Posted: 12 Dec. 2017 10 min. read

Business back to the rescue?

Weekly Economic Briefing

The Weekly Economic Briefing is written by two senior Deloitte Economists, David Rumbens from Deloitte Access Economics in Australia and Ian Stewart Deloitte’s Chief Economist in the UK. They provide a personal view on topical financial and economic issues. Subscribe to receive the Weekly Economic Briefing in your inbox!

Australian economic briefing by David Rumbens

This section of the briefing provides a snapshot of key economic data and issues of relevance to Australia.

Business back to the rescue?

Last week’s release of the National Accounts by the Australian Bureau of Statistics (ABS) provides an updated snapshot of the state of Australia’s economy.  In seasonally adjusted terms, the Australian economy grew by 0.6% over the September quarter of 2017, or 2.8% over the year.  This result is consistent with most estimates for trend growth in the economy of around 2.75%.  While a solid result, it is also a holding pattern – sustained above trend growth would be needed to bring the unemployment rate down to 5% and below.

Perhaps more importantly, this quarter marked the first time that business investment contributed positively to annual economic growth since the June quarter of 2013.  This marks a turning point in the economy and suggests that the hangover from the mining investment boom has nearly passed.

Business investment is now back in the mix as a growth driver. It contributed 0.9 percentage points to growth over the last year, or around a third of total growth.  This was second only to household consumption which contributed just under 50% of total growth.  However, household consumption accounts for a much larger share of the economy – approximately 60% compared with 12% for business investment – so its contribution to economic growth is expected to be larger.

Other indicators of business sentiment have also improved.  The recently released (and forward looking) ABS capital expenditure survey showed an improving picture for business investment.  The fourth estimate of expected business investment for 2017‑18 was higher than the equivalent estimate for 2016‑17.  This is also the first this has happened since 2012‑13.

This is a natural extension of what we have seen through most of 2017 – that business confidence is strong. This is clearly the message that has been coming through the Deloitte CFO Sentiment survey, and has been evident from other surveys. The NAB Monthly Business Survey has also had business conditions and confidence above their long term average, with business conditions reaching a record high in October.

Strong sentiment has morphed into new hirings (a gain of 360,000 jobs over the year to October is a triumph), and it now looks like businesses are lifting their eyes to the horizon and investing in additional capacity – nothing grand yet, but a lift nonetheless. Hopefully 2018 will see a continuation of this pick-up in investment, which will provide the best chance of sustainable jobs growth, an increase in the share of Australians working, and the long awaited return to significant real wages growth.

[1] Of course, these are national results and different parts of the country are still feeling the decline in mining investment – Western Australia and the Northern Territory in particular.


For more information on the Australian brief, please contact co-authors David Rumbens and  Ben Guttmann.


UK economic briefing by Ian Stewart

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. Subscribe to and view previous Monday Briefings at:

What to read this Christmas

We are launching our Christmas reading list today. Our ‘top six’ is the product of a lot of reading and some debate in the Economics Team. The list aims to offer a thought-provoking and enjoyable break from the rigours of Christmas. All are available free and online. You can save these articles on your smartphone’s or tablet’s reading list. To print any use the print icons, where available, on the webpages to ensure the whole article comes out.

Humans seem to be disagreeing more about the big issues of the day and becoming more intolerant of others’ opinions. Why are we becoming increasingly uncomfortable with views that differ from our own? This thought-provoking speech by New York Times columnist, Bret Stephens, examines the dying art of disagreement (10 pages).

The Monday Briefing recently mentioned journalist and economist Tim Harford’s search for the 51st thing that made the modern economy. The Briefing has also made the case for what we call prosaic innovation, the everyday, incremental changes, often low tech in nature, which shape our lives. Tim’s recent blog underscores this point, arguing that we should pay as much attention to cheap and humble technologies as to the most sophisticated (6 pages).

Most of us would think it worthwhile to pay a small fee to find the right long-term partner. Yet many dating apps struggle to get users to pay for premium features which increase the probability of finding a good match. Humans seem to be quite bad at valuing such long term gains (3 pages).

How did the sandwich consume Britain? This article looks at how two pieces of bread and a filler have transformed how we eat and the UK’s so-called “food-to-go” market. This fascinating history also looks at what could be next for the £8bn a year UK sandwich industry (14 pages).

Smartphone apps and newsfeeds are designed to constantly grab and retain our attention. We are less focused than ever, with one study finding that we are distracted nearly 50% of the time. Might this crisis of attention be one piece of the productivity puzzle? (5 pages).

Get your ducks in a row. Feed it back. Deep dive. How is it that the workplace became awash with gobbledegook and what is the cost of the tidal wave of management-speak? (8 pages).

