Don’t be held back from being your best.

When people think of trying to maximise their productivity, the conversation generally tends towards things you can do differently in the workplace.  And admittedly, most of my recent articles have focused on the work aspect.

There is actually a lot more to your productivity than focusing just on what happens during the day at work.

Essentially your output will be maximised when your energy is maximised.  Don’t even think about trying to pretend to be at your productive best if you are lacking in energy.

Now we are not talking about anything “new age” here.  We are just talking about the strength and vitality required for sustained mental or physical activity.

In order to understand how to maximise your energy you need to look outside the workplace, not just inside the workplace.  At Inside 80 Performance we talk about three broad categories – Body, Brain and Belief.  

If you were to think of every possible aspect as to what gives you energy or what takes it away from you, most things would fit into at least one of the below categories.

Let’s look at each of these:

Body

Your energy from your body depends on the physical aspects of how you look after your body.  For example are you exercising? Do you eat enough nutritious foods to give you energy? Are you getting enough sleep?

Brain

This is the part which is incorporates most of the things which happen in the workplace.  For example, are you working closely to your natural pace?  Are you factoring in recoveries and lighter tasks as part of your broader productivity plan?  Are you managing your diary to help you to get the most amount done in the least amount of time or do you spend more time “looking busy”?  How do you manage email and meetings?

Belief

This features in all aspects of your life.  For example do you have any limiting beliefs that are preventing you from reaching your full potential in work and in life?  Do you have a high ratio of positive thoughts to negative thoughts or is your lack of positivity holding you back?  Do other people’s actions affect your feelings and ultimately your productivity?

Everything is related

The interesting thing about all of these is that they are all inextricably linked.  Think of all of these aspects like a windshield.  If a crack starts to appear in one part, you need to address it or it will start to spread to other areas of your life.

For example – some people may find cracks occurring in the “body” component – if you aren’t eating good fuel to sustain your day at work your energy will decrease.  And if your energy decreases – ironically you will crave more bad food that is high in sugar.

To take that further, if you are not eating right then chances are you won’t be able to do much physical exercise.  Lack of exercise is also a big factor in depleting your energy.  Once you are lacking in energy from not looking after your body properly it may extend to other areas – for example your belief.

Generally speaking your positivity goes up when you feel good physically so if you don’t feel like you’re in peak performance mode physically, chances are you will start to feel a little more negative.  Once you feel negative this can permeate through to your behaviour at work that can affect you and those around you.  It can reduce not just your productivity but the productivity of those around you.

Others may find their cracks appear in the brain component – lack of time management for their pace leaves them feeling exhausted, this then flows through to their mind-set and of course if they have bad time management then chances are they are not exercising as let’s face it, no one has time for exercise – you need to create it.

It is important to look at all components – Body, Brain and Belief

Every person is different.   People can be energised and conversely stressed by completely different things.  In other words the windshield cracks will be different for everyone.  Some people need to focus on their fitness and nutrition to increase their productivity and decrease their effort in the work place.

Others need to focus on their positivity while others need to focus on how they manage their work in relation to their natural pace, just to name a few more examples.

Once you have determined the source of what is actually draining your energy you can then focus on these areas to give you the biggest results.

There is no “one-size fits all” approach

It’s quite easy for anyone to come up with at least 100 ways to improve energy.  The better solution is to identify just two to three things that you can do to improve your energy.

Making changes takes energy and given that we want to increase energy we don’t want to spend any unnecessary effort trying to make changes that don’t yield big results for you personally.  Therefore it’s important to make sure that the few changes you identify will give you the biggest results for the least amount of effort.

After all, that is what productivity is all about.

The post What’s really holding you back from maximum productivity? appeared first on AdviserVoice.

Relaxing for success.

In previous blogs  (How is your team’s productivity? and Is your output as high as it could be?) we discussed how important it is to decrease effort levels in order to maximise productivity and we discussed pace as a tool for individualising your approach.

Let’s take that a step further and talk about planning adequate recovery time as an important part of your productivity plan.

Let’s think about how many people work over the course of a year.  Many people work in a way that maximises their effort most of the year – regardless of what is going on at work.  They may find that they get sick or burn out or need a holiday (many people get sick on the first few days of their holidays) so their effort drops off quickly and then they pick it up again and go hard until the next crash.  Similar to the below diagram:

Unfortunately while they maintain a high effort their productivity is actually in decline over that time which means they spend a large amount of their year with their effort higher than their productivity as follows:

This is a fast path to burnout and doesn’t inspire people to want to work with you for extended periods.   It’s usually a very quick way to result in staff turnover.  And I’m sure I don’t need to tell you the costs to the business of hiring and training new staff.

