Economics is again prominent on public discourse. Economic data is spewing forth, with two climaxes next week. The first is the Reserve Bank board meeting and the second is the national accounts for the June quarter.

The old lady of Martin Place is widely tipped to sit on her hands due essentially to the “market turmoil”, which is however showing signs of calming as we write.

The gloomsters have been predicting a very subdued growth outcome, and some still are, but business investment surprised on the upside so we shall have to wait and see.

David Uren reports for The Oz on yet more evidence that Australian’s respond well to incentives, especially the chance to avoid some tax:

High-income earners poured up to $15billion into their superannuation funds between April and June as they rushed to take advantage of generous tax concessions.

The last-minute cash surge and a powerful performance from the share market helped lift total superannuation savings by a record $172billion last year, equivalent to about $15,000 for every superannuation fund member.

Peter Costello said the increase in superannuation assets in the three months to June was more than five times bigger than in the same period last year”.

The local share market has now recovered a fair proportion of its 15 % loss and those who faced a $150,000 loss after putting their million super contribution to work are breathing easier.

In other economic news, private new capital expenditure in Australia rose a solid 6.3% in the June quarter (+11.4% y-o-y). This was well ahead of expectations for a 2.0% increase.

The economics team at St George commented:

Today’s Capex data has implications for next week’s June quarter GDP data. The Capex data, being higher than we had expected, suggests we should revise up our GDP forecasts. However also released today was the June quarter net exports contribution to GDP, which was a little worse than we had anticipated. The upshot is that this has left our GDP forecast unchanged at -0.1%, which should see the annual rate of growth fall from 3.8% to 3.1%.

Australia’s current account deficit deteriorated 3.0% in the June quarter to a whisker under $16 bn, worse than market expectations. Amanda Tan, St George Treasury economist, commented: “The expansion in the current account deficit for this quarter reflected an increase in the deficit on goods and services of $264m (+7.0%).

Australia’s net income deficit – the amount we pay to foreigners as a return on their investments – had its usual increase, this time by $180m. The expansion in our net income deficit over recent years reflects both increased dividends on equity investments (as a result of the strong profitability of foreign-owned enterprises in Australia) and a higher debt servicing requirement (due to increases in interest rates and the stock of debt).

The deficit in the current account was accompanied by a further lift in our net foreign debt, of $8.9bn to $544.1bn. This lifts it to 53% of GDP, which is up from 52% in 05-06 and 48% in 04-05. Our higher exchange rate has however helped contain the increase in this component.”

Read more at  Henry Thornton

Peter Fray

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Peter Fray
Editor-in-chief of Crikey