Look back to a year ago and compare the gloom and doom merchants’ predictions against the reality of the slow but steady recovery.
Take a close look at Dr. Ed’s Economic Chart – what does Professor Ed Siegfried of the Stonier Graduate School tell you about the country that defied pollsters with a massive 323 to 206 win for President Obama:
- Housing starts are up
- GDP is increasing
- Unemployment is decreasing
- Rates are stable at all-time lows
- Inflation is very low
Despite these trends, older conservative financial commentators continue to pursue the negative news forecasts, highlight the same speculation that the West is in decline, that China’s growth has reversed and the hope that Rudd and Turnbull will make a spectacular (but unlikely) return to yesterday.
What the Obama election showed is that younger, female, minority and middle-class households do not follow these aspirations. The focus is on more kids staying longer at school seeking a better education and more companies keeping their best staff to increase performance.
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The fundamentals of the Australian economy remain strong and the outlook is favourable, with solid growth, low unemployment and well-contained inflation.
Robust demand in Asia should continue to underpin the strong outlook for the resources sector, where investment has reached unprecedented levels. Businesses expect to invest a record $120 billion in the resources sector in the next year, around 150% higher than its level just two years before, and 13 times the level of investment before the first phase of the boom. The resources investment pipeline is currently over $450 billion, with more than half of these projects already committed or under construction.
The continued rise in the Australian dollar is forcing a total reconstruction of the manufacturing sector and establishing the need for innovation creativity and increasing levels of corporate productivity. Consumer confidence has again been rising well ahead of business confidence reflecting a household experience of near full employment, further interest rate cuts and a systematic return to equity investments as the share market recovers a significant return.
Notwithstanding the unevenness in the patchwork economy, the unemployment rate has remained low and been relatively stable. At close to 5%, it is also lower than in most other advanced countries. The unemployment rate is around half that in the euro area and significantly below that in the United States.
Who would prefer to have the double digit inflation of many European countries or the disruption of countries with five times our level of youth unemployment?
It is true that weak demand and tight credit conditions are making conditions challenging in parts of the construction sector, domestic tourism and retail operations outside the resources sector. But compared to Europe and the US the continued national growth rate will most likely exceed that of most OECD countries, even if Wayne makes even further expenditure cuts to preserve the surplus he has to have.
Swan is right to point out that forecasts of the need to refund the years of fiscal stimulus remain the platform for longer term national economic stability, no matter how much Joe Hockey calls for a cut-back in the entitlement mentality.
While growth in the resources part of the economy has been exceptional in recent years, there has also been strong growth in sectors such as healthcare and social assistance, professional scientific and technical services, and education and training. The only real concern is that banks will become tougher on small business as they cope with the Basel III regulations.
So, ’tis the season for business leaders to make their own bright futures. Try to forget that we are heading into an election silly season and expect the national economy to grow at double the rate for the last couple of years. As we head into an endless round of Christmas parties, ’tis the season for smart companies to be growing a prosperous new year.
Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.