The politico-housing complex is careening towards doom

buffaloes In early 2010 I wrote at Business Spectator that I did not think that the time had yet come for the reckoning of the Great Australian Housing Bubble. My rationale was simple. Although the bubble had been obvious for a decade and more, it was equally clear that authorities had the wherewithal to bail it out if trouble came. And so it has proven to be.   The commodity super-cycle came and went and housing eased and then boomed again. In 2011, I coined the phrase "politico-housing complex" to define the extraordinary capture of policy at all levels of government by the bubble, its ideologies...
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Turnbull measured on online piracy

ScreenHunter_3568 Jul. 31 15.40 By Leith van Onselen It seems the Coalition's draconian internet policy is being driven by Attorney General, George Brandis, with Communications Minister, Malcolm Turnbull, taking a far more measured approach is an interview yesterday on ABC Radio. While Turnbull stated in the interview that Australians should not steal online content, he did also acknowledge that Australians are being ripped off and urged copyright holders to discourage piracy by making their content readily available at prices similar to those offered overseas: ...there is an obligation on the content owners, if their...
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DFAT, US warn on Ebola

Diseased_Ebola_2014 From DFAT: The outbreak has prompted Australian embassy staff to defer travel plans to Guinea, Liberia and Sierra Leone. "We recommend Australian travellers do the same," the Department of Foreign Affairs and Trade said in its latest updated advice. There's a real risk that Australians travelling in the region could become stranded if the outbreak worsens, the department said. Liberia has already closed most of its borders to combat the disease and entry points that remain open are being used as ebola prevention and screening centres. DFAT warns that borders in the region could close and...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Asia has capped off what has been a sensational month to be long Asian equities, although there are only modest signs of window dressing which seems confined to Australia and Japan. Yesterday I wrote about the huge outperformance in July by Asian markets relative to many Western markets, and I continue to hold a favourable bias to this region. After market yesterday it was detailed that international investors were the biggest buyers of Korean equities on the day since September 2013, so this was case in point. The ASX 200 has rounded off...
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China must slow, says IMF

images From Reuters: China should set an economic growth target of 6.5-7 percent for 2015 and refrain from stimulus measures unless the economy threatens to slow sharply from that level, the International Monetary Fund said on Thursday. Most of its directors hold that view, though some feel that an even-lower growth target is appropriate, the IMF said in the conclusion of its annual Article IV economic consultation with China. "Regarding the growth target for 2015, while most directors concurred that a range of 6.5-7 percent would be consistent with the goal of transitioning to a safer and more...
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Skills shortages at an “historic low”

ScreenHunter_2989 Jun. 26 08.16 By Leith van Onselen The Government's planned relaxing of 457 visa rules so that employers can hire an unlimited number of foreign workers under a temporary working visa, potentially opening the system to widespread rorting, is looking even more egregious following the release today of the Department of Employment's preliminary skills shortages report, which reveals that the number of occupations suffering skills shortages is at an "historic low": Employers continue to recruit skilled workers without marked difficulty, and the number of occupations in shortage is at an historical...
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Analysts wrong again on earnings

PC_wide_31Jul-DB-lessons-learned-620x349 From the SMH blog: Earnings have been forecast to grow by an average of 15% as the year begins, but end up growing by 6%. Excluding recessions, the initial 15% forecast drops to 11%. But in the past decade or so the downgrades have been smaller. The current picture: In recent months accelerating downgrades suggest limited EPS growth ahead, although improving global growth in 2H could improve this a little. As it stands, analysts forecast 7% for FY15 – a low number to start the year, and history suggests upgrades are uncommon. This leaves Australia not looking particularly attractive...
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Australia’s terms of trade to get hammered

ScreenHunter_3560 Jul. 31 13.44 By Leith van Onselen The Australian Bureau of Statistics (ABS) released export and import prices for the June quarter, which portends big falls in Australia's terms-of-trade when the national accounts are released next month. According to the ABS, export prices fell by 7.9% in June quarter and by 1.9% over the year. By contrast, import prices fell by a more moderate 3.0% over the June quarter but rose by 5.7% over the year (see below table). The fall in export prices were driven by the following factors: This [7.9% quarterly] decrease was driven mainly by falls in the prices received...
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Bloxo: Iron ore to soar!

