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."

Thursday, May 24, 2012

CBA: March tax data says economy/jobs growth strong + wages risks (charts)

CBA have provided an excellent and very detailed analysis of the March 2012 tax data for a more timely update on the Australian economy. The results are fascinating, and help address queries some analysts have raised, for example, about the disconnect between GST revenues and consumer spending (the RBA's Phil Low addressed this point in a recent speech, arguing that it was explained by non-GST services spending). The tax data should end any suggestions that the economy is on its knees. Analysing the latest budget revenues, CBA finds (extracts only):

Nominal GDP growth is holding up well. The broadest measure of income across the economy is nominal GDP. It is effectively the tax base. So the relatively firm growth in income tax revenues through QI points to relative firm growth in QI nominal GDP.

Jobs growth may be stronger than the official data suggests. Growth in PAYG revenues remains strong. These revenues are typically correlated with the strength or otherwise of the labour market. Elevated PAYG growth rates are not consistent with the flat trend in jobs growth. They are consistent with the flat-to-down trend in unemployment. They are also consistent with a labour market near full employment.

Trend-type growth in nominal consumer spending continues. GST revenue trends should follow consumer spending (or at least that part subject to the GST). Variations in GST growth are greater than for consumer spending so the direction of GST flows is probably the more important signal than the size of the move. The flat momentum in GST growth in QI suggests that nominal consumer spending growth continued at a reasonable clip. The pickup in retail trade growth in the last few months is consistent with this outcome.

The momentum behind wages growth is not showing any sign of slowing. Growth in the net income tax paid by individuals is a useful pointer to the direction of wages growth. QI flows suggest some upside risk to earnings growth. This risk sits at odds with RBA inflation forecasts based on a “judgement” that wages growth will slow.