Let’s now think athletic principles of maximising productivity.  In this case athletes know that they just can’t train really heavy every single day of the year.  (Note that their training schedules may look heavy to us mere mortals but in actual fact they are mixing up their training to incorporate lighter training and recovery periods.)

Their effort vs productivity schedule looks more like this:

As you can see – the athletes actually reduce their effort and make sure they recover as they know it is an important part of their overall performance.  They know that if you’ve had a really hard running session one day and you try to do the same thing the next day, it will feel as though they are training way harder and will have a higher risk of injuring themselves.

All athletes know that one day of rest is far more productive than being unable to train for the next 7 months with a torn Achilles tendon.

Again, it’s the same principle in the workplace.  If you are effectively “running on dead legs” at work, your productivity will decline.  And that could be the least of your worries.  You will also have a far higher risk of experiencing stress and all those effects that come with it.  For example – the same hormone, cortisol, which fights stress also fights cancer causing cells – and it doesn’t multi-task!  Where would you prefer your cortisol to be working?

It is important to plan your time – days, weeks, months and years to allow yourself to have recovery time to go hand in hand with your periods of hard work.

So what do we mean by recovery?

Recovery can take a number of different forms.  It may involve switching off from work completely.  For example it could be holidays or even just long weekends away throughout the year.

In the shorter term it might be finding a relaxing pastime that really helps you to mentally escape from work.  For example this could be going to the movies or out with friends for dinner.

Of course it’s not suggested that you should whip out and see a movie in the middle of your workday.  However there are ways to break up your day to give you more perceived recovery time such as switch to some tasks which absolutely need to be done but don’t take as much of your mental energy to do them.  Stay tuned for my next blog where we will explore this concept in further detail.

Give yourself permission to be productive

Of course the hardest part for most people about incorporating recovery is giving oneself permission to do so.  Many of us were brought up with the belief that you have to work harder to be more successful.  Don’t get me wrong – hard work certainly does go a long way to success – it’s certainly not about shying away from hard work, it’s just important to factor in some smart, considered and well-planned recoveries as part of the process in order to take your productivity to the next level.

The post Have you planned for productivity (output) or hard work (input)? appeared first on AdviserVoice.

• 

  Australia’s population set to exceed 70 Million by the end of the century.

  New population projections: The Bureau of Statistics believes Australia’s population could reach 70 million people in 2101. Five years ago, the ABS estimated that the population could hit 62.2 million in 2101. Melbourne could have a larger population than Sydney in 2030. And Perth could have a larger population than Brisbane in 15 years.

• Productivity challenge: Reserve Bank Deputy Governor Philip Lowe delivered a speech: “Productivity and Infrastructure”.
• Imports fall, prices rise: Imports of goods fell by 2.4 per cent in real terms in the September quarter. Imports prices (implicit price deflators) rose by 6.3 per cent.

What does it mean?

• In the space of five years, the Bureau of Statistics has found an extra 8 million people. In 2008, the ABS reckoned Australia’s population could hit 62.2 million in 2101. Now it estimates a figure of 70 million.
• In the next 90 odd years could Australia have a population of over 70 million? The Bureau of Statistics reckons there is a chance, but it would require high fertility levels of around 2 babies per woman and annual migration levels near 280,000 a year. The latest projections are important for policymakers, especially planners, as well as businesses to do some scenario or ‘what if’ work.
• Could Melbourne take over as Australia’s most populous city? Using the high population assumptions (series A) and medium (series B) assumptions, “Melbourne is projected to become the most populous, exceeding Sydney’s population in 2030 and 2053, respectively.”
• Using series B, the ABS finds “The population of Perth is projected to overtake that of Brisbane in around 15 years’ time, when they both reach 3 million people in 2028.”
• No matter which of the three assumptions is chosen by the ABS, Australia’s population is projected to increase. And that is notable as the ABS observes: “In contrast to the 2004-based set of ABS population projections released in November 2005, no series shows population decline for Australia before the end of the century.”
• Reserve Bank Deputy Governor Philip Lowe has provided a reality check for the ‘doom and gloom’ school: “the past two decades have been very good ones for the Australian economy.”Lowe says that “While not everybody in the community has benefited equally, there has been a very substantial improvement in our average standard of living since the early 1990s.”
• But Lowe has provided a reality check for the ‘blue skies’ school as well: “Looking forward, it is unlikely that these favourable developments will be repeated.” In short a lot has gone right over the past decade, but there are now challenges in maintaining the good times.
• Still, Lowe is not downbeat. The aim in coming years should be to boost productivity and Lowe believes there is some basis for optimism. Inflation is under control and productivity has indeed lifted recently.
• Productivity speech: Reserve Bank Deputy Governor Philip Lowe has delivered a speech entitled “Productivity & Infrastructure”. http://www.rba.gov.au/speeches/2013/sp-dg-261113.html
• Lowe summed up the talk as follows: “In conclusion, Australia faces a significant challenge over the coming years. While our exports are set to grow strongly, we will need to lift our rate of productivity growth substantially if we are to continue to enjoy the type of increases in our living standards that we have become used to. Meeting this challenge will require innovation by both the private and public sectors. Infrastructure is just one of the many areas that can play a role here. But if we are to maximise the benefits of our investment in infrastructure, that investment needs to be surrounded by strong governance, sound financing and pricing arrangements and due regard to the capacity constraints in the economy.”
• Population projections: The ABS notes: “Australia’s population at 30 June 2012 of 22.7 million is projected to increase to between 36.8 million and 48.3 million in 2061, and reach between 42.4 million and 70.1 million in 2101.”
• There are three projections: In Series A, Australia experiences strong and consistent growth, reaching 48.3 million in 2061 and 70.1 million in 2101. In Series B, the population will reach 41.5 million in 2061 and 53.6 million in 2101. In Series C, growth is projected to be lower, with the population reaching 36.8 million in 2061 and 42.4 million in 2101.
• Imports: The ABS report that imports of goods fell by 2.4 per cent in real terms (volume of goods imported fell) in response to a 6.3 per cent lift in prices.
• The latest population projections are important for long-term planning, especially by government but also private businesses, utilities, housing agencies, health and emergency services.
• The game has changed, and it is a case of everyone now updating their figures and debating the new circumstances. What sort of Australia do we want over the next 90 years?
• Just like the population data, the productivity and infrastructure challenges for Australia exist in the medium-term rather than short-run.

