ID :
17359
Fri, 08/29/2008 - 14:41
Auther :
Shortlink :
https://oananews.org//node/17359
The shortlink copeid
Australian economy 'may be holding up'
AAP - The Australian economy may be holding up better than expected with figures released on Thursday showing a surprising surge in business investment.
Overall, investment across corporate Australia rose by 5.7 per cent in the June
quarter after an upwardly revised 1.0 per cent increase in the previous three
months.
Future spending plans also give cause for optimism.
The third estimate for investment in 2008/09 is 26.2 per cent higher than a year ago
- the strongest reading in 26 years.
Total investment for the 2008 financial year was $84.8 billion, up 10.8 per cent on
a year ago.
The upbeat investment environment suggests national accounts figures - due out on
Wednesday - will be better than expected.
CommSec economist Savanth Sebastian said the strength in business spending would
help prop up overall economic growth in the quarter and likely add 0.5 per cent to
gross domestic product (GDP).
"If you have a look at the numbers overall, they show that the domestic economy
remains pretty robust," Mr Sebastian said.
"It's down to the fact that the mining boom is having a significant impact, but it's
not just mining. You are seeing it across other areas as well with transportation
and construction remaining quite strong.
"The important factor is that there are other economies around the world that are
noticing a pretty significant slow down but we're in a much more enviable position.
"It is reassuring for the reserve bank that the death of the Australian economy is
not at our doors yet."
The figures will also reassure the Reserve Bank of Australia (RBA) that it has the
capacity to deliver an interest rate cut next week.
The central bank will announce its decision on Tuesday and is widely expected to cut
the official cash rate by 0.25 percentage points.
Thursday's investment numbers point to an expansion in the productive capacity of
the economy and suggest the jobs market will remain on a solid footing, reducing the
potential for a wages breakout.
"This sort of gives them some light at the end of the tunnel. We've seen weakness in
consumer sentiment, we've seen weaker business sentiment numbers, but really it
hasn't translated into a weaker investment number yet," Mr Sebastian said.
"Really, the supply side of the economy is pretty well primed to grow quite rapidly
and absorb the inflationary pressures, so wages will remain in check.
"It gives the reserve bank the option of making that rate cut come next week."
A rate cut next week will likely give Prime Minister Kevin Rudd some much needed
ammunition to counter what has been a sustained attack from the opposition over his
economic credentials.
The opposition is continuing to blame the Rudd government for the dramatic slide in
business and consumer confidence since it took office nine months ago.
"I think they've compounded the problem, and I think that's why Wayne Swan really
has been the worst treasurer in Australia's history," opposition finance spokesman
Peter Dutton said.
"It's just unbelievable that Labor could trash business confidence so quickly and
comprehensively.
"There are international factors but it's being compounded in our country by the
incompetence of this treasurer."
Overall, investment across corporate Australia rose by 5.7 per cent in the June
quarter after an upwardly revised 1.0 per cent increase in the previous three
months.
Future spending plans also give cause for optimism.
The third estimate for investment in 2008/09 is 26.2 per cent higher than a year ago
- the strongest reading in 26 years.
Total investment for the 2008 financial year was $84.8 billion, up 10.8 per cent on
a year ago.
The upbeat investment environment suggests national accounts figures - due out on
Wednesday - will be better than expected.
CommSec economist Savanth Sebastian said the strength in business spending would
help prop up overall economic growth in the quarter and likely add 0.5 per cent to
gross domestic product (GDP).
"If you have a look at the numbers overall, they show that the domestic economy
remains pretty robust," Mr Sebastian said.
"It's down to the fact that the mining boom is having a significant impact, but it's
not just mining. You are seeing it across other areas as well with transportation
and construction remaining quite strong.
"The important factor is that there are other economies around the world that are
noticing a pretty significant slow down but we're in a much more enviable position.
"It is reassuring for the reserve bank that the death of the Australian economy is
not at our doors yet."
The figures will also reassure the Reserve Bank of Australia (RBA) that it has the
capacity to deliver an interest rate cut next week.
The central bank will announce its decision on Tuesday and is widely expected to cut
the official cash rate by 0.25 percentage points.
Thursday's investment numbers point to an expansion in the productive capacity of
the economy and suggest the jobs market will remain on a solid footing, reducing the
potential for a wages breakout.
"This sort of gives them some light at the end of the tunnel. We've seen weakness in
consumer sentiment, we've seen weaker business sentiment numbers, but really it
hasn't translated into a weaker investment number yet," Mr Sebastian said.
"Really, the supply side of the economy is pretty well primed to grow quite rapidly
and absorb the inflationary pressures, so wages will remain in check.
"It gives the reserve bank the option of making that rate cut come next week."
A rate cut next week will likely give Prime Minister Kevin Rudd some much needed
ammunition to counter what has been a sustained attack from the opposition over his
economic credentials.
The opposition is continuing to blame the Rudd government for the dramatic slide in
business and consumer confidence since it took office nine months ago.
"I think they've compounded the problem, and I think that's why Wayne Swan really
has been the worst treasurer in Australia's history," opposition finance spokesman
Peter Dutton said.
"It's just unbelievable that Labor could trash business confidence so quickly and
comprehensively.
"There are international factors but it's being compounded in our country by the
incompetence of this treasurer."
