Aussies' healthy glow not all it seems

CANBERRA - Treasurer Wayne Swan was almost smug when he released the latest national accounts, showing a healthy rise in Australia's economic growth.

"These national accounts represent a very solid outcome for the economy, for an economy that is the envy of the developed world," he said.

Who could blame him? After emerging from the global financial crisis in better shape than the major economies of Europe and North America, Australia's gross domestic product grew by 0.9 per cent in the December quarter, and by 2.7 per cent for the year.

On Thursday new figures showed a marked decline in the trade deficit, adding to a string of other recent statistics pointing not only to recovery, but also to a resumption of the resource-fuelled boom that appears to have paused but briefly for the global crisis.

Australia's economic gains again will be New Zealand's population loss, with fresh migration statistics that show the number of Kiwis moving across is rising once more.

Statistics New Zealand says just over 4000 Kiwis left for Australia last month, up from 2800 in December and 2000 in November.

The ASB says the rate of permanent exits across the Tasman is expected to rise steadily.

An international survey by global accountancy firm Grant Thornton found the number of Australian companies planning to increase salaries this year was 23 per cent higher than New Zealand ones.

Given our reliance on Australia as a trading partner, its good fortune is also New Zealand's. As Reserve Bank governor Alan Bollard last month said, "there's a lot of crumbs come off the Australian table that we can take advantage of".

Among other data across the Tasman, the Westpac-Australian Chamber of Commerce and Industry (ACCI) survey of industrial trends composite index rose 2.2 points to 50.4 in the December quarter, its third consecutive increase and its highest point since early 2008.

Commodity prices, driven by higher returns for coal, iron ore and beef and veal, have risen for the past two months, with total export earnings forecast to rise by 15 per cent to A$187 billion ($235.6 billion) in 2010-11 and to A$211 billion by 2014-15.

Confounding predictions, the economy added 52,700 jobs in January, pushing the unemployment rate down from 5.5 per cent in December to 5.3 per cent.

Retail sales rose by 1.2 per cent in January to a seasonally adjusted record of A$20.1 billion , sales of new cars were up 17 per cent last month, and the Australian Industry Group-PricewaterhouseCoopers manufacturing performance index showed growth in the sector and a lift in new orders.

The construction industry expanded in January, reflecting improved conditions in the engineering and commercial building sectors, and a boost to housing - also recorded in a Housing Industry Association survey showing a 9.5 per cent rebound in new-home sales.

Small business has begun to climb from the doldrums, with the ACCI reporting the sector's best conditions since late 2007, pushed by improving sales and profit growth.

Across the board, the nation is more confident.

The latest ACCI survey of investor confidence reported that most indicators of business expectations for the next three to 12 months were "moving into expansionary territory" and increasing above their five-year averages.

Morgan polling further showed a continuing rise in consumer confidence. Almost half of the nation's families expect to be better off this time next year, compared with 14 per cent who believe their finances will be worse.

"Economic conditions in 2009 were stronger than expected after a mild downturn a year ago," Reserve Bank Governor Glenn Stevens said when he announced a further rise of 25 basis points in official interest rates last week, pushing the cash rate to 4 per cent.

He said unemployment appeared to have peaked at a much lower level than expected, the slide in business credit was easing as lenders appeared more willing to lend to some borrowers, resource sector investment was very strong, and underlying inflation had fallen from its 2008 peak.

The longer-term future also seems to glow.

Driven by a predicted 40 per cent rise in global primary energy demand by 2030, Australia's energy exports are expected to experience net growth of almost 4 per cent a year over the next two decades.

Across Australia, 18 major minerals and energy projects totalling A$5.2 billion were completed in the six months to April last year, with A$80 billion invested in a further 74 projects nearing completion, and a huge A$277 billion earmarked for 247 less advanced projects.

But behind the halo of the headlines there are some disquieting qualifiers, especially for the near term.

The decline in the trade deficit, for example, reflects a fall in imports rather than a rise in exports, with even sales to China paling in January.

The dollar is putting on muscle, hitting exporters including manufacturers, tourism and education, growth in household spending is limping along at a 10-year-low, business remains pessimistic about its capital spending plans, and rising house prices are hammering home affordability.

Housing approvals have been hit by the end of the federal Government's expanded first home-buyers' grants and is expected to suffer again from rising interest rates.

Economic expansion will also run against constraints from a renewed skills shortage, and a more pervasive decline in productivity, emphasised again last week by a new federal report warning that groaning infrastructure and increasing congestion will hit critical productivity in major cities.

And industry bodies have also added caution to the latest national accounts.

The ACCI said much of the growth in the December quarter had been driven by private and public spending underwritten by the Government's economic stimulus package, and had been uneven across the country.

And Australian Industry Group chief executive Heather Ridout said growth recorded in the national accounts did not by any means represent a sharp recovery.

"Rather, it is consistent with our view that the recovery is gradual [and] patchy, rather than strong."

Boom times:

* Retail sales increased by 1.2 per cent in January to a record of A$20.1 billion ($25.3 billion)

* Commodity export earnings are forecast to rise 15 per cent this year to A$187 billion

* There were 52,700 new jobs added in January.

* Mining and energy projects worth A$277 billion are planned