STIMULUS APLENTY GIVES TIME TO ASSESS

EVERYONE, and especially commentators, should take a Bex and have a good lie down. The economy has received or is in the process of receiving a significant number of stimulants.

We need to take a month, or two, or three, to see how they are playing out both individually and added together.

The first was the election result. No, this is not a political comment, but a simple statement of consequence. Because “everyone” expected Labor to win, the “change”, the “stimulant” was the government staying in power.

Both individuals and businesses had either mentally or actually “preadjusted” to the proposed Labor tax hits on dividends, investment property and capital gains generally.

Now “everyone” had to adjust back to the situation ex ante – as it was before.

In the early days after the election, there was a clear boost to both business and consumer confidence. Less certainly, that seems to have faded somewhat.

Then in quick succession we got the two Reserve Bank rate cuts – and perhaps somewhat

economy? To me, looking good. What happens to the Chinese economy? To me, looking sluggish but not disastrously so.

What happens in the USChina “trade war”? Again, more posturing, with or without the “ceasefire”, but stopping short of real mayhem.

What the Fed does with interest rates and how Wall St react?

If it cuts at the end of the month, Wall St will go bananas; our market will definitely be dragged up through its pre-GFC alltime high. If the Fed doesn’t cut, Wall St will throw a tantrum, but it will be shortlived.

Absent the shock leftfield “event”, this suggests our immediate future will be largely in our own hands; and also, importantly, that we can take same time to both assess what state we are in and what we need to do or not do.

Absent, again, a disastrous jobs number next week, the RBA won’t cut again next month. Similarly, the government does not need to rush to any further immediate stimulus. Very importantly the $8 billion tax cut still leaves Treasurer Josh Frydenberg with plenty of firepower. If needed.