Foreigners guzzle Melbourne apartments

images By Leith van Onselen The AFR has produced an interesting report today on a 92-storey apartment development by Malaysian developer, UEM Sunrise, which reportedly has all but sold out after just two weeks, with three-quarters of the apartments selling to foreign buyers: With 941 apartments, the 92-storey Aurora is the first project in Australia by the developer... The developer has sold down 895 units already, mostly through its strong networks in south-east Asia and China, local buyers will account for 25 per cent of the stock. Around 60 per cent of buyers are investors... UEM Sunrise plans to...
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The Australian budget’s illusory strength

gnetbwe From the SMH blog: A recession in the next five years could have a devastating effect on the world's heavily indebted nations, although Australia would emerge relatively unscathed, a report shows. Global investment manager Standard Life Investments, in its report Defusing the Fiscal Timebomb, said that developed nations with high debt could be in deep trouble if current forecasts for economic recovery did not eventuate. ...The report divides countries into four categories based on their level of vulnerability. Greece, Ireland, Italy, Japan and Portugal are most...
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‘Straya: Determined to be dumb

ScreenHunter_16 May. 13 15.31 By Leith van Onselen Australia is cementing itself as a houses and holes economy, with the report today that the CSIRO will cut 1,400 science jobs: Previous governments have fought to stem the flow of our cleverest minds offshore in their search for better pay and research facilities. Now, cuts from the previous and current Federal Governments are driving out one in every five jobs at the nation’s internationally renown research centre, CSIRO. That’s the total loss of about 1400 scientists and assistants. Science communicator Julian Cribb told ABC Radio yesterday the cuts were...
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BREE’s cupboard is dangerously bare

thyj64u The now dead Bureau of Resource and Energy Economics (BREE) has released its last update on the pipeline of major Australian resource projects and reading between the lines the future is bleak. Here's the summary: This release of the Resources and Energy Major Projects Report provides an update on resource and energy project developments over the period May 2014 to October 2014. It comes at a time when investment in Australia’s resource and energy sector has been declining in response to a general decline in commodity prices. The environment of lower prices has encouraged resources companies...
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Sydney brick-maker says “It’s all in the land”

ScreenHunter_5164 Nov. 26 11.04 By David Collyer, cross-posted from Prosper Australia The AFR today reports Brickworks Ltd calling for steep increases in Sydney land supply to assist affordability for homemakers. Developers on the outskirts of all the major Australian cities are dribbling out lots piecemeal – stifling supply, household formation and economic activity. It is entirely rational for them to seek to maximise their profits in this way, but I see no reason why state governments should aid and abet this private capture of the future earnings of citizens through staggeringly high land prices. From The AFR: The...
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PM Pork to pull funding if VIC votes Labor

Capture By Leith van Onselen Prime Minister Pork has warned Victorians not to vote for the Labor party in this weekend's state election, claiming that he would pull funding allocated to the East-West Link road project if Labor fulfills its promise to tear-up the contract to build the road if it forms government. From The Australian: “I want to make it absolutely clear to the people of Victoria that the $3bn the commonwealth government has committed to this project is for one purpose and one purpose only — and that is to build East West Link. “Let me repeat: the $3bn the commonwealth government has...
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China consumer confidence remains weak

fthu4 From Westpac's Huw MacKay: The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, was essentially unchanged in November, printing 111.0 versus 110.9 in October, a +0.04% change over the month and –10.3% over the year. The November outcome is 8.7% below the long run average. The survey indicates that the anxieties that have been gnawing away at the Chinese consumer throughout the year remain in evidence. However, there are some tentative signs that the dominant themes of late - pronounced pessimism regarding the housing and labour markets - are shifting...
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Iron ore miners firm on Glenrio delusion

fghe5 Ivan Glasenberg's illusory tilt at RIO has all major miners firming today with BHP up 1%, RIO is up an opium-addled 2% and FMG flat. After all, when he's done buying RIO, BHP and FMG will be next.  Here are the comparative indexes: The idiocy spreads are all widening now and the moron cross (BHP falling faster than RIO) is back in play: Apparently Mr Glasenberg's ambitions do not extend to the juniors: Not sure why. If he's good to his word then Mr Glasenberg's cutting of RIO production will save the juniors, right? Or maybe they'll rush into the volume gap with BHP, Vale, FMG,...
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Is there a PBOC “put” in the making?

