Project LINK Meeting New York, October Country Report: Australia

Size: px
Start display at page:

Download "Project LINK Meeting New York, 20-22 October 2010. Country Report: Australia"

Transcription

1 Project LINK Meeting New York, - October 1 Country Report: Australia Prepared by Peter Brain: National Institute of Economic and Industry Research, and Duncan Ironmonger: Department of Economics, University of Melbourne 1. Australian economic outlook for the forecast period. At the centre of the current projections is the mechanism that the balance of payments is going to move back to the centre stage as a determinant of Australian economic growth. It occupied this position in the th Century to the late 198s, until the rapid expansion of world capital flows over the last years appeared to rescue Australia from worrying about its international debt and current account deficit. The sustained high current account deficits and steady built up in foreign debt, has meant that since the mid 199s Australia s ratio of short term debt (or international debt of less than one year to maturity) to foreign reserves has increased from to 1 to 1 to 1 currently. The optimum ratio for emerging economies is considered to be 1 to 1. Moreover, recent studies have indicated that the best indicator of how badly an economy was affected by the GFC was the reserves to international debt ratio just before the crisis. The lower the ratio the more adversely affected an economy was by the GFC. Australia clearly was one of the exceptions to this general rule. It cannot be assumed that this will remain the case. The next few years will be a difficult time for emerging or developed economies that have a high vulnerability to sudden changes in international investor sentiment. Risk margins demanded by investors over the next 1 years will be higher than the last decade. This means that the Australian economy is likely to generate distinct business cycles over the next 1 years with interest rates peaking over 1-13 and During the peak interest rate periods real short term interest rates will be in the region of % to.%. This will be required to attract the foreign capital to roll over Australia s international debt and to attract new capital to cover current account deficits. The interest rate peaks will be followed by periods of slow economic growth, around 1.7% for 13 and.% for 18, with sharp downturns in dwelling activity. Balance of payments pressures will be an important, but not the only, factor in driving interest rates and the economic cycle. The other will be the rate of inflation. The relatively high growth over 11-1 and 1 will push inflation rates to the 3% to % per cent range which will reinforce the upward pressure on interest rates from balance of payments pressures.. Interest rates. The interest rate profile is derived by a Taylor Rule equation which has worked well in explaining interest rates over the last decade. The arguments in the Taylor Rule equation are: (i) the inflation rate; (ii). times the gap between the inflation rate and %; (iii). times the gap between the capacity utilisation rate and nominal or non-inflationary capacity utilisation rates; 1 c:link\link1a.doc

2 (iv).1 times the gap between the current account deficit as a % of GDP and -.% where the latter is the sustainable level. Australian 9 day interest rates are high compared to most other countries. Australia s rate is approaching % compared to the.% of the US and Japan and.8 per cent for the Euro area. In many countries, unlike Australia, the medium term bond rate, such as the 1 year government bond rate, is the more important indicator of the interest rate benchmark for the rest of the economy. In the case of this indicator the differentials are less. Currently the 1 year bond rate for Australia is %, compared to 3.% for the United States and.8% for the Euro area. The differential is explained by the Taylor Rule drivers. For example, the inflation rate in the US and the Euro area are one half to two thirds of the Australian level. The Greek debt crisis has focussed attention on the ability of countries to service their debts. At first instance it may be thought that the Greek situation is irrelevant to Australia as the focus for Greece was on the ability of the country to finance its public debt. In contrast, Australia has low public sector debt and an annual public sector deficit as a per cent of GDP around a quarter of the Greek level. That is,.% compared to 1% for Greece for 1. The reality is that economic policy in Australia is being applied with a false sense of security. Consider the ratio to GDP of the annual current account (1 months ahead) plus the total foreign debt of 1 months or less to maturity less internal reserves held by the Reserve Bank of Australia. This ratio rose rapidly since the late 199s to reach about % of GDP in March 9. It has fallen back to % of GDP by March quarter 1. However, this decline reflects the recovery of the exchange rate from the lows of early 9. There are a number of points to be made. First, the Australian ratio is very high by international standards. Countries on international debt sustainability watch, such as the countries of Eastern Europe, appear to have comparable ratios at around % to 3%. Second, the ratio is sensitive to the exchange rate because a significant part of Australia s internal debt is in foreign currency. Third, any weakening of confidence of Australia to service its foreign debt could weaken the currency and quickly carry the ratio well beyond the % mark. The basic problem for Australia is that the bulk of the short term debt is held by the banking system. To protect the banking system in an exchange rate crisis the government could be forced to transfer part or all of the bank debt to its own balance sheet and, if confidence was not restored, a good part of medium term debt as well. The focus would then shift to the ability of the government to service the debt. That is, within a very short period of time Australia could go from having one of the lowest ratios of public sector debt to GDP of the high income countries to one of the highest. In the absence of an exchange rate crisis it is clear that at the very least the interest rate margin paid on foreign debt will increase over the next few years, which will place upward pressure on domestic interest rates over and above the level suggested by the standard Taylor Rule equation. That is the.1 coefficient for the current account deficit is increased for this projection. As has been noted above, it is expected that there will be considerable currency instability over the next four to five years. As a result, over 1 to 1 the short term interest rate is projected to peak at in excess of 8% during this time. The high interest rate will be a combination of: (i) inflation rates in excess of 3% and approaching % over 1-13; (ii) (iii) general world high interest rates because of high risk premiums for financial and currency risks; and high margins on Australian debt because of the need to roll over higher levels of short term international debt. 3. Inflation. Currently the underlying rate of inflation in Australia is running at around 3% per annum. This is what would be expected given the growth in unit costs of production in general, and the growth in nominal wages. The inflation rate is at the top of the RBA range for acceptable outcomes. The expectation is that inflationary pressures will intensify over the next two years compared to the current, largely satisfactory, inflation outcome. This is because of: (i) increasing capacity utilisation rates which will enable profit margins to recover or be enhanced as GDP growth is likely to grow faster than the underlying growth in capacity; c:link\link1a.doc

