By Peter Switzer

There’s really good news — business conditions had a record surge in October and Treasurer Joe Hockey now gets the Freezing Frog principle! I discovered this important development in Joe’s education as the country’s number one number cruncher, after being accused of having a $50 billion black hole in his Budget.

By the way, don’t think I’m being patronizing suggesting Joe needs education. All Treasurers need time at the coalface to understand their gig. The greatest Treasurer in Paul Keating’s mind is of course Paul Keating — and I think he did achieve some terrific things — but he did make some doozy mistakes.

Peter Costello made an interest rate gaffe in public when he started as Treasurer and he learnt that his job involved very careful language.

I think Joe harps on about the Budget too much. He went too hard in the Budget anyway at a time when the economy was slowing down. The pay-off is that interest rates will stay low for longer. Rates are a slow stimulator but they’re starting to work. How do I know that?

Well, I went looking for a newspaper today that might have talked up the record surge in business conditions and, true to form, this very good news story was ignored.

In case you missed it, NAB’s October reading of business conditions had the biggest lift in 16 years to the best reading in six and a half years! The number went from 1 to 13, which is huge and says that businesses are now experiencing better business conditions in their operations. It’s a business comfort reading and certainly looks like a cosy time for business after some tough times of late.

Why is it happening? It could be lower petrol prices, the end of the carbon tax and the mining tax, some of the tough Budget measures that haven’t got through, house prices that are making us feel wealthier, super that’s up nicely, interest rates being at historically low levels, and set to stay there, and banks like NAB trying to throw a $1 billion a month at business, which adds to optimism. Also, wage pressures are low and so is inflation generally and there are promises that infrastructure spending is on the way. Harold Mitchell says ad spending is on the rise and that’s a good sign as well for the economy.

I call what I’m seeing the Freezing Frog principle, which is the opposite of the famous boiling frog principle. This is where the poor frog is put in water and the beaker is heated and the frog doesn’t know he’s being boiled alive.
Economies can sometimes be insensitive to slow negative changes until some financial kick in the pants comes along.

In our case, I think there has been a build up of a lot of small, but positive, things that could actually help make 2015 be stronger, growth-wise, than many economists think.

Helping to take the heat out of negatives for the economy with my Freezing Frog Principle was the Treasurer, who reportedly said that he won’t try to plug any deficit black hole caused by the Senate because he fears “damaging business and consumer confidence.”

Bravo Joe. You now get it. Power up the private part of the economy — consumers and business and the economy will grow faster and bring the deficit down for you. Eventually, you’ll have to do some harder cutting, but because the economy is moving along strongly, you won’t hurt it.

By the way, Macroeconomics, the agency that says that there’s a $50 billion budget black hole, had to use an economic growth rate to guess the deficit. If Joe can help push growth up by not hurting confidence, then he’ll prove Macroeconomics wrong. This would be nice for him.

That massive spike in business conditions will feed into confidence, especially if the media talks about it. I have my doubts because they don’t do many positive economic stories.

Want proof? Well, try this. The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.2% in the week to November 9. The index is only 1.2% down on the 7-month high set on July 27. CommSec’s Craig James pointed out: “Aussie households’ views about economic conditions over the next five years lifted to a 10-month high!” And that’s an important development that we all should hear about.

Of course, the Yanks are keeping positive with the US stock market up slightly overnight, but importantly the NFIB business optimism index rose from 95.3 to 96.1 in October.

For five years I’ve been rooting for the American economy to come good and they’re now in the groove. We now have to get behind Australia and prove those negative economic and media types wrong.

It’s a worthwhile investment — jobs and material happiness will be the dividends. Go Australia.

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