long-put From Reuters: China's central bank will wait until fourth-quarter economic data is out and monitor U.S. and Japanese monetary policy before considering any more rate cuts or easing, a central bank adviser said on Tuesday. The People's Bank of China surprised the markets by cutting rates last Friday for the first time in more than two years to help stabilize the world's second-largest economy. Reuters then reported that China was prepared to ease policy again. "Regarding the next step, whether to cut rates again or take similar action, we still need to look at the fourth quarter's macroeconomic...
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NT LNG boom softens construction downturn

ScreenHunter_5170 Nov. 26 12.01 By Leith van Onselen The ABS has released data on the value of construction work done for the September quarter of 2014, which registered a seasonally-adjusted 2.2% fall in total construction activity over the quarter and a 5.1% decline over the year. The result disappointed analysts' expectations of a 1.9% fall over the quarter. The 2.2% quarterly decline in construction activity was broad-based, with engineering construction falling 3.2% and building construction falling 1.0%: Residential construction – the great hope as the mining investment boom unwinds – disappointed, falling...
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Will the iron ore crash destroy house prices?

19g0dseuuoeyxjpg Back in 2010 when MB was just taking shape, one of the very few sell side analysts to get the iron ore price right in advance, Tim Toohey of Goldman Sachs, wrote an equally excellent piece on what the great iron ore correction of 2014 would do to house prices. Here is some of it: On whether Australian house prices constitute a speculative bubble: No  • We think that the behaviour of house prices over the past year, and indeed the past decade does not resemble a speculative bubble. Our rationale is that: i) Refinancing of established homes is at a 9-year low. ii) The turnover of home sales that...
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The slow dawn of iron ore horror

021 From the AFR: Former Rio Tinto chief Tom Albanese says weak iron ore prices are here to stay for longer than expected and “volatility is the new normal”, as iron ore sank below $US70 a tonne overnight Tuesday for the first time in five years. ...“As long as there is a large amount of new supply you are going to have a much softer pricing world than people would have anticipated, for at least a couple of years.” He said the ditching of the benchmark pricing system in 2010 had transformed the market. ...“While it’s fun on the way up, it’s painful on the way down.” Yes, it is,...
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PPL ball and chain drags on Budget progress

bloom By Leith van Onselen With the year winding down, and many of the May Budget measures still stuck in limbo, the Abbott Government is preparing to "clear the barnacles" and water down or junk some unpopular measures in order to start the new year on the front foot. As reported in The AFR today, the $7 medical co-payment is set to be scrapped by the Government, along with the attached Medical Research Fund, with Abbott's signature paid parental leave (PPL) policy also likely to be watered down. It is also seeking a compromise with the Senate on university fee deregulation: Senior government...
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Citi: World moving to “everything but coal”

fhger From Citi: In the past two weeks, the US and China announced an agreement signaling stronger action to curb greenhouse gas (GHG) emissions. The International Energy Agency (IEA) issued its annual update, World Energy Outlook 2014 (WEO-2014). China released its Energy Development Plan 2014-2020. We consider the implications of these developments for investors in fossil fuels. Caution for coal and oil, optimism for gas – Citi’s commodities team assessed the impact of the US-China announcement, concluding that lower demand from 2015 to 2030 could be valued at ~US$1.3 trillion for oil and as...
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Macro Morning: Australian dollar to the ground

marketmorning By Chris Becker Even amid broad USD weakness last night, as gold, euro and other major currencies rallied, nothing could save the Aussie dollar from its almost perfect technical short setup as it fell over 1 cent and broke through critical support to a new four year low: I opined yesterday (I can't give any stronger hint than that!) that the four hour chart above was forming a classic head and shoulders bearish reversal pattern with the neckline at the 85.40 level. This medium term setup reflects the longer term picture for Aussie that we've been talking about at MB for a long time and with...
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Australian dollar smash resumes

1343012726_1pesoV The Aussie smash resumed last night with a new four year low just above $85.10: The iron ore crash is playing its part, as is good US growth, with bond rates falling faster in Australia: The end result is the spread between US and Australian bond rates is on verge of breakdown: Phil Lowe gave it a nudge as well. However, the Aussie was singled out for pain across the spectrum: Iron ore is certainly weighing and as it heads for $50 over the next eighteen months we can expect first 80 cents on the dollar, then 60 cents as the rate cuts flow, then sub-50 cents in the next...
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OECD piles pressure onto RBA housing blunder