3 (ii) (iii) (iv) decline in productivity growth as the economy moves towards higher capacity utilisation rates; recovery in oil prices and some commodity prices as the general world growth rate accelerates; potential weakness in the exchange rate leading to the intensification of inflationary pressures; and (v) the high probability of a carbon pricing regime circa 1 or 13, irrespective of the political colour of the government of the day because of strong international pressure. The cycle is then repeated over the second half of the period. The inflation rate, as measured by the CPI, is aggravated by a steadily devaluating weighted average exchange rate over the period. Over the projection period the currency is projected to decline by 3%, adding about % to the cumulative increase in the prime level. High productivity growth requires high GDP growth and it appears that Australia could well be locked into a cycle of relatively low trend rate of growth and a business cycle which discourages firms from investing at the level required to support high growth and high productivity growth. Australia s inability to ensure an adequate skilled labour supply from the resident population is another factor that will contribute to the inflationary problem.. Gross Domestic Product. The Australian GDP growth rate has been revised downwards from previous forecasts. The downward revisions to 1 reflect the more difficult international economic environment that will result from many high income countries exiting from their stimulus programs earlier than expected and the additional pressure that will be brought on Australia to operate within the balance of payments constraint to growth. After 1, the downward growth revisions reflect the fact that Australian households are borrowing annually $ billion to finance consumption expenditure, which will have to end over the next three to four years. When it ends, even with a soft landing over 13-, it will still require around an 8% reduction in household consumption expenditure relative to income. This will have a significant negative impact on GDP growth. The following section outlines why this will have to be the case. Australian households: Debt servicing and consumption The following table shows three indicators for the Australian household sector. The first row of data is the headline net savings rate as defined in the Australian National Accounts. The second row of data shows estimated household savings via superannuation based on the last National Accounts estimate. The third line of data in the table is the difference between the first two lines of data and represents non-superannuation savings by Australian households. It is significantly negative and has been so since the mid 199s. Australian Household Sector - June 199 to December 9 Savings as percent of Net Household Disposable Income Net household savings Jun 9 Jun 9 Jun Jun Jun 8 Dec 8 Mar 9 Jun 9 Sep 9 Dec Household superannuation savings Non superannuation savings It has long been recognised that Australian savings are low. However, the National Accounts have been deceiving us as to just how low. In countries where payroll taxes are levied to finance government social security schemes, any resulting savings are credited to the government and not to the household sector. In Australia compulsory superannuation contributions are levied which are very similar to payroll taxes, but because they are levied by private bodies they are included in the National Accounts as household savings. Households are thus credited with a savings rate of about 1 per cent of income, which would not be credited in the National Accounts of comparator countries. This means that household non-superannuation savings are well below zero, almost completely offsetting the superannuation savings impact given that net household savings are near zero and have been for some time. It appears from the data in the following table that negative household non-superannuation savings have largely been financed by the build up in the household debt to income ratio. 3 c:link\link1a.doc

4 Australian Household Sector - June 199 to December 9 Household Debt as percent of Net Household Disposable Income Jun 9 Jun 9 Jun Jun Jun 8 Dec 8 Mar 9 Jun 9 Sep 9 Dec 9 Household debt as % of net disposable income This hypothesis is consistent with two data series. There is a correlation between cumulative household equity withdrawal as a percentage of net household disposable income and the build-up in household debt. (Equity withdrawal is defined as the change in debt less net investment.) There is a close relationship between the change in debt since the mid 199s and the cumulative change in household non-superannuation savings as a percentage of household disposable income, where the latter has its sign reversed. This means that currently the Australian household sector is borrowing approximately $ billion per annum to finance its current level of consumption expenditure. This cannot continue and at some point it will stop with severe implications for the economy. At any time over the next five to ten years household consumption expenditure growth is likely to turn significantly negative. The alternative is a hard landing where the correction takes place over a one year period leading to a contraction in GDP of % to % and a percentage point increase in the unemployment rate. The longer the current situation continues, the more likely this will be the case.. Wages and employment. The employment growth rate is expected to decline relative to GDP growth over the medium term. This is because relatively strong employment growth was maintained over 9 and into 1 by declines in average hours of work. In this context it is worth noting that total hours worked in the March quarter 8 was approximately the same as in the March quarter 1. That is, if total employment had behaved in line with total hours worked, the unemployment rate would have exceeded 7%. It is assumed that as the economy s growth rate increases the average hours worked will increase. That is, employment growth will become relatively weak. The next significant downturn post 1 should result in the unemployment rate increasing to over %. In this context it should be noted that in any case the effective increase in the underlying unemployment rate has been considerably greater than the headline unemployment rate. This is because, as in past downturns, the true increase in the unemployment rate has been disguised by governments shifting working age unemployed from unemployment benefits to other forms of social security support. October 1 c:link\link1a.doc

