All 23 surveyed economists wrong on interest rates

imgres From Forexlive: all 23 economists polled  by Reuters see RBA keeping rates on hold at 2.5% none see rate cuts in next 12 months half see first rate hike by mid-2015 All are wrong and half are very wrong. Next move is...
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Horrible Q2 GDP preview

dfgwr From Westpac's Q2 National Accounts preview: The Australian National Accounts, to be released on Wednesday September 3, will provide an estimate ofeconomic activity in the June quarter. We expect the second quarter of 2014 to be a soft one for GDP, following a strong start to the year. Central to this profile is a lopsided performance by resource exports, with Q2 to see some payback for a burst in Q1. GDP growth is forecast to be 0.4%qtr, 3.0%yr in Q2. This follows an outcome in Q1 of 1.1%qtr, 3.5%yr. Net exports swing from a positive contribution of 1.4ppts to a 0.7ppts subtraction...
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Chris Joye fires bank capital skepticism

APRA3 The Deep T. critique of bank capital ratios has exploded today at the AFR via Chris Joye: One of the first charts APRA published this week was the amount of “common equity tier one capital” held by deposit-takers as a share of “risk-weighted” assets. This is similar to the first-loss equity home owners have invested in their property. According to APRA, the major banks had 8.6 per cent common equity tier one capital at June 30, 2014...On this basis, the major banks look to be leveraged 11.6 times, which is not absurdly high...But bankers and regulators heroically assume that a certain...
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Households turn back to deposits

3 APRA monthly banking statistics for August are out and show an interesting turn. Month on month deposits climbed: Year on year is at multi-year highs: It's all being driven by households: It's not term deposits, which are at multi-year lows but it's deposits...
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Investors pig-out as owner occupier mortgages slow

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of July: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.2% MoM; 0.5% QoQ; 0.8% YoY) and business credit growth (0.3% MoM; 1.5% QoQ; 3.4% YoY) continue to grow at a modest pace in annual terms, whereas housing credit growth (0.5% MoM; 1.6% QoQ; 6.5% YoY) is stronger, but remains at fairly subdued levels relative to its long-run average growth rate; although it is still growing more than twice as quickly...
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More Chinese cities lift property restrictions

search From Ifeng via Investing in Chinese Stocks: Three more Chinese cities have announced the cancellation of home buying restrictions: Hangzhou, Xian and Guiyang. Only 9 cities have yet to lift the restrictions, among them the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, plus Zhuhai, Sanya, Nanning, Xining and Lanzhou. In Hangzhou, buying restrictions are now lifted on properties larger than 140 sqm. There are rumors as well that the city has asked the PBOC branch office to lower second home down payments to 60%. On September 1, Xi'an will lift restrictions on everyone,...
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Iron ore miners defy price falls

maj Iron ore miners opened with a big drop this morning, with FMG especially down, threatening to break $4 and its 2014 low but since it's been all rally as Dalian and rebar futures opened marginally lower in China. Majors are still down a little but FMG is flat: And the idiocy spread has closed a touch: But juniors haven't budged: I have no idea why the very obvious risks aren't being priced other than the general overvaluation. Having said that, overvaluing zero is still...
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UBS: Atlas may “regret” payout

imgres Atlas Iron reported yesterday and UBS has this to say today: Despite reporting underlying EPS of just 0.9cps, AGO has announced an unfranked 2cps final dividend (UBSe No Div). We are surprised by the dividend given AGO now has net debt as of 30 Jun 14, and based on UBS forecasts for iron ore to average US$103/dmt cfr over FY 15, we still see AGO's net debt increasing. AGO is guiding to C1 costs of A$47-50/wmt FOB for FY 15 (A$51/wmt FOB FY 14), with lower SG&A and D&A charges. As a result, FY 15/16E earnings lift materially, but off a low base. Our forecasts are based on a...
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Coalition retreats from draconian dole requirements

