Maybe the Australian economy is not in that bad of a malaise.
Maybe the RBA doesn’t need to slash interest rates and the Aussie dollar doesn’t need to fall another 10 cents to help the economy adjust to the move away from the mining investment boom.
That is certainly what the data flow of the AiG performance of manufacturing index and the just-released ABS Retail Sales for August suggest. With a rise of 0.4%, retail sales have printed the strongest monthly increase since January and February this year which printed 1.2% each. Since then it has been either negative or low numbers.
So August is a welcome change to an appalling performance recently but in trend terms the outcome remains week at 0.0% from the previous months.
Even in the chart from 1990 the uptick from the recent lows has been very respectable.
But as the trend of zero growth in retail sales at the moment suggests, the recovery in the Australian economy is nascent at best but remember the words the RBA has been using for a few months now when it talks about interest rates:
The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values, and further effects can be expected over time, including from the declines in rates seen over recent months.
Monetary policy works with a lag – but today’s data suggests that it is starting to work.
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