PS: A couple of weeks ago we wrote a Monday Briefing on the future of the EU. Last week, the European Commission presented proposals on deepening the European Monetary Union. Their big idea is to transform the European Stability Mechanism – the fund established in 2012 to lend to governments – into a European Monetary Fund, akin to the long-established International Monetary Fund. Controversially, the new EMF would largely take decisions by majority votes. This would clip the power of Germany which has been the EU’s staunchest supporter of deficit reduction. The Commission also proposed that the EU should have its own economic and finance minister. European leaders, minus the UK, will discuss the plans at a summit next week, but little progress is expected in the absence of a new German government.

PPS: Nine- and 10-year-olds in England came eighth in a set of international reading exams carried out as part of the Progress in International Reading Literacy Study. Out of the 50 participating countries Russia came first, followed by Singapore, Hong Kong and the Republic of Ireland. Northern Ireland was in sixth place. The improvement in England’s ranking has been heralded as evidence of the effectiveness of the government’s educational reforms, including an increased emphasis on phonics. The steep increases in rankings for several countries, including England and Northern Ireland, offers a heartening demonstration of governments ability to improve educational outcomes.



The FTSE 100 ended the week up 1% at 7,394.

Brexit talks reached a breakthrough with the UK and EU agreeing a deal on the ‘divorce’ issues, paving the way for talks over the future trading arrangements. The pound rose against the dollar and euro on the news.


International economic briefing by Ian Stewart

Economics and business

  • The weak pound helped drive a 3.9% gain in UK manufacturing output over the last year
  • London was the most visited destination in Europe over the last 12 months, up from the fourth spot in 2016, with visitors citing the fall in sterling as an attraction
  • British retirees face the biggest fall in income when they retire compared to other OECD country citizens
  • Research by the Bank of England found that sales of foreign assets owned by British nationals fund the UK’s current account deficit
  • Students in England will be offered “accelerated” degrees in two years with a £5,500 saving in tuition fees
  • Facebook will recruit 800 more staff for a new London office making the UK capital the biggest hub outside the US
  • A strong US jobs market is helping lower income Americans and narrowing the gap between people of different education levels. The jobless rate for those aged over 25 years without a high school diploma is 5.2%, down from 7.9% a year earlier, and the lowest ever rate
  • Australia will ban foreign political donations and force lobbyists to disclose when they are working for overseas entities in a move to tackle espionage threats and Chinese influence in domestic politics
  • The EU and Japan finalised a free trade deal that will create the world’s largest open economic zone when it comes into effect in early 2019
  • In a further sign of Japan’s strong recover GDP growth rose at an annualised 2.5% in Q3
  • Chinese foreign direct investment dropped 40% in the 10 months of 2017 on a year earlier as a result of government measures to curb capital outflows
  • A YouGov poll found that one third of Americans would prefer to live in a socialist nation, with more than four in ten millennials opting for socialism


Brexit and European politics

  • The EU told Theresa May that it will not start discussing the terms of a trade relationship with the UK until February at the earliest
  • Brexit could offer the UK’s legal sector “enormous” opportunities, according to the Minister of State for Courts and Justice
  • The leader of Germany’s Social Democrats, the party in collation talks with Angela Merkel, has called for EU member states to commit to a “United States of Europe” by 2025
  • David Davis, the UK’s Brexit secretary, said that the 52 Brexit impact papers which MPs have been pressing for publication never existed
  • Eurogroup, the group of euro area finance ministers, picked Portugese Mário Centeno as their new president
  • The European Commission escalated its legal dispute with Poland, Hungary and the Czech Republic for failing to meet their refugee quotas
  • EU finance ministers have blacklisted 17 countries for refusing to co-operate with its crackdown on tax havens
  • Vladimir Putin, the Russian president, said he will run for re-election next year


And finally…

A Japanese firm has opted to give non-smokers six days additional holiday to compensate for cigarette breaks taken by smokers – tobacco leave

More about the author

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

Ben Guttmann

Ben Guttmann

Manager, Financial Services

Ben is a manager in the macroeconomic policy and forecasting group within Deloitte Access Economics. Ben is an expert in Budget policy and is a key author of Deloitte Access Economics’ Budget Monitor publication. Ben also has experience advising public and private sector clients across macroeconomics, tax and scenario modelling. Ben is responsible for producing Deloitte Access Economics’ State economic forecasts which are published in our flagship Business Outlook publication. Prior to joining Deloitte Access Economics, Ben worked at the Commonwealth Treasury across the macroeconomics, tax modelling and social policy teams.