succumbs to it is the day it begins to
under-invest in infrastructure.
certainly in the media, that the state
of the Budget is the most important
indicator of the economy (and of the
Government's ability to manage). It
is not; the unemployment rate is a far
better candidate. We have lost sight
of the fact that the Budget is there to
serve the purposes of the economy
and not the other way around.
on foreign investment, particularly
in agricultural land. For the past
200 years, Australia has benefitted
hugely from the influx of foreign
capital. We will continue to need the
latter for as long as we don't save
enough domestically to finance our
own capital needs. We already have
a Foreign Investment Review Board
whose job it is to assess large-scale
purchases with an eye to the national
interest, and there is no evidence that
this process is broken.
2% of the total. Finally, raising new
barriers runs the risk of flouting our
tax on everything", how can it be that
scrapping it saves the Budget money
because the compensation paid to
business is more than the revenue
collected by the tax?
in August, from 90.7 US cents to 89
cents. This leaves it above fair value.
During the month, the Reserve Bank
characterised it as still high, and I
share that view. The downward move
may not be over!
move that was "fully passed on" in
mortgage rates. Financial markets
remain convinced that there is a
further cut out there. I'm less certain;
the RBA would probably like to think
that it is finished. The key for a further
cut is the unemployment rate. It's
currently 5.7%, which is relatively low
by international standards. But it was
5% as recently as April last year and
the trend is ominous. If it continues,
unemployment will soon be higher
than it was at the worst point of the
rate cut.
I thought I made a mistake,
but I may have been wrong...
In mid-June, when the ASX200 stood
at 4739, I cut my end-of-year forecast
from 5300 to 5100. This after having
raised it from 5100 to 5300 in early-
March! Now either forecast looks
equally plausible. Perhaps I should just
settle for a range of 5100-5300!
Trumpet blowing...
In July, the Fairfax press awarded
me the `Palme d'Or' for being the
most accurate forecaster (among
economists) of the share market for
the financial year 2012/13. This was
on the basis of a forecast I had made
12 months earlier when the share
market was around 4100.
a Greek exit from the Eurozone) were
overstated, and hence that the market
was clearly cheap. My forecast for
30 June this year, of 4750, actually
turned out to be low, given that the
market finished the year at 4803.
Every lottery has a winner!