10 economic factors to watch out for

With Greece heading back to the polls and Tony Abbott hoping to do the same after Craig Thomson’s non-mea culpa on Monday in Parliament, leading companies need to put their operations on a watch list.

1. As the turbulence swirls around the house, watch the Greens for signs of a shopping list of demands, including protection of their climate change institute. Watch Adam Bandt battle for an on-shore open door for asylum seekers and the rest of the Greens calling for rushed rich taxes in the Senate.

2. Alternatively, watch Anna Burke in the chair if the view is that Craig Thomson and Peter Slipper are both going to have to take a year’s leave of absence and the Gillard Government negotiates a “before we go” package of reforms that make David Oliver’s replacement of Jeff Lawrence more understandable and Wayne Swan’s barons versus battlers more appealing.

3. The Murdoch press follows up the statement in the House with a “Third Strike” headline and a call for Tony Abbott to take control to cancel the carbon tax, the mining tax and the kid’s school bundle in favour of a 25% corporate tax and a rise in unemployment in favour of industrial relations flexibility. Watch Peter Van Onselen on Sky for continuing calls for an early poll.

4. To go beyond the minority government hiatus, watch for a meeting between senators and Kevin Rudd to hammer out a plan to move more quickly on the emissions trading scheme, bring in a $1 limit on the pokies, extend a set of the Henry tax reforms and scrap the fuel subsidies to the miners. That would be an announcement of a “we have heard you” rush to a snap spring election.

5. Give Andrew Robb and Joe Hockey their due for calling for an end to the assumptions that would enable a big spending promise by the Opposition and a continued belief in an entitlements mentality. Labor governments are usually thrown out of office when the electorate wants the beneficence of a booming economy, not on a downturn.

6. Outside the Parliamentary precinct watch the changing of the guard in China for early signs of a significant slowdown that will make the mining tax look deadly for an incoming Abbott Government. Chinese GDP growth is likely to plummet by 5% (not the published figures but the reality).

Zhou Hao, an analyst with ANZ Bank in Shanghai says, “It’s quite worrisome, and worse than before. It increasingly looks like we’re seeing a very broad-based slowdown that underpins Joe Hockey’s belief that the Wayne Swan surplus is a mirage. The Chinese Government has set a growth target of 7.5% for 2012, fearing that anything below that level could trigger mass unemployment and cause widespread unrest in the world’s second-largest economy.

Check out these statistics on the Chinese housing market, sent to us by the editor of Slipstream Trader, Murray Dawes:

• Year-on-year sales in the first quarter for all real estate were DOWN 14.6%.
• Residential property sales were DOWN 17.5%.
• Total amount of floor space “for sale” was up 35.5% year-on-year.
• Floor space of residential units “for sale” grew 47.4%.
• Housing starts were DOWN 14.4% year-on-year and 23.4% month-on-month.
• April land sale revenues were DOWN 54.7% year on year.

7. Then watch a tsunami of capital flight from Greece threatens to overwhelm authorities, forcing that country out of the euro before fresh elections in June. Greek banks have lost 30pc of their deposits since late 2009. The total fell to €171 billion in March.

“The surprise is that there is still so much left. I can’t believe it will stay much longer,” says Simon Ward from Henderson Global Investors.

UK Prime Minister David Cameron says that now is the time for the eurozone to make up or it is looking at a potential break-up.

David Kerns of Moneycorp suggests that a move out of the Euro could see a new currency could be devalued by 40% to 50%. The European Central Bank said on Wednesday it had stopped providing liquidity to some Greek banks as they have not been successfully recapitalised.

8. Consider the prospects facing Prime Minister Gillard as she heads out before Craig Thomson even gets to have his 30 minutes of people still listening to what he has to say. Gillard will leave Australia on Saturday bound for Chicago, where she will meet US President Barack Obama and other NATO and International Security Assistance Force (ISAF) leaders for three days of talks. At about that time the world’s finance leaders will be turning to the IMF for a potential re-run of the GFC, including the globalisation of finance, huge bailouts for the Mediterranean banks, international trade imbalances and fiscal policy choices related to government revenues and expenses.

9. If this is not sufficient to make leading companies worry more about a global re-run of 2008 just as that carbon tax hits business expectations in July, the oil price may fall, traded commodity prices will follow the decline in shipping, the Australian dollar may be seen as a new hedge and go back above parity and property prices could fall by a significant level for more than six months. The US external deficit will stay high only if US growth remains vigorous. If the US dollar continues to grow strongly, it will also retain a strong attraction for foreign capital, which should support players seeking to make Australia a haven. If gold heads back up towards $1,800, large companies will be sending a large jump in redundancies messages to the Government.

10. Against these signs of doom and gloom, consumer and business confidence in Australia is on the rise. Consumer confidence rose modestly after Australia’s central bank delivered a surprisingly large cut to the cash rate on May 1. The Westpac-Melbourne Institute Consumer Sentiment Index rose by 0.8% to 95.3 index points in May, up from 94.5 in April. Roy Morgan Consumer Confidence has jumped 5.4 points to 115.7 – its highest level for three months.

Gary Morgan says, “The positive reaction to the budget is reinforced by the strong fall in Australians saying they are “worse off” financially than this time last year (27%, down 6%) — the lowest this measure has been since February 12/13, 2011, more than a year ago”.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.