Australian Indicators
This quarterly report details the flow of all goods and services, income, and transfer payments to and from Australia and can be used as a general yardstick of how Australia’s economy is interacting (on a non-investment basis) with other economies from around the globe.
The Current Account figure is calculated by the Australian Bureau of Statistics and is released three months after the quarter for which it reports (for example, the report for the first quarter, which is up to March, is released at the end of May).
The Current Account is compiled by aggregating the value of the trade balance (exports and imports for goods and services), income payments (such as interest, dividends and salaries) and unilateral transfers (aid, taxes, and one-way gifts).
A positive value (a current account surplus) shows that the flow of money from these elements into Australia exceeds the money leaving Australia. A negative value (current account deficit) indicates a net capital outflow from these components.
Recurrent deficits may eventually cause a natural depreciation of the Australian dollar, as trade, income and transfer payments usually reflect Australian dollars leaving the country to make payments in foreign currencies (just as underlying surpluses may have an appreciating effect).
Along with GDP and Trade Balance, Current Account is a key force when considering long term developments in foreign exchange rates and accordingly is usually considered to be one of the more significant Australian economic reports.
It should be pointed out that the impact of the figure on the financial markets is diminished somewhat by only being released once a quarter, by which time many of the components of the report are already known.
The Consumer Price Index (CPI) is the foremost indicator of inflation for Australia.
The index is complied by the Australian Bureau of Statistics and is released on a quarterly basis, one month after the period for which it is reporting.
Inflation reflects a decline in the purchasing power of the Australian dollar, where each dollar buys fewer goods and services. In terms of measuring inflation, CPI is the most obvious way to quantify changes in purchasing power. It does this by measuring quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). This ‘basket’ covers a wide range of goods and services, arranged in the following eleven groups:
- food
- alcohol and tobacco
- clothing and footwear
- housing
- household contents and services
- health
- transportation
- communication
- recreation
- education
- financial and insurance services
An increase in the index indicates that it takes more Australian Dollars to purchase this same set of basic consumer items.
Unlike most other countries, Australia publishes CPI quarterly instead of monthly, increasing the market impact of the report upon release. The headline number is released as the percentage change from the previous quarter or year
Gross Domestic Product (GDP) is the broadest overall benchmark of economic activity and quantifies the production of goods and services within Australia.
It is calculated by adding up all expenditures on all final goods and services produced during the year as shown:
GDP = C + I + G + (X - M)
Where: C = Consumption
I = Investment
G = Government expenditure
(X-M) = Net exports (exports minus imports)
An increasing GDP indicates an improving economy, which is generally good for the Australian dollar and for the financial markets. Extremely robust economic expansion can create inflationary concerns which may contribute to tightening of monetary policy.
Most of the components that comprise the report are known well in advance, meaning that GDP tends to be well anticipated. If, however, the figure does differ from expectations, it has the potential to cause significant market movement.
The Labour Force Survey is a monthly report from the Australian Bureau of Statistics. It contains estimates of unemployed and employed civialians, classified by sex, status, territory and age. The estimates are based on a survey of about 30,000 dwellings and covers about 0.45% of the population of Australia.
The report is released at 11.30am EST on a Thursday, often the second Thursday of the month, and contains data pertaining to the previous month. The schedule for forthcoming releases is as follows:
| Issue | Release date |
|---|---|
| July 2007 | 9 August 2007 |
| August 2007 | 6 September 2007 |
| September 2007 | 11 October 2007 |
| October 2007 | 8 November 2007 |
| November 2007 | 13 December 2007 |
| December 2007 | 17 January 2008 |
The survey contains two important sections: the Unemployment Rate and the Employment Change.
Unemployment Rate
The unemployment rate details the percentage of unemployed persons in the labour force (unemployed persons are defined for the purposes of this report as being those who have no job but are actively seeking work, whilst the labour force is defined as the total of employed and unemployed persons).
The Unemployment Rate serves as a leading indicator of the state of the labour market and is considered to be a timely report, released as it is just a few weeks after the relevant period.
A large chunk of Australia’s GDP is made up consumer spending, and it therefore follows that high levels of unemployment, which equals lower overall incomes and will naturally serve to hamper consumer spending, will have an adverse effect on any prospective growth in the economy. The overall importance of employment for the economy means that the data contained within this report often has a major effect on the market.
Employment Change
This figure traces the number of people who are employed in Australia (the headline figure is the annualized percentage change in employed workers).
While a robust employment situation is generally beneficial for the economy, a strong rise in the numbers of the newly employed points toward the potential for rapidly increasing consumer spending, which presages inflationary pressures.
As the RBA often counters the threat of inflation with rate increases, this figure can be used as an indicator of future action by the central bank.
The Reserve Bank of Australia stands as the central monetary authority for the Australian economy and meets eleven times each year: meetings are held on the first Tuesday of each month (with the exception of January).
The bank's chief duty is to maintain inflation within a 2-3 percent band which is targeted by its own policy makers.
Inflation is controlled by making changes to the overnight cash rate, which has a large influence on Australia’s financial markets.
Any change in the cash rate will directly influence interest rates in consumer loans, mortgages and bond rates. As short-term interest rates fundamentally shape the returns from any holding in a currency, the RBA rate decision has a bearing on the Australian dollar exchange rates (a rate hike or expectations of such a decision will tend to cause the Australian dollar to strengthen, while rate cuts will case depreciation).
By adjusting the cash rate, the RBA seeks to keep consumer and producer prices increases at manageable levels without neglecting economic growth.