What are the details?

• Productivity speech: Reserve Bank Deputy Governor Philip Lowe has delivered a speech entitled “Productivity & Infrastructure”.
• Lowe summed up the talk as follows: “In conclusion, Australia faces a significant challenge over the coming years. While our exports are set to grow strongly, we will need to lift our rate of productivity growth substantially if we are to continue to enjoy the type of increases in our living standards that we have become used to. Meeting this challenge will require innovation by both the private and public sectors. Infrastructure is just one of the many areas that can play a role here. But if we are to maximise the benefits of our investment in infrastructure, that investment needs to be surrounded by strong governance, sound financing and pricing arrangements and due regard to the capacity constraints in the economy.”
• Population projections: The ABS notes: “Australia’s population at 30 June 2012 of 22.7 million is projected to increase to between 36.8 million and 48.3 million in 2061, and reach between 42.4 million and 70.1 million in 2101.”
• There are three projections: In Series A, Australia experiences strong and consistent growth, reaching 48.3 million in 2061 and 70.1 million in 2101. In Series B, the population will reach 41.5 million in 2061 and 53.6 million in 2101. In Series C, growth is projected to be lower, with the population reaching 36.8 million in 2061 and 42.4 million in 2101.
• Imports: The ABS report that imports of goods fell by 2.4 per cent in real terms (volume of goods imported fell) in response to a 6.3 per cent lift in prices.

What are the implications?

• The latest population projections are important for long-term planning, especially by government but also private businesses, utilities, housing agencies, health and emergency services.
• The game has changed, and it is a case of everyone now updating their figures and debating the new circumstances. What sort of Australia do we want over the next 90 years?
• Just like the population data, the productivity and infrastructure challenges for Australia exist in the medium-term rather than short-run.

The post Australia 2101: 70 million people? appeared first on AdviserVoice.

The integration delivers a more seamless service to advisers and will increase their productivity.

AdviserNETgain combines client, practice and advice management processes into one easy-to-use system that integrates advisers’ front and back office.

The integration sees:

• Direct movement of data from BT Wrap to AdviserNETgain leading to a more reliable and accurate transfer of data. This eliminates the need for advisers and other personnel to spend time updating data when generating portfolio reviews
• A single log-on meaning users logging on to AdviserNETgain are automatically logged on to BT Wrap
• The ability to move immediately from viewing a client’s details on AdviserNETgain to viewing the same client’s details on BT Wrap – without having to search for the client

Details on fees and transaction summaries from BT Wrap automatically inserted into advice documents generated by AdviserNETgain. National Manager of AdviserNETgain, Darelle Jenkins, said the integration was another significant step in improving advisers’ productivity and enabling advisers to provide timely and accurate service and advice to their clients.
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“AdviserNETgain is an important tool available to BT Financial Group’s aligned dealers. This major integration provides advisers with accurate, up-to-date information and effortless access to BT Wrap. The more up-to-date information AdviserNETgain has access to, the better clients can be served.”Head of BT Wrap, Chris Freeman, said.
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BT Wrap users would be well-served by the improved integration between the systems.
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“Many advisers who are currently using AdviserNETgain have portfolios in BT Wrap. This integration makes providing advice and ongoing service to clients with BT Wrap holdings extremely efficient.”