anvilflying From Bloomie: Iron ore is heading for the biggest monthly increase this year on speculation that demand for imports in China may be improving, helping to absorb a global surplus as local supplies in the largest buyer are displaced. Ore with 62 percent content delivered to Tianjin rose 0.6 percent to $US95.90 a dry tonne yesterday, according to data from The Steel Index. The raw material climbed 2.2 percent this month, poised for the largest advance since November. Prices gained a similar amount in June, snapping six monthly losses. Iron ore rebounded last month from the lowest level...
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Kouk reverts to rate hikes!

imgres From the Kouk: Some mixed news on the economy today – it suggest that the strong start to 2014 may have edged off a little, but that a resurgence in credit growth and on-going house price inflation are issues that will test the RBA in the months ahead. For now, with the economy rolling along with uneven pressures, the RBA is set to keep interest rates on hold next week and probably for some months beyond. Credit growth was upbeat, with a monthly rise of 0.7 per cent in June, which was the largest monthly rise since March 2008. Borrowers are back in town! This means that annual credit growth leapt...
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Dwelling approvals tank in June

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of June. At the national level, the number of dwelling approvals fell by a seasonally adjusted 5.0% to 15,659. The overall fall was broad-based, with the volatile unit and apartment segment falling by 10.5% and the more stable house approvals segment falling by 2.2%. The result disappointed analysts’ expectations, who had expected a flat result over the month. In the year to June 2014, dwelling approvals rose by a seasonally-adjusted 16.0%, with house approvals up by 13.1% and...
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West Pilbara cheap as chips?

sdf From Reuters: Aurizon Holdings Ltd , which teamed up with Chinese steel giant Baosteel to gain a 50 percent stake in the West Pilbara Iron Ore project in Australia, expects the port and rail cost to come in well below a 2012 estimate of A$4.6 billion ($4.29 billion). "We can't quantify it at the moment. But our expectation is that the numbers will be very materially different, i.e. better, than the ones that were anticipated in those 2012 numbers," Aurizon CEO Lance Hockridge told Reuters in an interview on Thursday. And? If iron ore is at $70 then WP iron ore will be...
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Investors still pigging out on mortgage debt

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 June: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.6% MoM; 0.4% QoQ; 0.7% YoY) and business credit growth (1.0% MoM; 1.5% QoQ; 3.5% YoY) continue to grow at a modest pace in annual terms, whereas housing credit growth (0.6% MoM; 1.8% QoQ; 6.4% YoY) is stronger, although is remains at fairly subdued levels relative to its long-run average growth rate. The below chart shows that housing credit...
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Adelaide to force housing into CBD

ScreenHunter_21 Apr. 10 19.29 By Leith van Onselen South Australian planning minister, John Rau, has announced that he wants to more than double Adelaide's CBD population within a decade, as well as house another one million people in the existing urban footprint. From News.com: “If we had the same density as is in North Adelaide through the existing footprint of the city, we could probably absorb another million people or something,” he said... “I think within the next 10 to 15 years we should aim for 50,000 in the city, maybe even that is a little modest and we could push that harder,” he said... “People...
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Coast-to-coast, Coalition mulls Keynsian romp

imgres From the quarterly Deloitte Access Economics Investment Monitor out today: Holding pattern As the Australian economy continues its transition away from growth led by investment in the resources sector, there are signs that investment in other sectors may lift over the coming year. Data from Deloitte Access Economics’ Investment Monitor database shows that the value of major projects is currently in a holding pattern. The total value of all projects has barely budged since June 2013, predominately due to the relatively static value of resources projects under construction. The resources...
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Deposit growth stable (members)

sdfq From APRA's June banking statistics out today. Monthly deposit growth is more or less stable: Year on year is the same around 8%: The components are showing stability for households and corporations but pressure for financial institutions as credit growth accelerates: I think it fairly clear that the current level of credit growth has already surpassed local deposit growth but the switch has coincided with the global dash for trash driving down bond yields. A presumably more accommodating APRA is allowing banks to resume offshore borrowing growth rather than drive up local...
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RP Data house prices leap in July (members)