,hbj The great monetary blunder of our time, attempting to slingshot the Australian economy over the mining bust using a housing bubble, is cast in stark relief today by new advice from the OECD to lift interest rates despite plunging growth, at least according to the AFR: The Reserve Bank of Australia should raise interest rates in the first half of next year to prevent housing prices rising to risky levels and “unwinding sharply”, the Organisation for Economic Cooperation and Development has advised. The OECD’s semi-annual economic outlook sounds an alarm bell about the household saving rate...
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Phil Lowe’s grand plan to kick the can

imgres By Leith van Onselen As noted by Houses & Holes earlier, RBA deputy governor, Phil Lowe, has delivered another Panglossian assessment of the prospects facing the Australian economy, effectively endorsing Australia's 'population ponzi' economic model and 'selling dirt' without adequately considering the downsides to Australian's living standards. Lowe's comments about Australia's rampant immigration intake are particularly curious: Over the past decade, Australia has had almost the fastest rate of population growth in the OECD and this is expected to continue for some time to come...
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Phil Lowe celebrates houses and holes

url My great hope for the future of the Reserve Bank of Australia is fading away. Deputy Governor Phil Lowe showed great promise in the early century as he led from below the bank's push against the Greenspan doctrine of the time. Alas, the independence of thought that characterised that young man appears to have been molded by the bank's awesome powers of group think into just another broken record pushing Australia further and further into structural imbalances. Last night, vice-Capt' Lowe described Australia's houses and holes economy beautifully while completely overlooking its internal...
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Abbott popularity surges among Indian youth

imgres If only they voted, from the UK Telegraph: Australia’s prime minister, has denied claims he bought “likes” on Facebook after it emerged that his biggest supporters are 18 to 34 year olds from New Delhi. Tony Abbott, whose approval ratings in Australia are low, said the surge was due to a recent visit to Australia by Narendra Modi, India’s prime minister, whose foreign tours tend to generate widespread enthusiasm both at home and from India’s expatriate communities. The recent surge in “likes” on Mr Abbott’s Facebook page was detected by a pair of Sydney comedians called the...
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More Glenrio dreaming

images From Gina's mining newsletter: Bernstein’s ­London-based senior analyst, Paul Gait...told The Australian ­Financial Review that Glencore’s shock announcement it would shut down its Australian coal operations for three weeks is a strong indication that Mr Glasenberg will try again for Rio. Mr Glasenberg would be able to point to Glencore’s willingness to pull tonnes out of an oversupplied market in a direct challenge to Rio over its expansion in iron ore, Mr Gait said. “To me this coal announcement is clearly Ivan ­playing games,” he said. “It had the language of someone trying to...
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Daily iron ore price update (Highway to Hell)

anvil6-200x200 Find below the iron ore charts for November 26, 2015: As expected, Chinese iron ore bears are in total control. The paper conflagration is raging out of control with Dalian signalling $60 by May. Surely we'll sink into the $50s today. Physical is no match for the wild fire and benchmark plunged well past Qingdao to $68.60. Texture from Reuters: "We're seeing very slow trades for spot cargoes. I think some sellers are also holding back and getting reluctant to accept the low prices," said an iron ore trader in Shanghai. "Iron ore markets remain conflicted, with oversupply from...
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Daily LNG price update (Brent bash)

fg35 Oil was knocked hither and thither last night as OPEC members muttered about no cuts and tightening discipline on existing targets.  Brent is down 2% in the low $78s as I write: The equivalent LNG contract estimate is $11.64mmBtu: The spot market is still weakening as well, down 6 cents to $10.10mmBtu, with sub-$10 in its sights: In news, the AFR has nice wrap on the state of play for developing US projects: The US could be shipping 60 to 70 million tonnes of liquefied natural gas by the end of the decade, cementing it as one of the industry’s top three players. ...Three...
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The hope of a Chinese rebound

Screen-Shot-2014-11-25-at-13.46.39 From Gavekal’s Chen Long via FTAlphaville: The crucial question is how the new easing cycle will affect credit growth and economic growth. In both 2009 and 2012-13, credit growth surged following rate cuts. In 2009, total credit growth leaped to 36% as new bank loans doubled the target official target. In response GDP growth rebounded to 12% and property prices skyrocketed. In 2012-13, YoY loan growth bounced modestly to 16%, but total credit growth rebounded to 22% in early 2013 as shadow financing exploded. The credit easing ignited another property boom, but the impact on the real economy...
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Links 26 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The commodity super-cycle aint over yet - Market Anthropology Oil prices: What’s the futures market telling us - covestor.com The bull case for European equities - Financial Times US Stocks Surge To ’Best’ Streak In 86 years - Zero Hedge The 51% Chinese Stock Rout That Analysts Never Saw Coming - Bloomberg Millennial Investors Don’t Trust The Market - mebfaber.com North America: US GDP registers best consecutive quarters of growth since 2003 -  Real Time Economics Q3 GDP revised upwards - Bespoke US house price inflation slowing -...
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