Australia’s Economy Slows as Households Save Extra Cash By Bloomberg



(Bloomberg) — Australia’s economy slowed last quarter as interest-rate and tax cuts failed to spur household spending, reinforcing expectations the central bank will need to resume its easing next year.

  • Gross domestic product advanced 0.4% from the second quarter, when growth was revised higher to 0.6%. Economists forecast 0.5% for the three months through September
  • From a year earlier, GDP expanded 1.7%, in line with estimates

The report comes a day after the Reserve Bank held interest rates at 0.75% following three cuts since June to try to revive consumption and rekindle economic growth. The Australian dollar traded lower after the data and was at 68.38 U.S. cents at 11:56 a.m. in Sydney on bets the RBA will need to resume cutting in 2020 to nudge households to spend.

Governor Philip Lowe said lower rates are boosting property and should in time lead to higher household spending and residential construction. So far, the impact of Lowe’s stimulus has come mainly through housing: national property values jumped 1.7% last month, the largest gain since 2003. Sydney and Melbourne continued to lead the rebound, with prices up 2.7% and 2.2% respectively.

“After a soft patch in the second half of last year, the Australian economy appears to have reached a gentle turning point,” Lowe said Tuesday. “The central scenario is for growth to pick up gradually to around 3% in 2021.”

  • Government spending and exports were the biggest contributors to growth
  • Dwelling construction detracted from the expansion, while household spending remained weak rising 0.1% from the previous quarter
  • The savings rate jumped to 4.8% from an upwardly revised 2.7%

Australia’s exporters are benefiting from a 16% drop in the dollar since early last year and miners are reaping windfalls as China ramps up steel production — boosting demand for iron ore — as it seeks to offset trade losses. That has helped produce Australia’s first back-to-back current-account surpluses in 46 years.

Lowe last week set out the central bank’s policy options ahead, suggesting it has two more conventional cuts available before reaching the effective lower bound for rates. At that point, QE would become a possibility, although the governor insists this is unlikely.

Prominent economists including Goldman Sachs Group Inc (NYSE:).’s Andrew Boak and Westpac Banking Corp.’s Bill Evans have urged the government to bring forward tax cuts to stimulate the economy. Lowe has similarly urged greater infrastructure spending and economic reform to lift productivity.

The government has resisted loosening the purse strings as it tries to land the first budget surplus since before the 2008 financial crisis. That stalemate is only likely to harden after S&P Global Ratings warned last week that deviating from returning the books to the black could risk the AAA credit rating.

The RBA’s forecasts economic growth to accelerate: Lowe hopes that a combination of his rate cuts and government tax relief, infrastructure spending, rising house prices, an increase in mining investment and a lower currency will carry the economy through.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Dollar nurses wounds as factory data sparks economy concern By Reuters



By Stanley White

TOKYO (Reuters) – The dollar traded near a one-week low versus the yen on Tuesday and near the lowest in almost two weeks against the euro, on concern about weak U.S. manufacturing data and signs of new fronts in the U.S. trade war.

Sentiment also took a hit after U.S. President Donald Trump announced tariffs on metal imports from Brazil and Argentina.

Recent U.S. economic data had shown signs of improvement, so a fourth consecutive month of shrinking manufacturing activity as well as an unexpected decline in construction spending put a big dent in hopes that the world’s largest economy had stabilized.

Investors are also worried about how the United States will scale back a 16 month-long trade war with China, while more tariffs on other countries’ goods would pose an additional risk to the global economic outlook.

“The weak data forced a lot of people to give up dollar longs and cut losses,” said Daiwa Securities’ foreign exchange strategist Yukio Ishizuki in Tokyo.

“This may have run its course, but there’s no reason to chase the dollar’s upside from here. Trade friction remains a lingering threat, which is not good for market sentiment.”

The dollar traded at 109.00 yen on Tuesday in Asia, close to its lowest in a week. It was quoted at $1.1076 versus the euro () after falling 0.56% on Monday, its biggest decline against the single currency since Sept. 17.

Against a basket of six major currencies, the () stood at 97.887, having fallen on Monday by the most in six weeks.

On Monday, the U.S. Institute for Supply Management said its index of national factory activity fell 0.2 point to 48.1 in November. A reading below 50 indicates contraction. Economists polled by Reuters had forecast a rise to 49.2 from 48.3 a month prior.

