Australian unemployment also surprises …
So unemployment in Australia fell from 5.7% in March to 5.4% in April. Following our better than expected March quarter this is all very interesting.
Very interesting …
People have decided to stop going to Aussie – go the collapsing labour market
Fewer people are departing to Aussie this February than in Feb 08 (down 22%). The economics tea leaves never leave me wanting – maybe I need to incorporate them into my forecasting routine.
This is a drastic slowdown – and is consistent with the sharp increase in unemployment over in Aussie. Now I’m just waiting for someone to say:
1) Aussie departures near record high or,
2) John Key stems tide to Aussie.
Both will give me a little giggle 🙂
Update: Go here, read the comments 😀
Australians denied insurance
When I saw this headline:
Australians refused insurance because of poor genes
And this headline (ht Marginal Revolution):
Australians denied insurance for genetic reasons
I immediately thought that they were talking about all of Australia. Then I read the article and realised how ridiculous this thought was 🙂
Supposedly some insurers are not allowing insurance because of newly testable genetic risk. Now how do you guys view this, I see two ways:
- It is good. It gets rid of the asymmetric information problem to some degree, so that we can have the “optimal” level of insurance. People that are low risk will now be able to insure themselves more cheaply afterall.
- It is bad. There is an endowment issue – some people are endowed with bad genes, and we want to redistribute to these people to make up for it.
Personally, I think even if we believe the second issue it would be better to have an efficient insurance industry and then redistribute ex-post …
Surprise fall in Aussie GDP: What happened
One piece of information managed to shake me out of my flu induced daze for long enough to write a post – Australian GDP had a surprising fall over the December quarter, falling 0.5% (seasonally adjusted) on September.
Appears that inventory accumulation was knocked down sharply – that is very interesting. Usually during a recession inventories are a positive contributor – as spending slows more quickly than production. This implies to me that the fall in GDP may not be sustainable – as inventory accumulation will need to build back up.
As a result, even with a 0.5% fall this quarter, I’m not sure if we are going to see an Aussie recession (two quarters of negative growth) quite yet …
Of course – the steep fall in their terms of trade is concerning – but that is a story for when I’m actually able to think 🙂
February RBA: Rates unchanged
The Reserve Bank of Australia has left their rates unchanged at 3.25% (statement here). We suggested that this was a possibility earlier in the day – and it is the closest thing to a correct rate call that I’ve have made for the last 18 months 😛
Relatively robust domestic demand, combined with commodity prices that just won’t fall sharply, has convinced the RBA that there is now enough stimulus.
They haven’t given up on future rate cuts. “The Board will consider the position again at its next meeting” indicates to me that there is room for cuts if Australian output starts to decline or if commodity prices from their end are really starting to sag.
This will definitely dent expected rate cuts in New Zealand. Before this I would have bagged a 75 cut – now a 50 cut is looking a lot more likely (than it was). I’ll keep an eye on iPredicit to see what is going to happen.
February Australian commodity prices
In all this negative news there is one plus that keeps on going: Australian commodity prices:
Source(RBA)
In Australian dollar terms export prices are virtually unchanged. I prefer looking at world prices though, as it gives you some idea of relative prices without having to look at the terms of trade (a sketchy idea). In this sense prices are down 12% on their September 2008 peak. However, to put this in perspective, this is 20% higher than February 2008!
I am very surprised with how strongly Australian commodity prices have held up. Late last year people told me it was because the RBA measure was a “lagging indicator. However, its February now and the index still looks very strong – why? With this sort of information I can understand why the RBA might not cut rates today.