Economic Conditions Still Challenging

The national growth rate is now over 3%, which many economists believe is ‘back on track’.  This means that there should be more money available for spending which, in the long term, will assist businesses.

There are some odd trends emerging:

  • The employment rate, which for most of the global financial crisis period remained in the 5% band, is now approximately 6.2%.
  • Housing approvals are up by approximately 6%.  However, car sales have dropped by approximately 1%.
  • Inflation is currently at 3%, which is the upper rate that was set by the Australian Reserve Bank in its targets for this year.
  • Corporate profits are up by 3.2% (reflected in the profit rates).
  • There are still concerns about business’ confidence relating to the government’s ability to undertake the budget repair work that is desperately needed.
  • The mining industry investment boom is over, with mining activities now commencing in many new locations.  However, the mining industry has been affected by the significant drop in iron ore prices over a short period of time.
  • Interest rates are remaining at 2.5%.  Whilst there is some speculation that the Australian Reserve Bank Board of Directors would like to increase the cash rate, the Board doesn’t wish to increase the interest rate until the Board is relatively confident that an upward movement of the interest rates will not further strengthen the currency.
  • Exchange rates have started to move in the last couple of weeks, which is great news for exporters.  However, importers will pay more for their products.  The movement down of the exchange rate is expected to significantly benefit the tourism industry.

With growth over 3% and interest rates at 2.5%, some businesses will be able to see some light at the end of the tunnel.  However, for many businesses, the challenges will continue in the next few months.

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