Australia’s Economy On The Up – Interest Rates Going Down

Recently, I was lucky enough to hear Craig James, CommSec’s Chief Economist, talk at a luncheon and the optimism in the room on the state of Australia’s economy was palpable.

According to Mr. James, who is without doubt one of the sharpest brains on Australia’s economy, we are in excellent shape and he offered some undeniable facts to back this up:

  • Inflation is at 2 %
  • Unemployment is just under 5%
  • There has been no recession in 20 years
  • There’s real wage growth

So the question he posed to the room was a great one, “with all of this great news, why so glum?”

The Media

As we all know, it’s not good news that sells and the media recently had a field day reporting the massive hit that ASX 200 took on Monday, 5th June but they failed to report that it mostly bounced back the next day!

Housing Figures And The Media

Again, listen to the media and at best the housing market is stagnant but at Empire in the last quarter, we’ve had to move exceptionally quickly to fight off opposition from other strong buyers to get good deals across the line.

At our lunch, a guest asked Craig James about property investment and he was animated about the fact that now was the time to buy, especially in the city bowl of Sydney (15K radius to the city).

The Real Australian Economy – Strong GDP Growth

For the March quarter, our national accounts figures revealed that the Australian economy expanded at 1.3% – double what the market expected and registering its second best growth rate in the last five years!

When even Joe Hockey, the Shadow Treasurer welcomes the result and concedes that the figures are ‘extraordinary’ then maybe it’s time to tentatively entertain the idea that, as a nation, we’re doing more than OK?

As Wayne Swane, Deputy PM and Treasurer said at the time, “Well I think the country should have a bounce in its step today. What a great day for Australia and what a stunning set of figures. I think these figures send the loudest possible message to the world that Australia is the strongest-performing developed economy, bar none”.

Interest Rates

Taking all of this into account, consumer confidence is still down and because of that, the RBA took the interest rates back another 25 basis points in June bringing our base rate to 3.50 per cent which is extraordinarily low.

The Big Picture

It’s easy to get bogged down in daily routines and worry about the small stuff but the reality is that we Australians are enjoying a unique combination of the fastest growing economy in the developed world and low interest rates!

Take a moment to celebrate the fact that Australia is in a great shape and worth investing in.

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