Posted: May 11, 2006

The bell is tolling!

Two related news stories today in the wake of the ridiculous decision by the Federal Government to continue in surplus in the coming fiscal year. If you want my opinion on the budget by the way go to http://e1.newcastle.edu.au/coffee. Story 1: Australian credit growth slows; Story 2: unemployment rate rising.

The National Australia Bank has indicated that it expects credit growth to moderate in Australia over the coming year. This will be in line with "with slower domestic demand." The Sydney Morning Herald reported that NAB CEO "said he agreed with the view from ... [Westpac's CEO who said] .... last week that business credit would probably slow from its current pace of more than 17 per cent to a more normal 11 to 13 per cent by around this time next year."

The ABS released the latest Labour Force data today which who that employent has dropped in April by 3,200 and the unemployment rate has risen to 5.1 per cent. Part-time employment fell substantially by 26,000.

Taken together it is clear that the private sector is winding back on its credit binge as a combination of stagnant housing prices and rising interest rates have forced it to review its precarious debt position. The fiscal drag embodied in the on-going federal bugdet surpluses will really bit when the private spending boom comes to an end and China starts to slow.

Blog entry posted by bill