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Robert Gottliebsen

Cracks expose the economy’s deep flaws

Robert Gottliebsen
Fairfax reported that revenue in the first few weeks of the year is down 9-9 per cent. Much of that is due to a big decline in house listings. Picture: Glenn Ferguson
Fairfax reported that revenue in the first few weeks of the year is down 9-9 per cent. Much of that is due to a big decline in house listings. Picture: Glenn Ferguson

Australia was travelling reasonably well in the second half of the 2015-16 financial year, but suddenly we are seeing cracks appear. Business is blaming the long Federal Election and the close result. While that is important, I fear we may be looking at something much deeper.

Yesterday a series of disturbing events really captured my attention.

At the Small Enterprise Association of Australia and New Zealand conference I got a whiff that segments of the small business community had opened the 2016-17 year with tougher conditions. For example, accommodation bookings in many tourist areas were down markedly. They are better in the CBD areas but still sluggish. The slow paying of accounts by big corporations and governments is taking a big toll in the small enterprise sector.

And then one of the companies that regularly indicates how the economy is faring, Fairfax, raised a warning flag. CEO Greg Hywood reported that trading in the first five weeks of 2016-17 saw revenue down 8 to 9 per cent. Much of that was a big decline in house listings in Sydney and, to a lesser extent, Melbourne, though there has been some recovery in recent weeks. Nevertheless that’s a big fall in the first few weeks of the year.

From Fairfax I went to Commonwealth Bank’s profit report and reflected on the inner meaning of what CEO Ian Narev was announcing. First of all CBA household deposits were up a staggering 9.5 per cent over the year to June 30, driven by transactional accounts. In a clear sign of nervousness, Australians are cashing up at a monumental rate. But they are not racing for longer-term deposits, which is why Narev lifted the one, two and three-year CBA term deposit rates last week. (The higher rates come in on August 19.)

Businesses are simply not investing. Overall CBA business lending was up 6.1 per cent but hidden among the figures there was virtually no growth in regional and agricultural areas and only 5 per cent in local business.

The only area of strong growth is the home building industry, where lending is up 7 per cent. Governments are spending money on public servants and social services but are not spending on infrastructure to drive development.

And so the ANZ-Roy Morgan Australian Consumer Confidence level fell a sharp 2.8 per cent to 114.7 last week, its lowest level in nine weeks. This was a surprising result given that the RBA cut the cash rate to a historic low of 1.5 per cent last week. Meanwhile, business confidence is also down.

Maybe it’s the Federal Election but I think it’s deeper than that. When the Coalition government took to superannuation with an axe and acted with clear retrospectivity while saying it was not acting retrospectivity, it shattered confidence across the board.

Bill Shorten could well have been Prime Minister but for the Daniel Andrews’ Victorian government’s disastrous attack in the CFA, which prevented Bill Shorten campaigning properly in his home state.

To reverse the trend we are going to require some clear thinking on superannuation and some sign that the 45th Parliament is workable. (How to fix the super mess, August 9.)

A lot will depend on Opposition Leader Bill Shorten. Will he be a Tony Abbott who relentlessly attacks the government? Or will he deal with the Coalition in the national interest?

If retirees are not treated fairly and chaos is created in Canberra then watch out — the current warning signs will become a clear nasty trend. We will have tough times and interest rate reductions will not make the slightest difference.

Robert Gottliebsen
Robert GottliebsenBusiness Columnist

Robert Gottliebsen has spent more than 50 years writing and commentating about business and investment in Australia. He has won the Walkley award and Australian Journalist of the Year award. He has a place in the Australian Media Hall of Fame and in 2018 was awarded a Lifetime achievement award by the Melbourne Press Club. He received an Order of Australia Medal in 2018 for services to journalism and educational governance. He is a regular commentator for The Australian.

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Original URL: https://www.theaustralian.com.au/business/opinion/robert-gottliebsen/cracks-expose-the-economys-deep-flaws/news-story/3320d3b5feb144c91d279cc91fa7d5ca