The post AdviserNETgain launches major integration with BT Wrap appeared first on AdviserVoice.

Key points

• The Japanese earthquake has caused terrible human suffering. In terms of the economic impact, in the short term it will likely depress Japan’s economy as a result of damage to factories, power supply, transport infrastructure and confidence. However, by the second half of the year the rebuilding effort is likely to result in a boost to growth.
• While it has added to short term uncertainty in global investment markets, we don’t expect the earthquake to derail the global economic recovery or growth in Australia. In fact, increased commodity demand associated with rebuilding will ultimately provide a boost for Australia. We continue to see the recent pull back in share markets as a correction, and not the start of a new bear market.

Introduction

It seems the string of disasters in our part of the world this year is not letting up – the Australian floods, the New Zealand earthquake, and now a massive earthquake and tsunami in north east Japan. At this stage the full extent of the damage in Japan is unknown, but it is clear it has resulted in a terrible human tragedy. Right now the focus is on the rescue effort and our thoughts are with the Japanese people and all those affected. This note looks at the likely impact on economic activity, investment markets and Australia.

Economic impact

All natural disasters follow a similar pattern in terms of their economic impact and the Japanese earthquake is unlikely to be any different. The initial impact is negative as production is disrupted as a result of damage to factories, the power supply, transport infrastructure, confidence, and to homes which means workers are focussed simply on survival. This then gives way to recovery as rebuilding kicks in and production returns to normal.

• This was seen in terms of the Kobe earthquake in Japan in January 1995, which claimed 6,434 lives. Japanese industrial production fell 2.6% that month only to be followed by gains of 2.2% and 1% respectively in the subsequent months. In fact it’s worth noting while Japan’s GDP fell 0.7% in the December quarter 2004, it actually rose 0.8% in the March quarter 2005 when the quake hit and rose another 0.8% and 1% in the June and September quarters respectively.
• It was also seen in the Boxing Day Tsunami in Asia of 2004, with initial negative economic consequences in the areas affected followed by a strong rebound. In fact it was barely a blip in the Asian growth story at the time.
• The initial negative effects from recent floods are now being felt in Australia, but there is good reason to expect a rebound in growth from the June quarter.

The areas most affected by the earthquake account for around 8% of Japan’s GDP. It is a centre for auto production with Toyota, Nissan and Honda plants being shut down. Electronics plants have also been affected and damage to fishing and agricultural production is likely to be immense.  That said, given the area directly affected by the earthquake is a smaller part of the Japanese economy than the area affected by the Kobe earthquake in January 1995 it’s possible the economic affect may be smaller this time. According to Bank of America Merrill Lynch the three worst hit prefectures in the Kobe earthquake accounted for around 12% of Japan’s GDP.

However, it is still very early days in assessing the damage and there are some reasons to be a bit more concerned this time around. First, it’s the tsunami which has caused most damage this time, wiping away whole towns and parts of cities, as opposed to just earthquake damage to buildings, roads, etc. This also means the rescue operation may be more involved as will be the clean up before rebuilding can commence. Some areas may now even be unliveable given the shift in land and sea levels. Second, as a result of problems at nuclear power stations, the interruption to power supply may be greater and longer than was the case in 1995. Third, the loss of life this time around is likely to be much greater. This will have a potentially bigger impact on confidence than was the case in 1995. Finally, there is a risk of a serious nuclear catastrophe this time around, which if it occurred would result in a far more disastrous impact.

The most likely outcome would seem to be a set back in activity over the next few months – perhaps 2% or so knocked off industrial production – before rebuilding kicks in boosting growth again during the second half of the year. Post the Kobe quake the rebuilding effort was very quick and efficient and the same is likely this time. The Bank of Japan has already committed to a “massive” liquidity injection into the Japanese banking system. This has initially taken the form of increased short term cash injections, but should also include more quantitative easing (ie using printed money to buy government bonds and foreign exchange). Fiscal stimulus is also likely to be announced soon.

There are three bigger issues for Japan though. Firstly, Japan’s recovery since the GFC has been the most fragile of the G3, ie the US, Europe and Japan. This was highlighted by the fall in Japanese GDP in the December quarter and much weaker levels for consumer and business confidence. See the next chart. The earthquake will likely only add to Japan’s fragility.