5 Project LINK October 1 - AUSTRALIA Calendar Years Aggregate Demand (Current Prices) Percent Change Private Consumption A$b Government Consumption A$b Fixed Capital Formation A$b Exports of Goods & Services A$b Imports of Goods & Services A$b Gross Domestic Product A$b Aggregate Demand (At 7-8 Prices) Percent Change Private Consumption A$b Government Consumption A$b Fixed Capital Formation A$b Exports of Goods & Services A$b Imports of Goods & Services A$b Gross Domestic Product A$b Aggregate Deflators (7-8 = 1) Percent Change Private Consumption Government Consumption Fixed Capital Formation Exports of Goods & Services Imports of Goods & Services Gross Domestic Product Balance of Payments Percent Change Exports All Goods A$b Imports All Goods A$b Exports All Goods US$b Imports All Goods US$b Annual Value Trade balance FOB US$b Current Account Balance US$b Exchange rate A$/US$ Key Economic Indicators Consumer price index (% change) Unemployment Rate (%) Treasury Bill Rate (%pa) Bond Rate 1 year (%pa) Government Surplus (A$b) Government Surplus (%of GDP) c:link\link1a.doc

6 Project LINK Meeting New York October 1 Charts: Australia Australia Outlook 1-1 Gross Domestic Product Fixed Capital Formation Gross Domestic Product Fixed Capital Formation Australia Outlook 1-1 Unemployment Private Consumption Deflator.. Unemployment Consumption Deflator c:link\link1a.doc

7 Project LINK Meeting New York October 1 Charts: Australia Australia Outlook 1-1 Private Consumption Government Consumption Australia Outlook 1-1 Exports G&S Imports G&S c:link\link1a.doc

Letter STUDENT NUMBER ECONOMICS. Written examination. Thursday 30 October 2014

Letter STUDENT NUMBER ECONOMICS. Written examination. Thursday 30 October 2014 Victorian Certif cate of Education 2014 SUPERVISOR TO ATTACH PROCESSING LABEL HERE Letter STUDENT NUMBER ECONOMICS Written examination Thursday 30 October 2014 Reading time: 3.00 pm to 3.15 pm (15 minutes)

More information

Statement by. Janet L. Yellen. Chair. Board of Governors of the Federal Reserve System. before the. Committee on Financial Services

Statement by. Janet L. Yellen. Chair. Board of Governors of the Federal Reserve System. before the. Committee on Financial Services For release at 8:30 a.m. EST February 10, 2016 Statement by Janet L. Yellen Chair Board of Governors of the Federal Reserve System before the Committee on Financial Services U.S. House of Representatives

More information

X. INTERNATIONAL ECONOMIC DEVELOPMENT 1/

X. INTERNATIONAL ECONOMIC DEVELOPMENT 1/ 1/ X. INTERNATIONAL ECONOMIC DEVELOPMENT 1/ 10.1 Overview of World Economy Latest indicators are increasingly suggesting that the significant contraction in economic activity has come to an end, notably

More information

Economic projections

Economic projections Economic projections 2016-2019 December 2016 Outlook for the Maltese economy Economic projections 2016-2019 Economic activity in Malta is expected to remain robust over the projection horizon, supported

More information

Victorian electricity sales and peak demand forecasts to 2024-25 SUMMARY REPORT

Victorian electricity sales and peak demand forecasts to 2024-25 SUMMARY REPORT Victorian electricity sales and peak demand forecasts to 2024-25 SUMMARY REPORT Prepared by the National Institute of Economic and Industry Research (NIEIR) ABN: 72 006 234 626 416 Queens Parade, Clifton

More information

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast 6. Economic Outlook The International Economy Growth of Australia s major trading partners is expected to remain around its long-run average pace in 15 and 16 (Graph 6.1). Forecasts have been revised down

More information

percentage points to the overall CPI outcome. Goods price inflation increased to 4,6

percentage points to the overall CPI outcome. Goods price inflation increased to 4,6 South African Reserve Bank Press Statement Embargo on Delivery 28 January 2016 Statement of the Monetary Policy Committee Issued by Lesetja Kganyago, Governor of the South African Reserve Bank Since the

More information

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast 6. Economic Outlook 6 4 0 The International Economy Overall, growth of Australia s major trading partners (MTPs) is expected to be around its long-run average pace in 015 and 016 (Graph 6.1). This forecast

More information

Introduction B.2 & B.3 111

Introduction B.2 & B.3 111 Risks and Scenarios Introduction The forecasts presented in the Economic and Tax Outlook chapter incorporate a number of judgements about how both the New Zealand and the world economies evolve. Some judgements

More information

Q&A on tax relief for individuals & families

Q&A on tax relief for individuals & families Q&A on tax relief for individuals & families A. Tax cuts individuals What are the new tax rates? The table below shows the new tax rates being rolled out from 1 October 2008, 1 April 2010 and 1 April 2011,

More information

Euro Zone s Economic Outlook and What it Means for the United States

Euro Zone s Economic Outlook and What it Means for the United States WELCOME TO THE WEBINAR WEBINAR LINK: HTTP://FRBATL.ADOBECONNECT.COM/ECONOMY/ DIAL-IN NUMBER (MUST USE FOR AUDIO): 855-377-2663 ACCESS CODE: 71032685 Euro Zone s Economic Outlook and What it Means for the

More information

Strategy Document 1/03

Strategy Document 1/03 Strategy Document / Monetary policy in the period 5 March to 5 June Discussed by the Executive Board at its meeting of 5 February. Approved by the Executive Board at its meeting of 5 March Background Norges

More information

Outlook. for theus Dollar

Outlook. for theus Dollar Outlook for theus Dollar The US dollar staged one of its most powerful rallies in August, with the 1 rising nearly 6% 2 that month. The breadth of the rally was also impressive, with the currency rising

More information

5 Taxes on consumption

5 Taxes on consumption 5 Taxes on consumption The federal government applies a number of different indirect taxes, primarily targeted at consumers, including sales taxes, excise duties and import tariffs. 35 Taxes on consumption

More information

1 Fiscal strategy and outlook

1 Fiscal strategy and outlook 1 Fiscal strategy and outlook Features The 2015-16 Budget delivers the Government s election commitments, with key measures to revitalise the State economy and frontline service delivery, especially in

More information

Key Challenges in Economic Management of Pakistan

Key Challenges in Economic Management of Pakistan The Lahore Journal of Economics Special Edition Key Challenges in Economic Management of Pakistan Taufiq A. Hussain * Abstract This paper points out that GDP growth is fundamentally on track although a

More information

Contents. General overview Key Economic figures Main Economic trends Financial services sector Economic Outlook...