Separate data showed construction spending fell in October as investment in private projects tumbled to the lowest level in three years.

The data surprised economists who had recently raised U.S. growth forecasts for the forth quarter due to positive data on trade, housing and manufacturing.

Meanwhile, Trump surprised policymakers in Brazil and Argentina with tariffs on steel and aluminum imports.

In a Monday tweet, Trump said the tariffs, “effective immediately”, were necessary because “Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers.”

The comment came despite both countries actively trying to strengthen their currencies against the dollar.

The Brazilian real rose 0.3% to 4.2230 on Monday after Brazil’s central bank conducted a spot auction to support the currency. The Argentine peso was largely unchanged at 59.88.

Graphic: World FX rates in 2019 – http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Hong Kong Retail Sales Slump Again as Chaos Cripples Economy By Bloomberg



(Bloomberg) — Hong Kong’s retail sales suffered a record contraction in October, as the city counts the cost of almost six months of political unrest.

Retail sales by value contracted by 24.3% in the month from a year earlier, the fourth month of double-digit declines. By volume, sales contracted by 26.2%, also a record, according to a government release.

Earlier Monday, Financial Secretary Paul Chan told lawmakers he expected the first budget deficit since the early 2000s for the fiscal year, and said that the ongoing turmoil has hurt economic growth by some 2 percentage points this year.

The retail data indicate that the annual “Golden Week” holiday in mainland China failed to translate into a tourist bump that could have alleviated the domestic economic pain. Overall, visitors to Hong Kong fell almost 44% in the month.

For retail businesses, that raises the stakes for coming months. Many proprietors will have to make hard choices: whether to continue the fight into next year or give up as leases come up for renewal and employee bonuses must be paid.

Iris Pang, an economist with ING Bank NV in Hong Kong, sees a 70% chance of a wave of store closures among retailers if spending continues to be weak. The situation is especially dire for catering companies, who typically enjoy brisk business at the holidays though face the prospect of cancellations during periods of unrest.

“Make or break is the correct description for most catering businesses in Hong Kong as some of them have continued in the business just because their rental agreement has yet to be due,” Pang said. “It is very likely that many catering businesses will close their business if their revenue doesn’t make a comeback during this holiday.”

Hong Kong’s large retailers face a similar predicament.

Cosmetics retailer Sa Sa International Holdings Ltd. may close about 30 stores in the coming year depending on how the market shakes out and “the results of discussions with the owners on rent reduction,” the company said in an emailed statement. Sa Sa shares have tumbled more than 40% this year.

Chow Tai Fook Jewellery Group Ltd. will look to cut costs by seeking bigger rent discounts, reducing advertising and reviewing store networks in Hong Kong and Macau, the company said in a webcast after reporting that first-half net income sank 21%. The company has leases at more than 40 stores in Hong Kong and Macau expiring in the next fiscal year.

Watch Out

Hong Kong has been one of the world’s largest centers for sales of luxury watches, but it has taken a hammering this year. Swiss watch exports to mainland China surpassed those to Hong Kong for the first time in October.

“If the situation persists, by the end of the year many watch companies will have to shut down business,” said Alain Lam, finance director with Oriental Watch Holdings Ltd. “At the end of the year, suppliers will ask for payment and employees will demand a one-month bonus — this may cut off the cash flow of some companies.”

Oriental Watch Holdings has managed to negotiate 8% to 10% discounts in rent from some landlords and will attempt to arrange better deals as leases come up, Lam said. But there’s no guarantee the company will retain its significant presence in Hong Kong, as it has healthier operations elsewhere.

“If the numbers don’t work out, we will close stores,” he said. “We are shifting our strategic focus to mainland China, aggressively.”

(Updates with retail data from first paragraph)



India plans to invest $1.39 trillion in infrastructure to spur economy By Reuters


© Reuters. India plans to invest $1.39 trillion in infrastructure to spur economy

NEW DELHI (Reuters) – India will unveil a series of infrastructure projects this month as part of a plan to invest 100 trillion rupees ($1.39 trillion) in the sector over the next five years, the finance minister said on Saturday, in a push to improve the country’s economy.