More fundamentally is the impact on longer term confidence. The Kobe earthquake arguably damaged Japan’s national confidence in the 1990s adding to the malaise of the last two decades. The latest quake may only add to this sense of longer term malaise.

Finally, while price deflation means Japan has plenty of potential for further monetary easing, further fiscal stimulus will add to already very high public debt levels. Japan’s budget deficit is already 8% of GDP and public debt is around 200% of GDP. This is way above levels at the time of the Kobe quake and is even far worse than Greece. Short term it’s easy to finance as the private sector in Japan is a net lender. Longer term it is more problematic as a rapidly aging population will mean households will likely become net sellers of Japanese public bonds.

What about the global economic recovery?

The Japanese earthquake is unlikely to derail the global recovery. Apart from the likelihood that the negative impact on Japan will be mainly short term, Japan’s importance globally has slipped in recent times. At only 6% of world GDP, Japan only accounted for 0.16 percentage points of the 4.5% or so increase in world GDP last year.

Australian impact

Japan is Australia’s second largest trading partner, but its share of Australian exports has slipped from 25% at the time of the Kobe earthquake to 15% today. Short term economic disruption in Japan could cause a decline in orders for coal, iron ore and other commodities in the next few months. However, this is likely to be no more than a blip as the broader impact is likely to be positive as rebuilding will add to strong global demand for raw materials. Problems with nuclear power stations as a result of the quake, and any resultant rethink of the relative attractiveness of nuclear power globally, will likely be negative for uranium demand but positive for gas and coal demand. There may also be increased demand for food stuffs as the area affected is important in Japanese agricultural production.

It is noteworthy that even though the value of Australian exports to Japan fell in the March quarter of 1995 when the Kobe quake hit, they rose solidly in total – up 13.8% in the March quarter and up 22.2% in 1995 as a whole.

Finally, imports of cars, electronic goods and other manufactured goods from Japan may see a short term disruption but this is unlikely to last long, with other global producers also likely to step into the breach given still significant global manufacturing spare capacity.
At this stage we see no reason to alter our Australian economic forecasts which see year average growth this year of 2.8% and 3.8% in 2012 and the cash rate rising to 5.25% by year end.

Financial market implications

For Japan, the earthquake is negative for shares on the back of worries about the short term economic impact, positive for bonds on “safe haven” demand and probably positive for the Yen as Japan repatriates funds, particularly by Japanese insurance companies. This is pretty much how it played out immediately after the Kobe quake. So far it appears to be playing out this way as well, particularly for the share market which has fallen sharply.

However, after the initial reaction, which the post Kobe experience suggests may last several months, expect the Japanese share market to rebound as rebuilding kicks in and production returns to normal. There is a bit more uncertainty around the Yen – past experience suggests it will strengthen initially but this could be short circuited if the Bank of Japan intervenes (as it should) to help exporters.

Short of a nuclear catastrophe, we don’t see the Japanese earthquake derailing the global economic recovery and nor do we see it derailing the cyclical recovery in global share markets. However, it has come at time when the worry list for investors has suddenly expanded again – to include unrest in the Middle East and oil prices, renewed concerns about European debt and Asian tightening – and so only adds to short tem uncertainty. In this sense it’s too early to say whether the correction in shares that began last month is over or not.

The same applies for Australian shares. The initial reaction in the Australian share market has been negative, but any negative economic impact on Australia is likely to be minor and short lived and Australia is likely to be a key beneficiary of increased raw material demand as Japan rebuilds. With the Australian share market now trading on a forward price to earnings multiple below 12 times, Australian shares are well placed to rebound once the correction in global shares has run its course.

In terms of sector specific impacts the earthquake is likely to be negative for insurers and uranium producers, but positive for gas and thermal coal producers. It should ultimately be positive for commodity producers more broadly as rebuilding demand kicks in.

So far the Japanese quake has taken pressure off oil prices, on the assumption refinery closures in Japan may reduce oil demand. This may be true short term but ultimately it will mean Japan may import more refined fuel. So overall the impact on the oil price is ambiguous, with events in the Middle East likely more important.

Concluding comment

The events in Japan are heartbreaking. However, like all natural disasters the negative short term economic impact should hopefully be less than feared and will give way later this year to rebuilding which will help boost growth.

The post The likely economic/financial impact of Japan’s earthquake appeared first on AdviserVoice.