Contents. General overview Key Economic figures Main Economic trends Financial services sector Economic Outlook... Contents General overview... 3 Key Economic figures... 5 Main Economic trends... 6 Financial services sector... 11 Economic Outlook... 15 General overview The financial and economic crisis called for the

More information

STATEMENT 7: DEBT MANAGEMENT

STATEMENT 7: DEBT MANAGEMENT STATEMENT 7: DEBT MANAGEMENT This statement discusses debt management, including maintaining the Commonwealth Government Securities (CGS) market and the proposed investment of financial assets in the Future

More information

LIST OF MAJOR LEADING & LAGGING ECONOMIC INDICATORS

LIST OF MAJOR LEADING & LAGGING ECONOMIC INDICATORS APRIL 2014 LIST OF MAJOR LEADING & LAGGING ECONOMIC INDICATORS Most economists talk about where the economy is headed it s what they do. Paying attention to economic indicators can give you an idea of

More information

PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY

PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY PUBLIC FINANCE REVIEW February 2013 SUMMARY Key messages The purpose of our analysis is to highlight the risks that fiscal policy

More information

WITH-PROFIT ANNUITIES

WITH-PROFIT ANNUITIES WITH-PROFIT ANNUITIES BONUS DECLARATION 2014 Contents 1. INTRODUCTION 3 2. SUMMARY OF BONUS DECLARATION 3 3. ECONOMIC OVERVIEW 5 4. WITH-PROFIT ANNUITY OVERVIEW 7 5. INVESTMENTS 9 6. EXPECTED LONG-TERM

More information

EUROSYSTEM STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA

EUROSYSTEM STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA EUROSYSTEM STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA On the basis of the information available up to 22 May 2009, Eurosystem staff have prepared projections for macroeconomic developments in the

More information

The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth

The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth enabling us to produce more and more to achieve higher

More information

Economic Outlook 2009/2010

Economic Outlook 2009/2010 Economic Outlook 29/21 s Twenty-Eighth Annual Forecast Luncheon Paul R. Portney Dean, Professor of Economics, and Halle Chair in Leadership Marshall J. Vest Director Economic and Business Research Center

More information

Economic and Fiscal Outlook for Ireland

Economic and Fiscal Outlook for Ireland Economic and Fiscal Outlook for Ireland Section 1 Macroeconomic Developments Slides 3-8 Section 2 Macroeconomic Outlook Slides 9-11 Section 3 Developments in Public Finances Slides 12-14 Section 4 Debt/Deficit

More information

Technical assumptions for interest rates, exchange rates, commodity prices and fiscal policies

Technical assumptions for interest rates, exchange rates, commodity prices and fiscal policies ECB STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA The current economic outlook is highly uncertain, as it critically depends on forthcoming policy decisions as well as the reaction of private sector

More information

Meeting with Analysts

Meeting with Analysts CNB s New Forecast (Inflation Report II/2015) Meeting with Analysts Petr Král Prague, 11 May, 2015 1 Outline Assumptions of the forecast The new macroeconomic forecast Comparison with the previous forecast

More information

EAST AYRSHIRE COUNCIL CABINET 21 OCTOBER 2009 TREASURY MANAGEMENT ANNUAL REPORT FOR 2008/2009 AND UPDATE ON 2009/10 STRATEGY

EAST AYRSHIRE COUNCIL CABINET 21 OCTOBER 2009 TREASURY MANAGEMENT ANNUAL REPORT FOR 2008/2009 AND UPDATE ON 2009/10 STRATEGY EAST AYRSHIRE COUNCIL CABINET 21 OCTOBER 2009 TREASURY MANAGEMENT ANNUAL REPORT FOR 2008/2009 AND UPDATE ON 2009/10 STRATEGY Report by Executive Head of Finance and Asset Management 1 PURPOSE OF REPORT

More information

4. Supply and Demand Developments

4. Supply and Demand Developments 4. Supply and Demand Developments The fourth-quarter national accounts data are consistent with the outlook presented in the January Inflation Report. After growing temporarily at a slower pace in the

More information

INFLATION REPORT PRESS CONFERENCE. Thursday 4 th February 2016. Opening remarks by the Governor

INFLATION REPORT PRESS CONFERENCE. Thursday 4 th February 2016. Opening remarks by the Governor INFLATION REPORT PRESS CONFERENCE Thursday 4 th February 2016 Opening remarks by the Governor Good afternoon. At its meeting yesterday, the Monetary Policy Committee (MPC) voted 9-0 to maintain Bank Rate

More information

Forecasting Chinese Economy for the Years 2013-2014

Forecasting Chinese Economy for the Years 2013-2014 Forecasting Chinese Economy for the Years 2013-2014 Xuesong Li Professor of Economics Deputy Director of Institute of Quantitative & Technical Economics Chinese Academy of Social Sciences Email: xsli@cass.org.cn