Nirmala Sitharaman’s comments, as cited in local newspapers, followed data released on Friday that showed India’s economic growth slowed to 4.5% in the July-September quarter – its weakest pace since 2013 – upping the pressure on Prime Minister Narendra Modi’s government to speed reforms.

“A set of officers are looking into the pipeline of projects that can be readied so that once the fund is ready, it could be front-loaded on these projects,” Sitharaman said at a business summit in Mumbai, the newspapers reported.

“That task is nearly completed. Before December 15, we will be able to announce frontloading of at least ten projects,” she said.

Modi came to power in 2014 on the promise to improve India’s economy and boost foreign investments, but he has struggled to meet those aims due to a lack of structural reforms. Modi won a second term in May and has taken various measures since 2014 to spur growth, including cutting the corporate tax and speeding up privatisation of state-run firms.

But several economic indicators show domestic consumption is weak, and many economists expect the current slowdown could persist for another two years.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Canada’s Economy Slows in Third Quarter Even as Demand Jumps By Bloomberg



(Bloomberg) — Canada’s economy slowed sharply in the third quarter, as a drop in exports and draw down in business inventories masked a rebound in domestic demand.

Gross domestic product grew at an annualized pace of 1.3% in the three months ended September, in line with economist estimates, Statistics Canada reported Friday. That was down from a revised 3.5% pace in the previous quarter that was largely seen as unsustainable. The period also ended as expected, with a monthly expansion of 0.1% in September.

While the slowdown last quarter marks a return to sluggish growth for the Canadian economy, the details of the report should provide some optimism about underlying strength domestically, even in the face of a weak trade sector, aided by a relatively robust jobs market and a rebound in housing.

Residential investment increased at an annualized pace of 13.3% in the third quarter, the fastest since 2012. Growth in household consumption picked up to an annualized pace of 1.6% in the third quarter, from 0.5% the previous quarter.

Non-residential business investment also surprised — given the global trade uncertainties — with spending on non-residential structures and machinery up 9.5%. That fully recouped a drop in the second quarter.

The end result was a 3.2% increase in overall domestic demand, fully rebounding from a very weak second quarter when consumption slowed and investment contracted. These underlying details should give Bank of Canada policy makers pause about cutting rates to counter an expected slowdown. Swaps trading suggests investors are placing a two-thirds chance of a rate cut in the first half of next year. The Canadian dollar pared losses after the report, and was trading at C$1.33 per U.S. dollar at 8:39 a.m. in Toronto trading.

The “hearty” gains in final domestic demand will “for now reinforce the Bank of Canada’s view that they have rates low enough to offset the drag from weak external markets,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a note to investors. “Overall, a mixed bag, but perhaps a bit better than it looks in the headline given the strength in domestic demand.”

The Bank of Canada, whose next rate decision is Dec. 4, had forecast growth of 1.3% annualized for the third and fourth quarters this year, before the expansion picks up a bit in 2020.

Another bit of good news was upward historical revisions by Statistics Canada to gross domestic product that showed the economy was slightly larger than initially estimated last year. This suggests there was less slack in the economy than previously thought, one less reason for the Bank of Canada to cut.

The biggest drag on the economy in the third quarter was a draw down in inventories by business to meet demand, instead of raising production. That’s the second straight draw down in inventories, and may still reflect concerns about the outlook.

At the same time, fewer inventories will ease worries that stockpiles had grown too large, posing a risk to future growth.

Exports dropped at an annualized pace of 1.5% in the third quarter, falling for a third time in the past four quarters.

Households also seem to be repairing their balance sheets, with the country’s savings rate jumping to the highest since 2015 in the third quarter.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



China wants to speed up business reforms, investment to boost slowing economy: premier By Reuters



SHANGHAI (Reuters) – China will speed up reforms to help build a market-based, globalized business environment and break investment barriers for all kinds of companies, Premier Li Keqiang was quoted as saying during a Cabinet meeting on Wednesday.

Economic growth slowed to 6% year on year in the third quarter of 2019, the weakest pace in more than 25 years, with the economy hit by a punishing trade war with the United States.

China has already drawn up new measures to start on Jan. 1 to “optimize” the business environment aimed at improving productivity and competitiveness.

Li was also quoted as saying in a summary of the Cabinet meeting published on China’s official government website (http://www.gov.cn) that taxes would continue to be cut as part of efforts to stimulate the slowing economy.