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Abbott Government has backed away from its draconian plan to require unemployed jobseekers to apply for 40 jobs a month in order to receive the dole, admitting the plan would have created a "meaningless" burden on employers that would have had to sift through piles of sham job applications. From The AFR: “It is clear that, overwhelmingly, people say that if you're unemployed, your full-time job should be job seeking,” he said. “On the other side, there is the view - and I think it's a legitimate view – that getting people to apply for 40 jobs in a meaningless...
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Bloxo pushes back rate hikes…again

imgres From the Eternal Sunshine of the Spotless Mind today: Australia’s great rebalancing act is underway, but its pace has been slow, largely because of the persistently high AUD. As expected, mining investment is falling sharply and, although resources exports are ramping up, the mining sector is contributing less to growth than it had been in previous years. Low interest rates are also largely doing their job, supporting housing prices and dwelling construction. But, in the face of falling commodity prices, the high AUD has acted as a drag on income growth. It has also hindered competitiveness and...
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BIS Shrapnel bull turns bear

imgres By Leith van Onselen BIS Shrapnel has predicted tough times ahead for the Australian economy, forecasting that domestic consumption and investment expenditure will experience its weakest four-year run since the early-1990s recession, averaging just 2% per annum to 2017-18. From Ferret: Richard Robinson, senior economist at BIS Shrapnel warns that employment growth will be soft with only 668,000 jobs created over the next four years. Robinson comments that it will be a slow and difficult transition from an economy driven by the huge resources construction boom, which largely underwrote...
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The Chinese will save iron ore!

imgres The ABC does iron ore this morning and there are some fun quotes: Iron ore consultant Philip Kirchlechner said it was being driven by too much supply. "The problem is there's been a huge influx of supply into the market over the last twelve months and that's really the key driver behind this slump in iron ore prices," he said. ...Macquarie Private Wealth's Bevan Sturgess-Smith said..."Whenever you get news out of China like that, it does tend to drive markets down a little bit, so people get a little bit nervous," he said. An oversupply of housing and government moves to discourage investment...
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Pascometer burns red on capex rebound

imgres Weeoo, weeoo, weeoo. As I wrote my recession risks post this morning I did spare a thought for The Pascometer, which hasn't fired off a counter-contrarian sell-signal in some time. But lo, here it is: It sometimes seems capital investment commentary in Australia concentrates on mining and manufacturing, perhaps because they are industries with unhappy outlooks – bad news is good news. The reality is that the game has moved on, that the non-resources sector is substantially larger than mining and that manufacturing is but a small part of that non-resources story. So while the immediate...
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Five reasons to prepare for Australian recession

imgres Sigh. The moment has come to call a spade a spade. The Chinese property bust is smashing iron ore. Thermal and coking coal are still falling and/or catching up to past falls in contract prices: Gold and oil/LNG are also down sharply in the past few months. In short, Australia's terms of trade (ToT) are getting smashed to the extent that it's rapidly assuming the proportions of an external shock, especially since the Australian dollar has totally detached itself from the economy. I can only estimate the ToT falls in train but can say with confidence that they are much bigger than forecast by...
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Daily iron ore price update (miners hammered)

anvil Here are the iron ore charts for August 28, 2014: Sheesh, where to begin! Paper markets got pulverised yesterday. The Singapore swaps rebounded before day's end but Dalian didn't. Rebar futures are roughly 100 yuan south of physical and still falling. The benchmark iron ore price fell another $1 to $87.30 within a whisker of the post-2009 low at $86.70 and it's going to break. A small contango with long swaps has reformed but given the broader weakness in paper remains unconvincing as a turning signal. The following chart from Axoim Capital also suggests it's not over. Observe...
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Chinese developers caught in accelerating bust

images101-200x200 It may be time for developers to start panicking. Remember the buyer stampede when Hangzhou lifted home purchase restrictions? Ifeng is reporting that the effect is fading quickly as buyers wait for prices to bottom. One sales agent said it seems like ending buying restrictions had no effect. The reporter in the story says that the gap between a rebound in sales and sales agents not seeing a change in the market is due to the market having not yet formed a bottom. A rebound is preceded by a bottom, but the market in Hangzhou hasn't stopped falling. Perhaps the reason is because the market has put...
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Weekly RP Data Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 28 August 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.28% (see next chart). Growth in this week's home values was fairly broad-based, with all capitals except Brisbane experiencing rises (see next chart). So far this month, home values have risen by 1.32%, with gains across the board but strongest growth in Sydney and Adelaide (see next chart): Values are up by 6.36% so far in 2014, with all major capitals except for Perth experiencing growth, and particularly...
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Mining gets its coolies