More information

Czech Economic Outlook and Prospects for the Exchange Rate Floor

Czech Economic Outlook and Prospects for the Exchange Rate Floor Czech Economic Outlook and Prospects for the Exchange Rate Floor Vladimir Tomsik Vice-Governor Czech National Bank Small Talks Symposium 9 October 2015 Investor Seminar 10 October 2015 IMF/WB Annual Meeting

More information

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast 6. Economic Outlook The International Economy Overall, growth of Australia s major trading partners (MTPs) is expected to be a bit above its long-run average in 014 and 015 (Graph 6.1). Forecasts for most

More information

6. Economic Outlook. The International Economy. Graph 6.2 Terms of Trade Log scale, 2012/13 average = 100

6. Economic Outlook. The International Economy. Graph 6.2 Terms of Trade Log scale, 2012/13 average = 100 6. Economic Outlook The International Economy Growth of Australia s major trading partners is expected to be around its long-run average in 015 and 016 (Graph 6.1). Forecasts for 015 have been revised

More information

Meeting with Analysts

Meeting with Analysts CNB s New Forecast (Inflation Report IV/) Meeting with Analysts Tibor Hlédik Prague, 7 November, Outline Assumptions of the forecast The new macroeconomic forecast Comparison with the previous forecast

More information

ECB STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA

ECB STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA Box STAFF MACROECONOMIC PROJECTIONS FOR THE EURO AREA The current economic outlook is highly uncertain, as it critically depends on forthcoming policy decisions as well as the reaction of private sector

More information

Main Indicators for the Finnish Economy

Main Indicators for the Finnish Economy BANK OF FINLAND Monetary Policy and Research - Financial Markets and Statistics Main Indicators for the Finnish Economy 1/11 January 1 January 11 Monetary Policy and Research - Financial Markets and Statistics

More information

Main Indicators for the Finnish Economy

Main Indicators for the Finnish Economy BANK OF FINLAND Monetary Policy and Research - Financial Markets and Statistics Main Indicators for the Finnish Economy 3/11 17 March 11 Main Indicators for the Finnish Economy is produced jointly by the

More information

Consumer Sentiment Indicators and the Economic Outlook

Consumer Sentiment Indicators and the Economic Outlook Consumer Sentiment Indicators and the Economic Outlook July 2014 Key Points: Consumer confidence fell sharply after federal Budget 2014/15 and there are concerns about the budgets implications for economic

More information

Loi M Bakani: Papua New Guinea s semi annual Monetary Policy Statement (MPS)

Loi M Bakani: Papua New Guinea s semi annual Monetary Policy Statement (MPS) Loi M Bakani: Papua New Guinea s semi annual Monetary Policy Statement (MPS) Address by Mr Loi M Bakani, Governor of the Bank of Papua New Guinea, Port Moresby, 30 March 2012. Objective of monetary policy

More information

UK Economic Forecast Q1 2015

UK Economic Forecast Q1 2015 UK Economic Forecast Q1 2015 David Kern, Chief Economist at the BCC The main purpose of the BCC Economic Forecast is to articulate a BCC view on economic topics that are relevant to our members, and to

More information

Recent Trends in Superannuation Fund Assets

Recent Trends in Superannuation Fund Assets Recent Trends in Superannuation Fund Assets The assets of superannuation funds have increased rapidly in the 99s. Along with managed funds more generally, this growth has been considerably faster than

More information

ETF Portfolio Solutions Core Diversified ETF Model December quarter 2013

ETF Portfolio Solutions Core Diversified ETF Model December quarter 2013 ETF Portfolio Solutions ETF Model December quarter 2013 PORTFOLIO SOLUTIONS Portfolio Objective The broad investment objective of the ETF Model is to offer financial advisers an ETF-based investment portfolio

More information

13. If Y = AK 0.5 L 0.5 and A, K, and L are all 100, the marginal product of capital is: A) 50. B) 100. C) 200. D) 1,000.

13. If Y = AK 0.5 L 0.5 and A, K, and L are all 100, the marginal product of capital is: A) 50. B) 100. C) 200. D) 1,000. Name: Date: 1. In the long run, the level of national income in an economy is determined by its: A) factors of production and production function. B) real and nominal interest rate. C) government budget

More information

Main Indicators for the Finnish Economy

Main Indicators for the Finnish Economy BANK OF FINLAND Monetary Policy and Research - Financial Markets and Statistics Main Indicators for the Finnish Economy /1 13 April 1 13 April 1 Monetary Policy and Research - Financial Markets and Statistics

More information

Correlation between the US Federal Funds Rate and Unemployment Rate

Correlation between the US Federal Funds Rate and Unemployment Rate Macroeconomy and Financial Markets Correlation between the US Federal Funds Rate and Unemployment Rate Sungwon Cho, Research Fellow* Despite low interest rates, the US inflation rate is within the Federal

More information

Monetary policy assessment of 13 September 2007 SNB aiming to calm the money market

Monetary policy assessment of 13 September 2007 SNB aiming to calm the money market Communications P.O. Box, CH-8022 Zurich Telephone +41 44 631 31 11 Fax +41 44 631 39 10 Zurich, 13 September 2007 Monetary policy assessment of 13 September 2007 SNB aiming to calm the money market The

More information

6. Economic Outlook. The International Economy. Graph 6.1. Australia s Trading Partner Growth* Year-average RBA forecast

6. Economic Outlook. The International Economy. Graph 6.1. Australia s Trading Partner Growth* Year-average RBA forecast 6. Economic Outlook The International Economy Overall growth of Australia s major trading partners is expected to be a bit above its long-run average pace in 01 and 015 (Graph 6.1). This forecast is little

