The politico-housing complex is careening towards doom (members)

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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Coalition to ditch higher HECS interest

ScreenHunter_26 Oct. 16 10.41 By Leith van Onselen The Abbott Government has indicated that it will ditch its plan to apply real interest rates to outstanding student debts after it received advice from the architect of the HECS repayment scheme that it would unfairly punish to poor graduates. From The Canberra Times: Modelling by education economist Bruce Chapman has found poor graduates could pay 30 per cent more for a degree than their high-income counterparts if the government indexes student debts at the government bond rate rather than inflation. Women who take time off work to have children would be among the hardest...
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Official Chinese PMI firms

images News of the day! China's Manufacturing Purchasing Managers Index (PMI) for July is out at 51.7 versus an expected 51.4. Prior was 51. No surprise,...
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The madness of West Pilbara (members)

wefrwew Reuters has more on yesterday's blather surrounding the proposed West Pilbara development: Chinese steel giant Baosteel Group is counting on slashing the A$7.4 billion ($6.90 billion) cost estimate for the West Pilbara Iron Ore project in Australia to justify building a new mine, rail and port that will add to a global glut of iron ore. Baosteel Resources, working with Australian rail operator Aurizon Holdings Ltd, took control of the West Pilbara Iron Ore project in July after sealing a $1 billion takeover of Aquila Resources. In buying into West Pilbara, Baosteel shrugged off the...
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Full RP Data July house price release

imgres Members already got the July house price data from RP Data yesterday but here is the full RP Data release for you squatters out...
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Coalition to facilitate start-ups, innovation

ScreenHunter_3574 Aug. 01 09.56 By Leith van Onselen I have previously lamented how Australia's tax settings discourage entrepreneurs from starting-up new companies and stifles innovation. One of the barriers is Australia’s ludicrous treatment of shares/options received under an employee share scheme, which effectively creates an upfront tax charge where the value often cannot be realised (or shares sold), discouraging the development of start-up companies in the process. Such rules were brought in by the former Rudd Labor Government in 2009, replacing the system whereby employees could defer the tax on shares or...
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China unleashes hukou reform

rewqr From Citi today: Hukou reform details reaffirm positive reform momentum — China’s State  Council released a three-page document regarding China’s hukou reforms,  targeting a uniform hukou registration system and the gradual provision of an equitable public service system. This follow-up to the 30 June Political Bureau  meeting was delivered slightly earlier than our expectation (approx. Sept.),  demonstrating the government’s proactive reforming stance. The gov’t targets to settle a 100m population (mainly migrant workers’ households), moving from rural areas into cities/towns...
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Banks race to borrow offshore

buffaloes From the SMH: Australian banks have relied on wholesale finance to bridge a funding gap for the fourth month in a row, as an expansion in lending continues to outstrip deposit growth. ...But as lending increases, deposit growth is failing to keep pace, pushing banks to raise more debt from wholesale markets. During the year to June, there was a $14.7 billion funding gap between deposit and loan growth, as banks switched their focus towards other cheaper sources of funding. Commonwealth Bank of Australia analyst Tariq Chotani said deposits from households and businesses had only funded 59 per...
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Mirabile dictu: Manufacturing expansion!

Capture The AIG manufacturing PMI is out and don't blink, we're above 50:   The internal look OK too: But a deeper look should reassure policy-makers that their hollowing-out campaign is still on track. Only wood and food are expanding: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) moved into positive territory this month, following eight months of contraction between November 2013 and June 2014. The index increased by 1.7 points, to 50.7 points (seasonally adjusted), indicating broadly stable conditions across the manufacturing...
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Senator Day declares war on developer rent-seekers

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen About the only person in federal politics that is willing to stand-up on the issue of housing affordability is new Family First senator, Bob Day. The AFR has revealed that Senator Day is in the process of selling-off his $80 million stake in Homestead Homes and Home Australia - building companies that he founded 40 years ago - so that he can concentrate on politics and attempt to "weaken the political influence of high-density property developers and land developers" who he claims have "created a housing affordability disaster". Senator Day met Treasurer Joe Hockey...
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The death of evidence-based policy (members)

ScreenHunter_3572 Aug. 01 07.37 By Leith van Onselen What is it with the Abbott Government at the moment? Last week we learned via Treasurer Hockey's biography that Tony Abbott's universally condemned paid parental leave (PPL) scheme was nothing more than a thought bubble between Abbott and Rupert Murdoch, and that the Coalition party room had no input into the policy prior to its announcement in 2010. And while tony Abbott's declaration that he would be Australia's "infrastructure Prime Minister" is a worthy ambition, the Coalition's infrastructure policy has so far been governed more by ideology than robust...
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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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Daily iron ore price update (Vale parley)

sdfwd Here are the iron ore charts for July 30, 2014:    Equilibrium persists across markets. The BDI cape is still becalmed. Reuters has texture: Iron ore would need to see aggressive restocking by Chinese mills for the price to break out of its current range, said Graeme Train, analyst at Macquarie Capital Securities in Shanghai. "I just don't think conditions are quite like this. Chinese steel demand is holding up okay, but I don't think it's getting much stronger. The mills are not in a mood to go out and do a massive restock just yet." "I don't really see any long-term support for...
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Chinese stampede property as blocks lifted

rdn_53d993eacc488 Cross-posted from Investing in Chinese Stocks.   Developers and local governments in China are rushing to sell amid a sudden rise in demand as property buying restrictions have been lifted in 30 out of 46 cities. Some sales are indeed jumping in Hangzhou and Wenzhou at the high end of the market, sparking big upticks in sales figures. No doubt there is some pent up demand, and it's logical that it would be at the high end due to limited supply. The question is how deep this demand goes and if we will also see buying pick up in the middle and low end of the market. The article...
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US applies LNG blowtorch with yet more projects

blow-torch_01 Uncle Sam is on an LNG tear. Overnight the US Department of Energy (DOE) approved another new LNG project for exports and this time it's a greenfields project in Oregon,suggesting even more could be in the pipeline OregonLNG will have a capacity of 9 million tonnes per annum (mtpa) and begin shipping in 2019. That takes the total of US approvals in the past eighteen months to 80mpta, just shy of the capacity of Australia's current wave of projects. As well, the Federal Energy Regulatory Commission (FERC) approved construction of FreeportLNG (it already has export approval).  Meanwhile,...
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Risk off on a thousand cuts (members)

Employment Costs Occupation Group Last night's market action saw risk roar back to life. Stocks fell the better part of 2% in the US and the Australian dollar fell into the high 92s: The US dollar broke out of a one year trading range: Gold was dumped 1% but US bonds were flat at the long end but were bid at the short end. If you're confused then you're in good company. If this was  another taper tantrum then bonds would be selling. Still, there was data to support the move being result of rate rise fears. In the US,  the BLS released micro labour price data that showed inflationary pressures even if its macro data...
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A users guide to idiotic market commentary

image001 From Bespoke comes a useful guide to ignoring market...
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Links 1 August 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why a tick up in Treasury yields shouldn’t be all that surprising - Sober Look Stocks and bonds are once again moving together - Afraid to Trade Financial sector internals point to possible decline - Andrew Thrasher Why emerging markets have more room to run - A Wealth of Common Sense North America: Weekly initial unemployment claims are solidly at pre-crisis levels - Calculated Risk Unemployment to Hover Around 6.2 Percent for the Next Six Months - Brookings Breaking down the Q2 GDP report - Econbrowser California comeback has a long way...
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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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