The good, the bad, the ugly

I’m glad I am not inside the RBA’s board room today, trying to decide whether or not to lift rates or keep them on hold (there is absolutely no chance of a cut – we’re going too well for that).

The signals being delivered by the economy are just so mixed. On the one hand we’ve got companies (Macarthur Coal) upgrading their profit outlook and on the other we’ve got companies (construction giant Valemus) abandoning float plans because of a fall in the sharemarket.

So where do you look? Here’s a quick breakdown of the good, the bad and the ugly in Australian business right now.

The good

• No rate rise today, although inflation remains a real concern and we’re almost certain to get more hikes later this year.
• Eagle Boys Pizza, which just announced 14.5% revenue growth to about $165 million, and 28% EBIT growth. Which just goes to show that there is plenty of growth in this economy if you work hard to find it.
• The Cooper review of superannuation has some really positive ideas for improving Australia’s super system, which is now worth about $1.3 trillion. We’ve got to get this right and it appears we are on the right track.
• Big takeovers were announced by companies from China, Thailand and Singapore yesterday, highlighting the level of interest in Australia from around the Asian region.

The bad

• Business confidence remains patchy, which is a good reflection of conditions in many sectors. The recovery is underway, but it’s taking its time in really blossoming.
• A spike in corporate collapses is never welcome, but what we are seeing now will particularly hit the SME sector hard. We’ve been saying it has been coming for a while now, but it is something we would rather have been proved wrong on.
• The decision by Valemus to postpone its float is symptomatic of the nervousness on the Australian sharemarket right now. Nine out of the last 10 trading days have finished in the red and it’s hard to see what turns that around in the very short-term.
• Housing affordability remains a real issue, and not just from a property market point of view. What impact will the fact that it now takes four years to save a house deposit have on our society?

The ugly

• Great article from Business Spectator‘s Karen Maley today about the state of the US housing market, which shows 14% the 56 million mortgages in the US are either behind or in the process of foreclosure. That means eight million American homeowners have stopped paying their mortgages. Wow.
• The debate over asylum seekers has quickly become very ugly and divisive. Yet it is such a small problem – surely the major parties have bigger issues to focus on?