ScreenHunter_59 Aug. 29 07.46 By Leith van Onselen Despite overall unemployment at 12-year highs (and rising), a budding youth unemployment crisis, and its own Department of Employment revealing that skills shortages are at an "historic low", with employers able "to recruit skilled workers without marked difficulty" and "generally large fields of applicants vying for skilled jobs and employers filled a high proportion of their vacancies", the Coalition has announced that it will materially loosen rules to enable employers in specific regions to import more labour from overseas. From The Australian: ...the federal government...
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War adds to US bid

_77221029_023659940-1 More good data in the US overnight with Pending Home Sales strong: The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 3.3 percent to 105.9 in July from 102.5 in June, but is still 2.1 percent below July 2013 (108.2). The index is at its highest level since August 2013 (107.1) and is above 100 – considered an average level of contract activity – for the third consecutive month.  Weekly unemployment claims were firm: In the week ending August 23, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 1,000 from the previous...
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US begins Ebola vaccine trials

images From the World Health Organisation: The aim is to stop ongoing Ebola transmission worldwide within 6–9 months, while rapidly managing the consequences of any further international spread. It also recognizes the need to address, in parallel, the outbreak’s broader socioeconomic impact. It responds to the urgent need to dramatically scale up the international response. Nearly 40% of the total number of reported cases have occurred within the past three weeks. The roadmap was informed by comments received from a large number of partners, including health officials in the affected countries, the...
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Links 29 August 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The stock market can decline without an inversion of the yield curve - Pension Partners Albert Edwards warns on the end of the stock buyback boom - Business Insider Investors can’t help themselves chasing performance - A Wealth of Common Sense Dividend paying stocks are not a substitute for bonds - Pragmatic Capitalism Which hedge funds are attracting big assets - Bloomberg Why S&P 500 index funds are a second-best choice - Rick Ferri North America: Weekly initial unemployment claims continue to trend below 300k - Calculated...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets It’s been another fairly quiet day in Asia with most of the domestic focus on Australian capex and the turnaround story that is Qantas, with underlying earnings providing some confidence that the worst is behind the airline. Australian private capital expenditure intensions were revised for the coming year and, at A$145.2 billion, it was enough of an increase to cause a pop in the AUD, with AUD/USD hitting a high of 0.9372.The RBA won’t see too much in the finer details to suggest animal spirits are driving spending, although they will be...
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Dump stamp duty for land taxes

ScreenHunter_30 Aug. 27 15.36 By Leith van Onselen The Housing Industry Association (HIA) yesterday released a report lamenting the high cost of stamp duty in Australia, which "makes household indebtedness worse by increasing required borrowings" and damages the "long-term financial well-being of ordinary homebuyers": “The typical homebuyer in Victoria is hit with a $24,100 stamp duty bill, the highest in the country,” remarked Shane Garrett. “In states like New South Wales and Western Australia, the average homeowner can look forward to handing almost $20,000 over to the state government before the removals truck...
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More on Chinese iron ore output

1033017e6d From Reuters: Australian exports have risen to account for more than 60 percent of China's total draw from the rest of the world in the past couple of months...That's displacement of higher-cost supply with lower-cost supply in action. The biggest displacement, based on where production sits on the global cost curve, should take place in China itself. ...Yet the official figures from the National Bureau of Statistics (NBS) suggest the opposite. Those for July showed iron ore production up 11 percent year-on-year with cumulative year-to-date growth running at 9 percent. This may in part be...
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Has Abbott blundering saved the RET?

images From the Australia Institute's Richard Denniss today in Crikey: In a clear vote of no confidence in the Australian economy, Australia’s largest ever investment in solar energy was scrapped this week. The problem for the government is that while there is a big difference between media strategy and economic strategy, this government doesn't appear to be doing a good job of either. Whoever leaked the rumour that the Prime Minster was keen to kill off the Renewable Energy Target (RET) is no doubt pleased with the front-page splash he or she achieved in The Australian Financial Review. No doubt...
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