar is going to be good and bad news: good because US dollar receipts will be greater, which will help commodity exporters offset some of the lower world prices, and help other exports repair the damage done to their receipts from the higher value of the Aussie currency over the past year.
For companies like retailers who import a lot this is bad news, but for mining and resource companies in particular, the sharp slump in the currency will offset the falling price of oil, copper and other metals, and shower even more money on the iron ore and coal exporters whose prices rose this year.
But the biggest problem will be that the downward pressure on import costs, especially for oil and fuel products, is no longer there.
The RBA has forecast inflation will run at 5% in this and the December quarter, and then start to ease through next year.
A sharply weaker dollar means the chances of that easing occurring are now not as good: the RBA might have to leave interest rates higher than it wants, it might have to slow the pace of change, or it may decide to let the economy slow a bit more to put more pressure on companies to absorb the extra cost pressures and take lower profit margins.
That is what has happened before when the Aussie has weakened.
Meanwhile the impact of the higher dollar over the past year can be seen on the latest figures on the value of export earnings from mineral resources.
They hit a record $116 billion in 2007-208, according to the Australian Bureau of Agricultural and Resource Economics today.
That was an 11% on 2007 and was thanks to higher volumes for most commodities and significantly higher prices for crude oil, LNG, thermal coal, iron ore, copper and gold.
But if the currency had been at present levels, or the levels it was at in the early part of the 2008 year at around 80 USc, that revenue figure would have been over $125 billion. The currency fell to 79.50 US cents in early Asian trading this morning.
And figures from the Australian Bureau of Statistics confirmed the Reserve Bank’s private credit figures of a further slump in lending in July.
The ABS said that total finance commitments fell 1.3% in July with lending for housing was down 0.2% in July, and by 17.6% over the past year.
Other personal finance commitments fell 0.5% and by 3.0% for the year, while business finance commitments (including finance leases) fell by 1.8% in the month and by 17.2% for the year.
The fall in other personal lending relates to the margin calls in July on investors, but the real damage is being done in housing where the slowdown in finance is continuing.