More information

THE GREAT DEPRESSION OF FINLAND 1990-1993: causes and consequences. Jaakko Kiander Labour Institute for Economic Research

THE GREAT DEPRESSION OF FINLAND 1990-1993: causes and consequences. Jaakko Kiander Labour Institute for Economic Research THE GREAT DEPRESSION OF FINLAND 1990-1993: causes and consequences Jaakko Kiander Labour Institute for Economic Research CONTENTS Causes background The crisis Consequences Role of economic policy Banking

More information

Best Essay from a First Year Student

Best Essay from a First Year Student RBA ECONOMICS COMPETITION 2010 Appreciation of Australia s real exchange rate: causes and effects Best Essay from a First Year Student ASHVINI RAVIMOHAN The University of New South Wales Appreciation of

More information

APPENDIX A SENSITIVITY ANALYSIS TABLE

APPENDIX A SENSITIVITY ANALYSIS TABLE APPENDIX A SENSITIVITY ANALYSIS TABLE The economic forecasts and assumptions underpinning the 2013-14 Budget are subject to variation. This section analyses the impact of variations in these parameters

More information

Chapter 12: Gross Domestic Product and Growth Section 1

Chapter 12: Gross Domestic Product and Growth Section 1 Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,

More information

Economics. Total marks 100. Section I Pages marks Attempt Questions 1 20 Allow about 35 minutes for this section

Economics. Total marks 100. Section I Pages marks Attempt Questions 1 20 Allow about 35 minutes for this section 2011 HIGHER SCHOOL CERTIFICATE EXAMINATION Economics Total marks 100 Section I Pages 2 8 General Instructions Reading time 5 minutes Working time 3 hours Write using black or blue pen Black pen is preferred

More information

a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis

a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis Determinants of AD: Aggregate demand is the total demand in the economy. It measures spending on goods and services by consumers, firms, the

More information

CURRENT ANALYSIS December Impact of Lower Oil Prices on the Canadian Economic Outlook: An Update. Analysis. Highlights

CURRENT ANALYSIS December Impact of Lower Oil Prices on the Canadian Economic Outlook: An Update. Analysis. Highlights 93619 CURRENT ANALYSIS December 2014 Impact of Lower Oil Prices on the Canadian Economic Outlook: An Update Highlights Overall Canadian production growth expected to be little impacted Activity in the

More information

ECONOMIC REVIEW(A Monthly Issue) April, 2014

ECONOMIC REVIEW(A Monthly Issue) April, 2014 ECONOMIC REVIEW(A Monthly Issue) April, 2014 Economics & Strategic Planning Department http://www.bochk.com The Reasons Why the Singapore Economy Has Been Outperforming Hong Kong Dai daohua, Senior Economist

More information

ENGINEERING LABOUR MARKET

ENGINEERING LABOUR MARKET ENGINEERING LABOUR MARKET in Canada Projections to 2025 JUNE 2015 ENGINEERING LABOUR MARKET in Canada Projections to 2025 Prepared by: MESSAGE FROM THE CHIEF EXECUTIVE OFFICER Dear colleagues: Engineers

More information

2.5 Monetary policy: Interest rates

2.5 Monetary policy: Interest rates 2.5 Monetary policy: Interest rates Learning Outcomes Describe the role of central banks as regulators of commercial banks and bankers to governments. Explain that central banks are usually made responsible

More information

An Evaluation of the Possible

An Evaluation of the Possible An Evaluation of the Possible Macroeconomic Impact of the Income Tax Reduction in Malta Article published in the Quarterly Review 2015:2, pp. 41-47 BOX 4: AN EVALUATION OF THE POSSIBLE MACROECONOMIC IMPACT

More information

Australia s trade since Federation

Australia s trade since Federation Australia s trade since Federation Introduction Australia s trade has always been a key component of the economy however the composition of Australia s trade has changed significantly since Federation.

More information

The Effects of Funding Costs and Risk on Banks Lending Rates

The Effects of Funding Costs and Risk on Banks Lending Rates The Effects of Funding Costs and Risk on Banks Lending Rates Daniel Fabbro and Mark Hack* After falling for over a decade, the major banks net interest margins appear to have stabilised in a relatively

More information

TRENDS IN AUSTRALIA S TRADE AND THE BALANCE OF PAYMENTS

TRENDS IN AUSTRALIA S TRADE AND THE BALANCE OF PAYMENTS TRENDS IN AUSTRALIA S TRADE AND THE BALANCE OF PAYMENTS TIM RILEY Director Economic Literacy Centre and Tim Riley Publications Pty Ltd HSC Economics Day Thursday June 21st 2012 THE UNIVERSITY OF WOLLONGONG

More information

Sovereign wealth funds and the exchange rate: comparing resource booms in Australia, Chile and Norway

Sovereign wealth funds and the exchange rate: comparing resource booms in Australia, Chile and Norway Sovereign wealth funds and the exchange rate: comparing resource booms in, Phil Garton 1 The idea of establishing a sovereign wealth as a response to the challenges posed by the resource boom has attracted

More information

Research. What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields?

Research. What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields? Research What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields? The global economy appears to be on the road to recovery and the risk of a double dip recession is receding.