• Wages rose by 1.0 per cent in the December quarter, slightly above market expectations. In annual terms wages are up 3.9 per cent on a year ago – exactly in line with the average growth over the past five years.
• Private sector wages rose 1.0 per cent in the quarter and 3.9 per cent over the year. Public sector wages rose 0.9 per cent in the quarter and 3.9 per cent over the year.
• In a speech today, the Reserve Bank Governor has reinforced expectations that rates are set to remain on hold. Glenn Stevens has stressed, “a careful response is needed” to the fact that the terms of trade gains are being saved rather than spent while the terms of trade is inducing major structural change in the economy.
• The Reserve Bank Governor has stressed the need for improved productivity, a fact borne out by the latest wage data.

What does it all mean?

• Wage growth across the economy is good, rather than being great. Workers in the fastest growing sectors like mining are achieving the highest wage growth while workers in transport, real estate, media and telecommunications are only achieving salary increases that are modestly above the rate of inflation. The main concern is that wages in the utilities – electricity, gas and water – remain lofty despite poor productivity in the sector and disappointing industry growth.
• In an economy-wide sense, the latest wage figures are encouraging. Wage growth near 4 per cent is sufficiently above the rate of inflation to boost consumer purchasing power. A year ago, wages weren’t covering price increases. And current growth of wages wouldn’t be taxing for businesses especially given solid profit growth over the past year.
• Looking ahead though, businesses will need to focus on extracting greater productivity from their workers rather than just putting more workers on payrolls. Wage growth near 4 per cent is fine when productivity growth is near the longer-term average of 1.5-2.0 per cent, but not when productivity is barely growing as it is currently.

• Productivity has been the missing element in the economic debate of the past few years. Federal Treasury has been successful with two of its three P’s – that is, increasing population growth and increasing workforce participation. But if Australia is to sustainably grow at a fast pace, productivity needs to lift.
• The Reserve Bank Governor is again a force of reason when it comes to discussing the terms of trade (ratio of export prices to import prices). Glenn Stevens knows the income boost from the terms of trade would be a worry if the income were being spent, not saved. But he believes the gains are being saved. In addition he is worried about the structural change induced by the terms of trade. In short, he argues for a “careful response”.
• Analysts should heed the Reserve Bank Governor’s advice. A higher terms of trade doesn’t mean that interest rates need to be jacked up – in fact it may turn out to be completely the wrong response.

What do the figures show?

Wage price index

• The wage price index rose by 1.0 per cent in the December quarter after lifting 1.1 per cent in the September quarter. Annual wage growth continued to move away from the decade low of 2.9 per cent set in the December quarter 2010, lifting from 3.5 per cent to 3.9 per cent. In original terms annual wage growth stands at 3.8 per cent.
• On average, wages have grown by 3.9 per cent over the past five years.
• Private sector wages rose by 1.0 per cent in the December quarter while public sector wages rose by 0.9 per cent. Compared with a year earlier, private and public sector wages rose by 3.9 per cent.
• Including bonuses, wages rose by 0.8 per cent in original terms in the quarter with annual growth of ordinary time hourly rates steady at 3.9 per cent in the December quarter.
• Industries with fastest annual wage growth: Electricity, gas, water & waste (up 4.7 per cent), Mining and Professional, scientific & technical services (both up 4.6 per cent), Education & training and Financial & insurance services (both up 4.4 per cent).
• Industries with slowest annual wage growth: Transport, postal & warehousing (up 2.9 per cent); and Rental, hiring & real estate services (up 3.0 per cent); Information media & telecommunications and Arts & Recreation services (both up 3.1 per cent); Other services (up 3.2 per cent),
• Annual wage growth across States & Territories: NSW, 3.8 per cent; Victoria, 3.6 per cent; Queensland, 4.2 per cent; South Australia, 3.9 per cent; Western Australia, 4.0 per cent; Tasmania, 3.3 per cent; Northern Territory, 3.8 per cent; and ACT, 3.7 per cent.

What is the importance of the economic data?

• The Labour Price Index has been compiled since September quarter 1997 and measures quarterly changes in wage and salary costs for employees. The index is based on a representative sample of employees, and includes measures of non-wage costs including superannuation, payroll tax, public holiday and workers compensation. The Labour Price Index is useful in measuring wage pressures in the economy. While strong growth in wages would boost domestic spending, it could also serve to lift employer costs and prices and add to economy-wide inflationary pressures. The labour price index is a measure of hourly pay rates (excluding bonuses).

What are the implications for interest rates and investors?

• The latest wage data represents a rare bit of good news for retailers and other consumer-focussed businesses. A situation where wages are outstripping inflation – but not excessively so – puts more spending power in consumer pockets.
• When you add all the factors up – a strong job market, real wage gains, stable interest rates and record wealth – it points to higher consumer spending ahead. Now you just have to convince consumers to spend.
• The weakness in wage growth over the past year has been a key reason why consumer spending has been depressed. A year ago wages were growing at the slowest pace in a decade – hardly the reason to start spending, especially on non-essential or discretionary items.
• No one at the Reserve Bank would bat an eyelid at the latest wage data – growth is not a threat to inflation. Interest rates are solidly on hold.