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s daily house price index for 31 July has been released, which has enabled me to calculate monthly price movements for the five major capital city markets. As shown below, home values at the 5-city rose by 1.55% in May, driven by a big 3.75% jump in Melbourne and a 1.45% rise in Sydney, more than offsetting the small losses recorded in the other major markets: It was the second consecutive lift in values after May’s large seasonal fall: Values at the 5-city level have now increased by 4.97% since the beginning of the year, with all major...
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Sino Iron slowly ramps up

imgres Sino Iron is slowly raising its output but has a long way to go: Hong Kong-listed Citic Pacific has shipped 1mn t of iron ore concentrate from its Sino Iron mine in Western Australia as it continues its slow production growth following its first shipment in early December. The Sino Iron project hit the 1mn t shipment level through Cape Preston on the Pilbara coast on 12 July, according to Citic Pacific. This implies a slow ramp up after it shipped its first 400,000t shipment of magnetite concentrate from the $10bn Sino Iron venture in early December. Citic Pacific has been bedding down the...
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The Coalition’s roads to nowhere

ScreenHunter_3539 Jul. 31 08.24 By Leith van Onselen Business groups have taken aim at the Abbott Government's road funding fettish, arguing that Australia's dilapidated rail freight network is in desperate need of upgrading and is hampering the nation's export competitiveness. From The AFR: Grain exporters are becoming increasingly frustrated with Australia’s poor freight rail networks, claiming lack of investment in rail infrastructure, which has reduced haulage loads and created track congestion, is forcing more grain onto trucks... GrainCorp’s supply chain manager, Matthew Warrington, told an industry conference in...
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Senators: Axe PPL if you want Budget support

ScreenHunter_3079 Jul. 02 09.04 By Leith van Onselen It seems Tony Abbott's paid parental leave (PPL) scheme, which was devised on the fly by Abbott and Rupert Murdoch, has no friends left and faces imminent defeat in the Senate. Following the Greens' reversal last week, in which they announced that they would now oppose the scheme, key Senate cross-benchers have called-on the Coalition to axe PPL if they wish to secure support to repair the Budget. From The AFR: Senators Nick Xenophon and Bob Day singled out the scheme ahead of separate meetings in Adelaide on Wednesday with Treasurer Joe Hockey... Mr Hockey has hit...
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Former chief minister opposes ACT light rail pork

ScreenHunter_06 Jun. 06 09.33 By Leith van Onselen Former ACT Chief Minister, Kate Carnell, has joined the growing chorus of people against the ACT Light Rail Project, arguing that the population density along the proposed rail route linking Gungahlin in the North and Civic is far too low to make the project viable. From The Canberra Times: [Carnell said] a price tag of $614 million for the project risked detracting from other infrastructure development in the capital... "I think it’s a great idea but we just couldn’t make it work 10 or 15 years ago, and I give you Canberra is a bit bigger now but it’s not bigger...
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China expands housing market supports

fgrs BofAML has useful inventory of the burgeoning Chinese housing policy supports today: Weak property market calls for more concerns The Minister of Housing and Urban-Rural Development (MOHURD), Chen Zhenggao, said on 18 July that one of the top priorities would be destocking of the housing market. A focus on sales may imply further price cuts or discounts, adding to the price concern. The property market remains the major downturn risk for the Chinese economy, in our view. As one of the mini-stimulus measures, the PBoC has requested since mid-May that commercial banks lower mortgage rates and...
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China’s anti-corruption drive is just starting

imgres Via FTAlphaville, Gavekal today sees a top in China's anti-corruption drive: The hunt for tigers should therefore be winding up, now that Xi has bagged both Zhou, the former security chief, and retired general Xu Caihou, a former senior military leader. Such a shift could alleviate some of the political uncertainty that the anti-corruption campaign has brought about, since its breadth and ambition has kept every Chinese official guessing about who will be targeted next. The swatting of flies, however, is certain to continue. About 63,000 people, mostly lower- level officials, have already been...
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Daily iron ore price update (range trade) (members)

liub Here are the iron ore charts for July 30, 2014: Paper markets retraced, including rebar futures. Physical was up but is going nowhere fast. Likewise the BDI cape was up 5 points and is dancing on the spot. Reuters has texture: "Mills are still in the market to buy some material although demand is not that big, so the market is still oversupplied," said an iron ore trader in Shanghai. ..."Local stockists are booking for immediate requirements only, due to continuing price fluctuations and the arrival of the rainy season," said British-based steel consultancy MEPS on China. Basically,...
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Australian dollar smacked on US growth (members)

iluiub The US released Q2 GDP last night and the news was good (charts from ZH): Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.0 percent in the second quarter of 2014, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 2.1 percent (revised). The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports,...
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