More information

6. Economic Outlook. The International Economy. Graph 6.1. Graph 6.2 Terms of Trade 2010/11 average = 100

6. Economic Outlook. The International Economy. Graph 6.1. Graph 6.2 Terms of Trade 2010/11 average = 100 6. Economic Outlook 6 4 0 - The International Economy The Bank s forecast for overall growth of Australia s major trading partners is little changed from those in the November Statement. Year-average trading

More information

Property Operators and Real Estate Services Industry Report

Property Operators and Real Estate Services Industry Report Property Operators and Real Estate Services Industry Report Property Operators and Real Estate Services Industry Report Industry Division Rental, Hiring and Real Estate Services Industry Division Industry

More information

GENERATING BALANCED DEMAND AND SUPPLY TO ACHIEVE FULL EMPLOYMENT AND PRICE STABILITY. by Leigh Harkness

GENERATING BALANCED DEMAND AND SUPPLY TO ACHIEVE FULL EMPLOYMENT AND PRICE STABILITY. by Leigh Harkness GENERATING BALANCED DEMAND AND SUPPLY TO ACHIEVE FULL EMPLOYMENT AND PRICE STABILITY by Leigh Harkness 1. Introduction The attainment of full employment and price stability are not conflicting objectives,

More information

TREASURY MANAGEMENT UPDATE QUARTER 4 2014/15

TREASURY MANAGEMENT UPDATE QUARTER 4 2014/15 Committee and Date Cabinet 10 June 2015 12.30 pm Item 9 Public TREASURY MANAGEMENT UPDATE QUARTER 4 2014/15 Responsible Officer James Walton e-mail: james.walton@shropshire.gov.uk Tel: (01743) 255011 1.

More information

Meeting with Analysts

Meeting with Analysts CNB s New Forecast (Inflation Report II/2016) Meeting with Analysts Petr Král Prague, 6 May, 2016 Outline 1. Assumptions of the forecast 2. The new macroeconomic forecast 3. Comparison with the previous

More information

H1 2012 Earnings Presentation. BRSA Bank Only

H1 2012 Earnings Presentation. BRSA Bank Only BRSA Bank Only Macro Outlook Q1 GDP growth at 3.2%, mostly backed by net exports. Budget deficit was TRY 6.7 billion in H1 12, one third of Latest GDP figure is supportive of the soft landing the government

More information

CBA mortgage book secure

CBA mortgage book secure Determined to be better than we ve ever been. Australian residential housing and mortgages CBA mortgage book secure 9 September 2010 Commonwealth Bank of Australia ACN 123 123 124 Overview Concerns of

More information

QUARTERLY ECONOMIC BULLETIN DECEMBER QUARTER 2011

QUARTERLY ECONOMIC BULLETIN DECEMBER QUARTER 2011 BANK OF PAPUA NEW GUINEA MEDIA R E L E A S E 02 nd May, 2012 QUARTERLY ECONOMIC BULLETIN DECEMBER QUARTER 2011 Mr. Loi M. Bakani, Governor of the Bank of Papua New Guinea (Bank of PNG), today released

More information

Econ 330 Exam 1 Name ID Section Number

Econ 330 Exam 1 Name ID Section Number Econ 330 Exam 1 Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If during the past decade the average rate of monetary growth

More information

Main Economic & Financial Indicators Russian Federation

Main Economic & Financial Indicators Russian Federation Main Economic & Financial Indicators Russian Federation 02 NOVEMBER 201 NAOKO ISHIHARA ECONOMIST ECONOMIC RESEARCH OFFICE (LONDON) T +44-(0)20-777-2179 E naoko.ishihara@uk.mufg.jp Overview The Bank of

More information

Britain s Investment Gap. Falling Behind

Britain s Investment Gap. Falling Behind Britain s Investment Gap Falling Behind Britain s investment gap Key findings This report finds that: - Britain has an investment gap (relative to the OBR s June 2010 forecasts) of 12.4bn a quarter. Our

More information

Supplemental Unit 5: Fiscal Policy and Budget Deficits

Supplemental Unit 5: Fiscal Policy and Budget Deficits 1 Supplemental Unit 5: Fiscal Policy and Budget Deficits Fiscal and monetary policies are the two major tools available to policy makers to alter total demand, output, and employment. This feature will

More information

Statistics Netherlands. Macroeconomic Imbalances Factsheet

Statistics Netherlands. Macroeconomic Imbalances Factsheet Macroeconomic Imbalances Factsheet Introduction Since the outbreak of the credit crunch crisis in 2008, and the subsequent European debt crisis, it has become clear that there are large macroeconomic imbalances

More information

MLC Investment Management. Constructing Fixed Income Portfolios in a Low Interest Rate Environment. August 2010

MLC Investment Management. Constructing Fixed Income Portfolios in a Low Interest Rate Environment. August 2010 Constructing Fixed Income Portfolios in a Low Interest Rate Environment August 2010 Stuart Piper Portfolio Manager MLC Investment Management For Adviser Use Only 1 Important Information: This Information

More information

Meeting with Analysts

Meeting with Analysts CNB s New Forecast (Inflation Report III/2016) Meeting with Analysts Tibor Hlédik Prague, August 5, 2016 Outline 1. Assumptions of the forecast 2. The new macroeconomic forecast 3. Comparison with the

More information

Current account deficit -10. Private sector Other public* Official reserve assets

Current account deficit -10. Private sector Other public* Official reserve assets Australian Capital Flows and the financial Crisis Introduction For many years, Australia s high level of investment relative to savings has been supported by net foreign capital inflow. This net capital

More information

Insurance Insights. When markets hit motorists. How international financial markets impact Compulsory Third Party insurance

Insurance Insights. When markets hit motorists. How international financial markets impact Compulsory Third Party insurance Insurance Insights When markets hit motorists How international financial markets impact Compulsory Third Party insurance August 2012 Chris McHugh Executive General Manager Statutory Portfolio Commercial