The post Goldilocks wages; RBA Governor caution appeared first on AdviserVoice.

• Employment rose by 54,600 in November, well above forecasts centred on job gains of around 20,000 (range from +5,000 to +35,000 jobs). The October result was revised up to show job growth of 36,900
  (previously showed a rise of 29,700). Full-time employment rose by 55,100 (October jobs were down by 7,600) and part-time jobs fell by 400 (October jobs rose by 44,500).
• The unemployment rate fell from 5.4 per cent to 5.2 per cent. The participation rate rose from 65.9 per cent to a record high of 66.1 per cent. The working age population rose by 20,100.
• Average hours worked were largely flat (up 0.04 per cent) in November but were up by 3.1 per cent over the year.
• Across the states and territories unemployment rates in November were: NSW 5.1 per cent (5.4 per cent in October); Victoria 5.5 per cent (5.6 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.6 per cent (5.7 per cent); Western Australia 4.5 per cent (4.7 per cent); Tasmania 5.4 per cent (5.2 per cent); Northern Territory 3.1 per cent (3.1 per cent); ACT 3.1 per cent (3.1 per cent).

Click here to download this document (pdf)

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Most people tend to regard the national accounts as just an update on economic growth. But the publication is far more comprehensive than that, covering indicators such as inflation, productivity, savings and wage costs. So from a big picture perspective what can we conclude?

Well if we were to sum the economy up in one word it would be ‘patchy’. The economy is growing, but certainly not uniformly. For instance 11 of the 19 industry sectors actually went backwards in the September quarter. And if you stripped out the rural sector, the non-farm economy also went slightly backwards.

Still, we shouldn’t panic. The economy is still expanding, and given the firm result in the June quarter we should have expected some softening in the September quarter. However the soft result is clearly a wake-up call.

All we have been hearing about over the past year is our booming terms of trade (rising export prices and falling import prices). The concern has been that this income boost would filter across the economy boosting wages and prices. Certainly that is a risk, but it is not the full story. As the Reserve Bank has previously suggested, if the income boost is saved, not spent, it is less of a concern. And that is happening. Businesses are cautious about spending and borrowing and cautious Aussie consumers have been saving more.

If you measure the household savings ratio in trend terms, the result for the September quarter is the highest in 23 years. Now if there were signs of this conservatism coming to an end that would be a concern for policymakers. But there is no evidence of slippage. Threats of higher interest rates, rising living costs, media hype about housing affordability, a soggy sharemarket and global concerns are all causing people to squirrel away more of their income.

And while it is important to focus on the effect of the mining boom across the broader economy, it is also important to focus on the broader effects of factors like higher interest rates and the stronger Aussie dollar. These factors also have multiplier effects across the economy and at present they appear to be nullifying the impact of the mining boom.

Certainly one piece of good news in the latest national accounts was the low reading for inflation – the household consumption deflator was only up by 0.3 per cent in the quarter and 2.0 per cent for the year (well below the decade average of 2.5 per cent). Then there were labour costs. In real terms, real unit labour costs were down by 2.2 per cent on a year ago – no wonder employers have been looking to take on staff.

But all the extra people added to the workforce over the last year have been at the cost of weaker productivity. Productivity has lifted just 0.5 per cent over the year. There are more people with jobs but at present it isn’t translating to more output across the economy.

The week ahead

Ordinarily the Reserve Bank Board meeting would be the dominating influence in the coming week. But with rates up in November, inflation under control and the economy losing momentum in the past quarter, clearly now is not the time to be lifting rates further. The Reserve Bank Board meets Tuesday and the final meeting for 2011 should be relatively uneventful.

Still, even with the Reserve Bank firmly camped on the interest rate sidelines there is still a swathe of economic figures to be dissected over the week. On Monday, TD Securities and the Melbourne Institute release the monthly inflation gauge for November while the Performance of Construction index is released and various surveys of job advertisements will be released. Also on Monday the latest data on tourism arrivals and departures is published.

In an underlying sense inflation is well contained, with significant discounting by retailers keeping price pressures in check. And while job ads probably rose in November, recent data suggests that businesses were becoming a little more circumspect about putting on staff.

On Tuesday, estimates of industry productivity are issued – one for the data aficionados.

On Wednesday, housing finance figures for October are released while Reserve Bank Assistant Governor Lowe also delivers a speech. We suspect that new home loans fell again in October – highlighting the softness of the sector – with the value of loans down 2 per cent.