China aims to reduce administrative barriers, lower industry entry thresholds, eliminate discriminatory practices and decentralize investment decisions, the summary said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



U.S. labor market, manufacturing data point to slowing economy By Reuters


© Reuters. FILE PHOTO: Job seekers and recruiters gather at TechFair in Los Angeles

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits was unexpectedly unchanged at a five-month high last week, suggesting some softening in the labor market.

While other data on Thursday showed a mild pick-up in factory activity in the mid-Atlantic region this month, manufacturers reported a sharp slowdown in new orders, shipments and unfilled orders.

There were also declines in factory employment and hours measures. The persistent weakness in manufacturing is despite an easing in tensions in the 16-month trade war between the United States and China, which has depressed capital expenditure.

The reports added to last week’s downbeat October retail sales and manufacturing output data in suggesting the economy lost speed in the fourth quarter. Slower growth was underscored by the third straight monthly decline in a gauge of future economic activity in October. But the risks of a recession in the near term are low as the housing market is rebounding from last year’s soft patch, driven by lower mortgage rates.

The Federal Reserve last month cut interest rates for the third time this year and signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.

“This is no time for complacency, but it’s not time to panic either,” said Tim Quinlan, a senior economist at Wells Fargo (NYSE:) Securities in Charlotte, North Carolina.

Initial claims for state unemployment benefits were flat at a seasonally adjusted 227,000 for the week ended Nov. 16, the highest level since June 22, the Labor Department said. Data for the prior week was revised to show 2,000 more claims received than previously reported.

Economists polled by Reuters had forecast claims decreasing to 219,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 3,500 to 221,000 last week, the highest since June 29.

The claims data covered the week that the government surveyed establishments for the nonfarm payrolls component of November’s employment report. The four-week average of claims rose 5,250 between the October and November survey weeks.

While that would suggest little change in job gains this month, employment growth will be boosted by the return to payrolls of about 46,000 workers at General Motors (N:). The 40-day strike at the automaker’s plants in Michigan and Kentucky helped to hold back payrolls gains to 128,000 jobs in October.

“This recent weakening in the claims data points to some deterioration in the labor market,” said Daniel Silver, an economist at JPMorgan (NYSE:) in New York. “We expect effects of the recent United Automobile Workers strike to boost the November employment count after depressing the October data.”

The dollar was steady against a basket of currencies, while U.S. Treasury prices fell. Stocks on Wall Street were trading lower as a row between Washington and Beijing over protests in Hong Kong cast doubts on the timing of a trade deal.

WORKER SHORTAGES

Job growth has slowed this year, averaging 167,000 per month compared with an average monthly gain of 223,000 in 2018, in part because of the U.S.-China trade spat, ebbing demand and a shortage of workers.

Minutes of the Fed’s Oct. 29-30 policy meeting published on Wednesday showed that while officials at the U.S. central bank viewed labor market conditions as remaining strong, they also acknowledged the slowdown in the pace of job gains.

Policymakers attributed the moderation in hiring to worker shortages and also viewed it as “indicative of some cooling in labor demand,” in line with recent declines in job vacancies.

Troubles for manufacturing, which accounts for 11% of the economy, have persisted into the fourth quarter. In a separate report on Thursday, the Philadelphia Fed said its business conditions index rose to 10.4 in November from 5.6 in October.

But the survey’s measures of new orders, employment and shipments declined, pointing to underlying weakness in manufacturing in the region that covers eastern Pennsylvania, southern New Jersey and Delaware.

The Philadelphia Fed survey’s six-month business conditions index rose to 35.8 this month from 33.8 in October. But its six-month capital expenditures index tumbled to 19.4 from a reading of 36.4 in the prior month

A survey from the New York Fed last Friday showed a drop in its business conditions index this month and manufacturers remained pessimistic about conditions over the next six months.

Manufacturing is also being undercut by an inventory overhang, especially in the automobile sector, design problems at Boeing (N:) and slowing global growth.

The Fed minutes on Wednesday showed policymakers believed conditions for manufacturing “were unlikely to improve materially over the near term,” citing “continuing concerns about global growth and trade uncertainty.”

In a third report, the National Association of Realtors said existing home sales rose 1.9% to a seasonally adjusted annual rate of 5.46 million units in October. But gains are likely to be limited. The median existing house price surged 6.2% from a year ago to 270,900 in October, the biggest rise since June 2017. In addition, the stock of houses on the market fell.

