By Peter Switzer


I know it has been a big and expensive political showpiece but the G20 show does not get me all that excited because it’s dominated by hot-aired politicians. Stuff does happen but it is a slow burn and it’s a shared thing and we are a long way down the pecking order in the G20.

But the Free Trade Deal with China, now that could be another positive at a time when the Government needs to cash in on a few other pluses running in the economy’s favour.

Before looking at the expected deal, let’s recap some good stuff from last week:

• The NAB business conditions index rose from 1 point to 13 points in October and stands at its best reading in 6.5 years. October also recorded the biggest monthly lift in business conditions in 16 years!

• Business confidence was down but only from 5 to 4 and if it’s over zero it means positivity still outscores negativity.

• The Westpac/Melbourne Institute index of consumer confidence rose by 1.9% in November and the weekly survey by ANZ and Roy Morgan was released as well and also showed a lift in sentiment in November.
 
• Men (index reading of 97.6, up 0.1%) are still more optimistic than women (95.6, up by 3.6%) but women are gaining in confidence. The confidence gap – men versus women – was 97-92 in October and so it’s closing.

• The Westpac survey also showed the estimate of family finances over the next year was up by 3.1%;

• And the consumers’ views on economic conditions over the next 12 months was up by 10.8%! That’s a good but ignored reading.

You could ask why the creeping and rising optimism? Try these if you need convincing:

• Interest rates are at historical lows.
• Super was up 13% last financial year.
• Petrol prices are down over 8 cents a litre in two weeks.
• A lot of the tough Budget measures, which spooked mums, did not get through.
• Job ads up 12 months straight in trend terms.
• Dollar down from 105 to 87 US cents — that’s an 11% depreciation, which helps exporters and businesses that compete with imports.
• The end of carbon tax and energy bills falling.
• Wage rises are subdued, which is good for business costs, and consumers are seeing lower petrol and energy bills, so the purchasing power of wages could be OK.
• House prices up over 9% in one year across the country and in Sydney it was 14% and this makes us feel wealthier.

And now this free trade deal which we will hear about today with China’s President Xi Jinping, which will open up billions of dollars of new customers for our exporters.

Dairy farmers, winemakers, horticultural products, seafood and more, will see tariffs go. The slug on coal is expected to go in two years while others go by four years.

Of course there will be losing local businesses – no deal that takes away trade restrictions can be all win-win. If our farmers sell more exports they buy more mechanical, vet and repair services. They buy more equipment and their entire regional area benefits. It’s called the multiplier effect and it’s not just an economic snowball but is also a confidence snowball.

That’s what Joe and Tony have to keep working, so 2015 is a much stronger growth year than this year. Solid economic growth will help take our Budget from the red and into the black in a much quicker timeframe.

By the way, the Dow Jones was down by 18 points or 0.1% but the S&P 500 index was up by less than 0.1% and the Nasdaq was up by 8.4 points or 0.2%, so no real news from Wall Street. Over the week the Dow Jones and S&P 500 indexes were up by 0.4% while the Nasdaq rose by 1.2%, so the Yanks remain confident, which is good news for a big finish to the year on the market.

 

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