And on Thursday the November employment report is issued. In October the jobless rate surprisingly rose from 5.1 per cent to 5.4 per cent as more people went in search of work. We suspect that the labour force participation rate may have eased modestly from 65.9 per cent to 65.8 per cent in the month. And with employment estimated to have lifted by 25,000, this would cause the jobless rate to return to 5.1 per cent.

In contrast to Australia, economic data will be thin on the ground in the US in the coming week. Consumer credit figures are released on Tuesday with data on wholesale inventories issued on Thursday together with the weekly figures on claims for unemployment insurance. On Friday monthly trade figures are released alongside the monthly budget data and the survey of consumer sentiment.

The trade deficit is expected to be largely unchanged at US$44 billion while consumer sentiment may have improved from 71.6 to 72.2 in December.

Apart from the US data, investors will also be focussed on new Chinese economic indicators to be released on Friday. Trade figures for November are slated for release together with figures on property prices. Also data on money supply and fixed direct investment are slated for release over the period December 10-15.

Sharemarket

We have made no adjustment to our sharemarket forecasts for four months and we remain comfortable with the current view. CommSec expects the All Ordinaries and S&P/ASX 200 indexes to end the year at 4,800, before rising over 2011 to end the year around 5,400 points. It’s worth noting however that when we last adjusted our forecasts, that the All Ordinaries and ASX 200 were much closer together. But currently the All Ordinaries is around 90 points above the ASX 200. The widest gap on record was 129 points on June 3 2008. The All Ordinaries tends to out-perform in a flat to falling market, so the gap with the ASX200 may ease over 2011 should the market lift as we expect.

Interest rates, currencies & commodities

The Reserve Bank is constantly watching so-called “market pricing” to determine what traders and investors are pricing in for the cash rate in coming months. There is no definition about what this “market pricing” is, but the main guides are the overnight indexed swap (OIS) rate and 90 day bank bill futures.

The current 1-year OIS quote is 4.93 per cent, meaning that financial market traders and investors believe that there may be one rate hike over the next twelve months, but they aren’t yet totally convinced. In terms of the bank bill market, the implied yield on December 2011 bills is 5.30 per cent. Given that the current physical 90 day bill rate stands at 5.00 per cent, this again highlights current thinking that there may be just one rate hike over the next year.

Certainly economists have tended to have a more bearish view of where rates will be in 2011 – in other words, they expect a few more rate hikes. The current consensus view is that the cash rate will be around 5.50 per cent in late 2011. Still, this consensus estimate hasn’t been adjusted since the Reserve Bank Governor delivered testimony last Friday as well as the soggy figures on economic growth and retail trade. No doubt the consensus view is more likely to gel now with so called “market pricing.”

The spot iron ore price has posted a stunning rebound over the past 4½ months. In mid July the price hit lows of US$117.50 a tonne. It was a case of two steps forward, one step back, through to mid September with a similar trend through to the current day. Currently the iron ore price stands at a 6½ month high of US$167.80 a tonne and is again within sight of the record high of US$186.50 a tonne posted in late April. Recent data shows that the Chinese economy continues to expand strongly, suggesting further upside in commodity prices.

The post Investor Signposts Week Beginning December 5 2010 appeared first on AdviserVoice.

• The current economic expansion began in the September quarter of 1991. The 19th year of the expansion was completed in the June quarter 2010 and the 20th year of growth has begun with the Australian economy expanding by 0.2 per cent in the September quarter. While growth was only modest in the latest quarter, arguably Australia is still in the strongest position of any global advanced economy.
• While growth was modest in the quarter, it follows a 1.1 per cent increase in the June quarter. The modest growth in the quarter should be regarded as the pause that refreshes. Annual economic growth now
  stands at 2.7 per cent – below the Reserve Bank’s estimate of “normal growth” of 3.25 per cent.
• Eleven of the 19 industry sectors contracted in the September quarter. The strongest contribution came from agriculture, forestry and fishing (up 18.5 per cent in the quarter and contributing 0.4 percentage
  points to growth). Farm GDP rose by 21 per cent in the September quarter – marking the fastest quarterly gain in 17 years.
• The household saving ratio stands at 10.2 per cent. Productivity was disappointing – down 0.1 per cent in the quarter and up 0.5 per cent over the year. Inflation was under control – the household price deflator rose 0.3 per cent in the quarter and 2.0 per cent over the year.
• Real (inflation adjusted) spending on petrol fell by 5.2 per cent over the past year – the biggest drop in records going back 25 years.
• The Reserve Bank Governor has previously indicated that interest rate settings are on hold until 2011. There is nothing in today’s data that is likely to see him shift from that view. In short, Merry Christmas!

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