The growth figures relating to Australia should not be taken at face value but instead contains data which suggests they are obscuring a term of trade threat.

Just at face value the terms of trade for Australia for quarter 1, show a 1.3% increase in real GDP combined with an unexpected jump in May employment suggesting a strengthening economy and labour market.

However, according to Deutsche Bank analysis paper released yesterday, this GDP figure should be adjusted to take into account the 10% slump in the past 6 months of the terms of trade, which measures income from exports.

The much more modest growth of nominal GDP was a more accurate measure of Australia's performance and was a more sobering statistic of 0.3%. When this is combined with the fact Australia is a small, open commodity driven economy this will serve as a warning that Australia is prone to sluggish growth and not a particularly strong economy as such.

The nominal GDP growth of Australia per quarter is -

0.27% - December
0.3% - March

That is slow and leaves the economy prone to considerable risk in balance of payments, when factored in by the continuing debt crisis in Europe.

As the terms of trade continues to fall for Australia, particularly from European economies - the revenue for the Australian Government will be placed at risk and holes in the budget can creep into the balance sheet.

The problem is that Australian exports were propping up the economy during the price commodity boom, however this is starting to reverse now - as the nominal GDP suggests, which will drive negatively into Australia across all sectors.

UBS Australia comments -
"Whilst annual real GDP of Australia is roughly around average rate of 4% expansion of the last 2 quarters, the nominal growth of GDP is less than 1%. In effect there is far less cash around the economy, through businesses and households, the real GDP rate masks this fact."

All in all, Australia is not doing as well as the headlines from certain quarters would have you believe.

With a nominal growth of just 0.3%, a worsening European debt crisis, a Chinese slowing of growth - the chances of this nominal GDP dropping and heading into negative territory is very real.

Australia is not in a particularly safe position.

Source:
Australian Financial Review
UBS Warburg
Deutsche Bank

Hey Prev, why not PM freediver for a members board?
The you & Whitey could spray your sh!t all over each other & we could choose whether to have our intelligence insulted.
smacking retard.

FriYAY wrote on Jun 8^th, 2012 at 2:01pm:



I wholeheartedly concur.

Dsmithy70 wrote on Jun 8^th, 2012 at 1:57pm:


Hear hear!

Buzz, despite your attempts to believe you are as well educated as I am - we both know that in Finance matters there is about 15 football pitches in distance between your knowledge and mine.

None of the facts I have stated are incorrect.

Andrei.Hicks wrote on Jun 8^th, 2012 at 2:28pm:


The AUD has not dropped over the last 6 months all though has been on a steady decrease since it's record high of 1.08 in Feb.
I cant find an up to date picture but here's a link to realtime charts, go to timescale & change if not already on weekly.

http://www.forexdirectory.net/aud.html

Change it to monthly & count back its half & half

That sounds a bit contradictory I know but 94USD is still 20 points higher than the average & as we speak it's back trading around .98USD on an upward tick.

buzzanddidj wrote on Jun 8^th, 2012 at 3:29pm:



Could you just confirm then for the record, that you do not believe you are as well educated?

You are essentially, admitting to being of below-par educated background?

It is still WAY to high for our exporters, smiffy is right.