In the space of a month, Judo Bank’s Joseph Healy went from “never seen it so good” to “concerned at the outlook”. The latter is now the prevailing wisdom on the economy for business.
The commentary was in headlines attached to the Judo Bank co-founder’s press interviews in December and then January, but away from the news pages, the reality is business is struggling. It’s a lot more than just Omicron, according to Healy.
Business is suffering from labour shortages and cost price. Sentiment has changed.
This was reflected in the recent NAB monthly business survey, which said confidence has slumped and conditions are worse.
This is not exactly the message Prime Minister Scott Morrison wants broadcast but the coming Reserve Bank of Australia meeting tomorrow is now widely tipped to be taking the first step to raising rates by winding back quantitative easing measures.
Recent inflation and other numbers are widely expected to result in some extensive upgrades in the RBA’s own projections.
The facts have changed.
The RBA has been buying back bonds as part of official measures to boost the economy and this might stop now.
The US Federal Reserve has said it will raise short-term rates in mid-March, and while the RBA was meant to sit on its hands all this year the recent inflation figures and international rate moves will force its hands.
NAB chief economist Alan Oster said on Friday: “We now see the first RBA rate hike occurring in November, with follow up hikes in December 2022 and February 2023.”
He expects a 15 basis point move in November and then 25 basis points a month for the next few months .
An end to easy money is not unexpected. The federal reserve have long made clear they were taking away the stimulus.
Judo Bank’s Healy says its time for the federal government to actually do something to help business: fast forward administration of the temporary skilled worker visas.
There is chronic shortage of skilled labour compounding the known supply chain issues which means basic building materials like steel and timber are in short supply .
The Department of Immigration says it processes 50% of skilled workers visas in fourth months. But doing administration of the test takes 11 months.
Healy (and others) argue this is simply not good enough — better administration shouldn’t cost anything. It is just basic good governance.
But this is not always the Morrison government’s strong point. He is far better at the marketing, throwing a few dollars here and there as he does the rounds.
While that goes on, business is grinding to a halt. The current stage of the pandemic has caused a ‘shadow lockdown’.
Talk of a fast recovery is in essence a better presentation of the numbers, comparing 2021 with 2020 when the country was shut down at the outset of COVID-19.
If you take the comparisons back to 2019 levels the numbers don’t look so good and back then the economy was perceived to be crawling.
NAB’s Oster has noted “the Omicron outbreak had a significant impact on leading indicators”.
“While the economy was still going OK in December, it was clearly slowing and the warning lights were coming on.”
“Purchase costs have lifted to near-record highs, and that pressure is flowing through to strength in output prices,” he says.
“With significant disruption to supply chains and labour markets, price pressures are to be expected and the key question will be how quickly (if at all) these pressures abate over coming months.”
Business is looking not for handouts but basic good government. In an election year that might be too much to hope for.
John Durie has been a business reporter for 40 years, starting his career in the Canberra Press Gallery in 1980. John worked for 13 years as Chanticleer Columnist for the AFR, four years as business columnist for the New York Post, and also worked in Paris.
