After the solid 0.9% Q1 GDP release earlier this week, Australian Treasurer Joe Hockey took aim at the those doubting the strength of the economy, declaring them to be “clowns”.
But Westpac’s senior currency strategist Sean Callow is out with a report defending these “clowns”, saying the flow of data has been weak enough lately to give anyone pause for concern.
Callow said that Hockey “used the report to take aim at the forecasters who were sufficiently worried about the tumble in business investment plans to mention the word ‘recession’. He declared such people ‘clowns’.”
Callow adds that Westpac isn’t one of the forecasters talking recession, with a base case of 2% growth in 2015 rising to 3% in 2016. But he notes pointedly:
But to give the “clowns” their due, the recent data flurry has offered plenty of reason for concern, from the capex survey to the record trade deficit in April and a disappointing flat reading on Apr retail sales. GDP itself also offered cause for concern beyond the encouraging headline. As the chart across shows, the ongoing fall in Australia’s terms of trade is steadily squeezing national income. Households are attempting to maintain consumption by saving less: the saving ratio continued its decline to 8.3%, a low since the GFC.
There is plenty more in the report to worry both “clowns” and the rest of us who are a bit more upbeat. Westpac Economics argues that the GDP report “strengthened the case for an eventual rate cut”.
What he said.