Australian business activity is starting to slide rapidly. Whoever wins the next election will face revenue falls that are steeper than treasury’s current estimates. The almost certain August interest rate cut is likely to be followed by more reductions, as NAB reiterated today, and the dollar may fall further. The government should have called an election late August, before the community understood the depth of the business decline. However I now realise an August election was never on the Rudd agenda, especially as he would not have known the depth of despair spreading through the business community.
Those with a knowledge of history and the personality of Kevin Michael Rudd know that he, as prime minister, passionately wants to attend the G20 leaders meeting in St Petersburg between September 5 and 6 which will include the heads of most leading nations including President Obama.
Rudd played a huge role in getting us at the G20 table when he was prime minister and regards one of his greatest achievements as foreign minister in the Gillard regime to be getting the G20 2014 summit to come to Australia. And it will be held in his home state of Queensland (Rudd went to the backbench three months after the decision).
Because we are holding the next the G20 meeting, the Australian prime minister should attend the September 5 and 6 St Petersburg summit, and Kevin Rudd will take a lot of persuading to hold an election on September 7.
Given Rudd has ruled out Gillard’s September 14 date, that means the earliest date for an election is September 21. The final week of September is Grand Final week so if an election on September 21 is too close to the G20 summit then we will move to October.
Right now, according to Morgan Research, Australian consumer confidence is at a three-month high. The interest rate reductions are helping boost housing prices, but they are not opening wallets and purses to any significant extent. By late September the cold blasts of lower business activity will start to affect large areas of Australia.
Yesterday I was yarning with a major business network provider who has big markets among banks and mining companies. Mining communication traffic has fallen 10 per cent and bank traffic is down five per cent.
When there is a big movement – up or down – in traffic it signals a significant economic change in direction, which is later reflected on other indicators.
However we have already seen some early signs. Building approvals tumbled by almost 7 per cent in June, against analyst expectations of a rise. Worse still the June approvals are now 13 per cent lower than in the same month last year, against analyst expectations of a flat result (June building approvals tumble almost 7%, July 30).
Car sales are expected to fall 20 per cent after the FBT changes. It’s taken a while, but mining construction is now turning down according to a report by Newport Consulting.
Newport says mining executives see an increasingly gloomy outlook for their sector, and they are cutting jobs (Mining sentiment slides: Newport, July 30).
Myer says the interest rate cuts are not having their normal effect on retail demand although some retailers say they have seen a swing back to Australian online purchases after the fall the dollar. Woolworths and Coles are doing well.
Morgan polling shows the ALP is ahead of the Coalition. But we still may have a new prime minister given the election is to be delayed until late September or October.