The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, June 12, 2012

Australia's business surveys have a problem

The business surveys are giving a bit of a bum-steer on the economy (although they remain important). The problem is that all of the growth in the economy is coming from a small minority of companies. So when you do a survey of all businesses, you are getting artificially negative results. The RBA raised this complication in a Bulletin paper some time ago (subtly). It is a pretty obvious issue. Think about it: 20% of the economy is roaring while 80% is growing below-trend. If you poll this sample, you are going to conclude that the economy is weak. UBS report:

NAB’s survey of business conditions dropped further in May to -3.5 (UBS ‘down’, mkt nf) – the lowest since May-09 – from -0.1 in April and a decent +2.6 in March, to well below average (+5.5 since 1997). Further, business confidence slumped to -2.2 – the weakest since Aug-11 and 2nd lowest since the GFC (to also be well below its +6.3 average) – from a one-year high of +4.1 in April. For conditions by sector: mining collapsed back, manufacturing and retail stayed negative, construction plunged deeper into contraction, wholesale bounced to flat and transport rebounded to positive. Recreation moderated after strength.