“This is likely to be as good as it gets for existing home sales,” said Chris Rupkey, chief economist at MUFG in New York.

“Baby boomers are sitting on their properties and not downsizing or moving as much as earlier generations and this is likely to put the kibosh on any further improvement in existing home sales for this cycle.”

A fourth report from the Conference Board showed its Leading Economic Index dipped 0.1% in October after declining 0.2% in both September and August.



GDP revisions put China on target to double economy, but data doubts remain By Reuters


© Reuters. An electric delivery vehicle drives in the Central Business District in Beijing

BEIJING (Reuters) – China on Friday revised up its nominal 2018 gross domestic product (GDP) by 2.1% to 91.93 trillion yuan ($13.08 trillion), keeping it on track to achieving its goal of doubling the size of its economy by 2020 from 2010.

However, with the economy growing at its weakest pace in nearly three decades, the revisions could fuel scepticism about the credibility of Chinese data with some analysts suspecting authorities may be massaging the numbers to achieve Beijing’s ambitious targets.

In a statement, the National Bureau of Statistics (NBS) said the change in the size of 2018 GDP will not significantly influence the calculation for the 2019 growth rate.

Yet some analysts suggest the nominal nudge may actually not be so nominal after all.

Despite “NBS stressing that the current round of revisions is the result of the census uncovering previously unrecorded activity, it’s hard to ignore the fact that it will also help them meet official growth targets,” said Julian Evans-Pritchard, Senior China Economist at Capital Economics, in a note.

In previous revisions real growth has almost always been revised upwards, he said.

Indeed, growth of about 6.2% is seen needed for the whole of this year and the next to meet the Communist Party’s longstanding goal of doubling GDP and incomes in the decade to 2020.

Such a rate of expansion would be a stiff ask given the 6.0% GDP growth logged in the third quarter – the slowest pace since 1992 – and with many analysts tipping the pace to slip below 6% in 2020.

A slowdown in demand at home and abroad has weakened the world’s second-biggest economy, in part with business investment and factory activity hit by a trade war with the United States.

China routinely revises its annual GDP data. Days before GDP data for 2018 was released in January, the statistics bureau cut its final 2017 growth figure to 6.8% from 6.9%.

China’s fourth National Economic Census, released on Wednesday, included “richer” data points that showed more business entities and a bigger total asset base in 2018 than assumed under earlier GDP estimates, Li Xiaochao, deputy head of the statistics bureau, told Reuters earlier this week.

Revisions to historical GDP figures will also be made, Li told reporters.

The services sector contributed more to GDP in 2018 than the original data had indicated, the statistic bureau said. Nominal GDP includes changes in prices due to inflation, so it is usually higher than adjusted, or real GDP.

MASSAGING NUMBERS TO HIT TARGETS?

Analysts say that without further information from the NBS, it’s hard to calculate the impact of the latest adjustments on the 2018’s real GDP or the GDP growth rate for that year.

But a rough estimate of an adjusted real GDP growth in 2018 might be 8.9%, compared to an original reading of 6.6%, said Chaoping Zhu, Global Market Strategist at J.P. Morgan Asset Management, in a note.

The government’s target range for 2019 growth is 6%-6.5%. The economy expanded 6.4% in the first quarter, 6.2% in the second and 6.0% in the third – the weakest pace since 1992.

If the 2018 figure is revised up, the government might be more tolerant of an economic slowdown next year and set a lower growth goal in 2020, said Zhu.

As the deadline for doubling the size of the economy draws nearer, it’s become increasingly clear that the target was “too ambitious,” said Evans-Pritchard.

“Our research suggests that political pressure to meet growth targets has encouraged the National Bureau of Statistics (NBS) to massage the GDP deflator in recent years.”

The GDP deflator is the ratio of nominal to real GDP.

In an email to Reuters, Louis Kuijs, head of Asia economics at Oxford Economics, said he would not discount the possibility of the NBS massaging the data. However, an upward revision by the NBS is neither surprising nor unreasonable, he said, noting that newly included sectors in statistical coverage tend to grow quickly.

“Also, outside of China, revisions of the size of economies are almost always upwards,” he said.

