PRDnationwide Quarterly Economic and Property Report Ed 1 2013
2013 has started poorly in many aspects of the Australian economy be tough for the economy. The negativity was dominated by three main themes. The mining boom had run out of puff, the Australian Dollar was suffocating the non-mining sector, and the repeated round of rate cuts had failed to fire up consumer sentiment. In addition, the global economy was slowing with the US stuck in neutral, Europe continuing to battle its debt crisis, and Japan displaying further weakness.
However, an 85 per cent rebound in iron prices from their September lows has improved the domestic situation remarkably. Until recently, the soaring price was declared a short-term inventory restocking exercise. But the sudden surge in Chinas exports and imports hinted at something far more substantial. There has been tentative evidence of a Chinese recovery for several months now, and with the new leadership likely to be installed in the near future, a new round of optimism is firing up the engine room in our biggest trading partner. The mining boom, delivered to the mortuary just a few months ago, has been resurrected.
The American housing market has improved, despite historically low activity and home values. Unemployment has been inching lower, while growth in construction activity has increased rapidly. Macquarie Private Wealth analysts noted that 2012 would be the year that marked the turnaround in the American property market, with 2013 likely to see a resurgence on Wall Street that already has threatened to head to a new peak.
Meanwhile, the European economy still remains very turbulent. Currently Europe as a whole is officially in recession. European GDP shrank by 0.1 per cent in the third quarter after a drop of 0.2 per cent in the second quarter. The data also suggests that German growth is slowing. The European Central Bank (ECB) halved its 2013 growth forecast for Germany and now expects GDP to grow 0.8 per cent next year, down from the previous forecast of 1.7 per cent. This is aligned with the German governments own forecast for 2013 of around 1.0 per cent. To date, Germany has been insulated from the difficulties in the Eurozone, due to its strong trading ties with non-Eurozone countries and the low Euro. However, with the global economy slowing, German exports are now affected.
Combined with a the resurgence in China and a slowly stabilising US, if Australian unemployment can remain in check for 2013 and interest rates remain low, then rebuilding on Australias fragile confidence can continue. The second half of 2013 could be much brighter than how the new year has commenced.