More information

The Credit Card Report May 4 The Credit Card Report May 4 Contents Visa makes no representations or warranties about the accuracy or suitability of the information or advice provided. You use the information

More information

BCC UK Economic Forecast Q1 2016

BCC UK Economic Forecast Q1 2016 BCC UK Economic Forecast Q1 2016 David Kern, Chief Economist at the BCC The main purpose of the BCC Economic Forecast is to articulate a BCC view on economic topics that are relevant to our members, and

More information

GETTING OUT OF DEFLATION AN EXPERIENCE OF UNCONVENTIONAL MONETARY POLICY

GETTING OUT OF DEFLATION AN EXPERIENCE OF UNCONVENTIONAL MONETARY POLICY GETTING OUT OF DEFLATION AN EXPERIENCE OF UNCONVENTIONAL MONETARY POLICY 1 Bank of Japan Shinichi Uchida Prologue (1990) 2 IN 1990 I was an LLM Student at HLS. 3 600 CY 1980=100 AT THAT TIME Japan was

More information

Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation

Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation August 2014 Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation The exhibits below are updated to reflect the current economic outlook for factors that typically impact

More information

Economic Outlook for Europe and Finland

Economic Outlook for Europe and Finland Economic Outlook for Europe and Finland Finnish-British Chamber of Commerce 15 March 213 Seppo Honkapohja Member of the Board Bank of Finland 1 World economy: World industrial output improved, but international

More information

An outlook on the Spanish economy Official Monetary and Financial Institutions Forum (OMFIF), London

An outlook on the Spanish economy Official Monetary and Financial Institutions Forum (OMFIF), London 09.02.2016 An outlook on the Spanish economy Official Monetary and Financial Institutions Forum (OMFIF), London Luis M. Linde Governor I would like to thank OMFIF and Mr. David Marsh for the invitation

More information

MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS

MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS BUSINESS ANALYSIS INTRODUCTION To determine a proper price for a firm s stock, security analyst must forecast the dividend & earnings that can be expected

More information

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast

6. Economic Outlook. The International Economy. Graph 6.1 Australia s Trading Partner Growth* Year-average RBA forecast 6. Economic Outlook 6 4 0 - The International Economy Overall growth of Australia s major trading partners (MTP) is expected to be around its long-run average in 014 and 015 (Graph 6.1). This forecast

More information

Domestic Activity. Graph 6.2 Terms of Trade Log scale, 2013/14 average = 100

Domestic Activity. Graph 6.2 Terms of Trade Log scale, 2013/14 average = 100 6. Economic Outlook 6 The International Economy The outlook for GDP growth of Australia s major trading partners (MTPs) is unchanged from the November Statement. Over the next few years, growth is expected

More information

Business Expectations Survey

Business Expectations Survey Business Expectations Survey Dun & Bradstreet Q1 2016 FINAL RESULTS RELEASED 5 JANUARY 2016 Index CapEx plans up despite low expectations The results from Dun & Bradstreet s December Business Expectations

More information

Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them

Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them Rising Foreign Debt, Slow Economic Growth and High Unemployment: A brief explanation of their cause in Australia and how to overcome them by Leigh Harkness Economic theories may appear rational when explained

More information

5 Balance sheet and cash flows

5 Balance sheet and cash flows 5 Balance sheet and cash flows Features The Government s Debt Action Plan will reduce General Government Sector debt by approximately $7.5 billion in 2015-16, compared to the level of debt in the absence

More information

FLEXIBLE EXCHANGE RATES

FLEXIBLE EXCHANGE RATES FLEXIBLE EXCHANGE RATES Along with globalization has come a high degree of interdependence. Central to this is a flexible exchange rate system, where exchange rates are determined each business day by

More information

The level and Distribution of recent Mining sector Revenue

The level and Distribution of recent Mining sector Revenue The level and Distribution of recent Mining sector Revenue Introduction From 3/ to 7/, mining sector revenue increased substantially, with Australian dollar receipts rising by an average of around per

More information

COUNCIL OPINION on the updated stability programme of Belgium, 2009-2012

COUNCIL OPINION on the updated stability programme of Belgium, 2009-2012 2.6.2010 Official Journal of the European Union C 143/1 I (Resolutions, recommendations and opinions) OPINIONS COUNCIL COUNCIL OPINION on the updated stability programme of Belgium, 2009-2012 (2010/C 143/01)

More information

PRESENT DISCOUNTED VALUE

PRESENT DISCOUNTED VALUE THE BOND MARKET Bond a fixed (nominal) income asset which has a: -face value (stated value of the bond) - coupon interest rate (stated interest rate) - maturity date (length of time for fixed income payments)

More information

Measuring Credit 1. Introduction. What Is Credit?

Measuring Credit 1. Introduction. What Is Credit? Measuring Credit 1 Introduction Central banks put significant emphasis on credit aggregates for understanding financial conditions in the economy. Measuring credit outstanding, however, is not straightforward,

More information

Chapter 1: Economic commentary

Chapter 1: Economic commentary Compendium: Chapter 1: Economic commentary This section of the Pink Book provides an examination of recent trends, main movements and international comparisons for a range of information contained in subsequent

More information

Falling home prices, worsening credit availability, shrinking equity values, and growing

Falling home prices, worsening credit availability, shrinking equity values, and growing Economic Outlook Falling home prices, worsening credit availability, shrinking equity values, and growing job losses delivered a crushing blow to the national and California economies in 2008. Consumer

More information