A paper published by the U.S.-based Brookings Institution earlier this year said China had overestimated nominal and real growth rates by about 2 percentage points between 2008 and 2016.



Australia to fast-track $2.6 billion worth of infrastructure spending in bid to revive economy By Reuters



By Colin Packham

SYDNEY (Reuters) – Australia’s conservative government will fast-track A$3.8 billion ($2.59 billion) in infrastructure spending, Prime Minister Scott Morrison said on Wednesday – a fillip to a stalling economy.

Australia’s economic growth has slumped to its lowest in a decade, led by weakness in consumer spending and home building.

Desperate to reinvigorate the economy, the Reserve Bank of Australia (RBA) has chopped interest rates by 75 basis points to an historic low of 0.75%, though it has repeatedly said increased government spending on infrastructure was required.

Heeding those calls, Morrison will use to a major speech on Wednesday to promise an injection of government spending on road and rail projects across the country, two sources familiar with the plans told Reuters.

Nearly half of A$3.8 billion to be invested over the next four years will be spent over the next 18 months, Morrison will say.

Speaking ahead of the speech in Brisbane, Morrison confirmed the infrastructure plan.

“All these projects will provide important extra support to the economy,” Morrison told Australia’s Channel 7.

Morrison has for several months since his unexpected re-election in May dismissed calls for accelerated infrastructure spending, insisting the government was focused on delivering Australia’s first budget surplus in more than a decade.

But with iron ore prices hitting new highs, Morrison’s conservative government has more fiscal firepower to prop up the country’s struggling economy.

The infrastructure spending plan is also a boost to the RBA, which discussed cutting interest rates again this month, though it decided to assess the impact of the three cuts already delivered since June.

Analysts generally assume the central bank would not want to take its cash rate below 0.5% and would have to resort to other stimulus steps such as asset purchases or lending to banks at super-low rates.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Risks to U.S. economy still to the downside By Reuters


© Reuters. FILE PHOTO: John Williams, CEO of the Federal Reserve Bank of New York, speaks at an event in New York

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The U.S. Federal Reserve has interest rates at the appropriate level for the U.S. economy but risks to the economic outlook are still tilted downwards, New York Federal Reserve President John Williams (NYSE:) said on Tuesday.

“I think some of these issues, with inflation still below target, we are still seeing some downgrades in the global outlook, I am definitely watching more for some of the downside,” Williams told reporters following an appearance at a capital markets conference in Washington.

Earlier, Williams had echoed his colleagues at the U.S. central bank in describing monetary policy as in the right place with the U.S. economy “right where we would like it to be.”

The Federal Reserve voted 8-2 to cut interest rates by a quarter percentage point at its October meeting to a target range of between 1.50% and 1.75%.

It was the third interest rate cut this year, but the Fed made plain at the time that it would lower rates again only if there is a material deterioration in the U.S. economic outlook.

Earlier this month, Williams also said the U.S. economy is in a good place and reiterated that the central bank’s reduction in borrowing costs this year should mitigate the potential risks of the ongoing U.S.-China trade war and slowing global growth.

On what it would take for the Fed to reconsider its current pause on interest rates, Williams told reporters it would be important for the Fed not to overreact to individual data points but to follow trends.

“Are these global factors or other things causing the U.S. economy to slow more than expected and slow below trend growth on an ongoing basis? That would be an argument for some more accommodation. Similarly, if inflation were to move in the wrong direction on a sustained basis, that would be an argument to consider more accommodation,” Williams said.

The New York Fed chief also addressed September’s ructions in short-term lending markets and said the central bank and regulators should closely examine how regulations put in place following the 2008 financial crisis may have contributed.

“My only message on this would be there are reasons we have regulations that were put in place after the crisis… That said, there may be ways that there are unintended consequences and inefficiencies,” Williams said.

“We don’t want inefficiencies in terms of how those markets work so those are the things that will be studied carefully,” he noted.

The Fed began purchasing Treasury bills in mid-October to increase the level of reserves in the banking system and minimize volatility after September’s liquidity crunch, which caused borrowing rates in short-term lending markets to spike.

The New York Fed said last week it will purchase $60 billion in short-term Treasury bills through mid-December.

The Fed has one more interest-rate setting before the end of the year, on Dec.10-11 but investors now see the Fed keeping interest rates unchanged until at least mid-2020.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.