When bad news is good news
There I was, late yesterday afternoon — under-caffeinated and overworked — discussing my new research report with a colleague.
‘What’s different about this research? Haven’t people had enough doom and gloom for one year?’ he asked me.
‘Oh no, this one isn’t about doom and gloom,’ I told him. ‘This is about how to survive the doom and gloom.’
I’m pretty sure that’s the moment I heard the eye roll.
But never one to back down from a challenge…I continued.
‘The bad news is being masked and the mainstream are telling us it’s good news…’
The hard data is telling us something is off in the Aussie economy. But it’s constantly being dressed up as nothing to worry about.
We are supposedly at almost full employment, but there’s no wage growth. Interest rates are at unprecedented levels — and have been for almost three years — but there’s no inflation in consumer goods…just essentials like petrol, healthcare costs and utilities expenses.
Aussies have a staggering amount of household debt. Our savings rate is well below trend. Right back to where it was before the financial crisis, in fact.
These are worrying signs at the individual level.
Something doesn’t add up
Yet…all around in the mainstream press, you keep being told that the Aussie economy is in good health.
But the picture gets worse for the broader economy.
Australia’s most recent trade balance data should concern you.
Trade surplus — where the value of our exports is higher than the cost of imports — grew to $3.68 billion in December, up from a $2.25 billion trade surplus in November.
It might not sound like much, but it’s a 65% increase in 30 days.
Exporting more than we import tells us that domestic demand is weak. A higher trade surplus also reflects the lack of business demand for goods used in construction and engineering.
It’s not a one-off, either. We have been growing a trade surplus since January 2018.
Local demand for stuff — whether it be for business, to fill our homes, or to spend at cafés and restaurants — is dropping.
Oh, but don’t let the facts of the economy get in the way.
The Reserve Bank of Australia certainly isn’t.
Last year, it forecast that Australia’s gross domestic product would average 3.5% for 2018. The actual figure was 2.8%.
Whoops. It missed its forecast by a mile.
This year, the RBA reckons we’ll average around 3% growth. Although I doubt that figure will be accurate either.
So, how do the ‘professionals’ get it so wrong? Well, as Jim explains below, they use old models that don’t match up with a modern economy.
While Jim’s focus today is on the US Federal Reserve making poor calls, the analysis applies to the Aussie economy as well.
The bad news is being dressed up for you. The so-called experts aren’t joining the dots…
I’ll share more details about my report next week.
Until then, it’s over to Jim.