Weekend Reading 25-26 February 2017

Global Macro / Markets / Investing: On the fickleness of capital flows – VOX Longevity in rich countries – The Economist Report: The Corporate Innovation Imperative – Medium U.S. Gas ’Pain Train’ May Chug Along as Spring Fever Grips Bears – Bloomberg End of Bacon Boom Sends Pork Prices Tumbling the Most in Three Years – Bloomberg Foreign booms, domestic

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Macro Afternoon

by Chris Becker Asian markets remain very cautious, unable to translate new record highs on US stock markets to further advances domestically. Currencies are little changed with the USD remaining steady against most majors after last nights falls while commodities are mixed as iron ore falls and oil wants to lift higher after being steady


China steel mill sentiment rockets (or does it?)

From Macquarie: Our survey respondents are the most bullish they’ve been in over five years. This bullishness is clearly reflected in recent price moves in steel and iron ore. Source: Macquarie Bank The bullish sentiment is reflecting expectations for post Chinese New Year demand rather than recent orders…orders have been more subdued as is to


Phil Lowe back tracks on company taxes

By Leith van Onselen A fortnight ago, RBA Governor Phil Lowe contradictory urged the government to lower Australia’s corporate taxes to attract more foreign investment while simultaneously striving to balance the Budget as well as investing more in infrastructure. These comments were subsequently seized upon by the Turnbull Government to spuik its plan to cut


Bigger cities are engines for inequality

Cross-posted from The Conversation: Australia’s global cities are a very large part of the nation’s economic success, but they are also generating significantly unequal incomes. Our recent research found that as Australian cities have grown, their income inequality has increased. Cities provide many social and cultural opportunities and allow large numbers of people to stay


Dutton the next revolving door PM?

From Bernard Keane, doyen of the Fake Left today: Naturally all this will be seen through the prism of Turnbull versus Abbott. But Abbott is no longer the heir apparent — or challenger apparent — for many in the right. The mantle has fallen on the gormless shoulders of Peter Dutton, now viewed by many


Australia can’t build its way out of population ponzi

By Leith van Onselen The full speech that Ken Henry gave to CEDA yesterday has been released, and Dr Henry pulled no punches in admonishing the Government’s negligence in managing Australia’s mass immigration program. Below are the key highlights: In the broader community, there is considerably less support for a larger population.  People are concerned


Desperate developers dangle insane commissions

An interesting article out yesterday revealed the largesse local developers are now showering on brokers and real estate “advisers” to help move unsold stock from upcoming off the plan apartment developments: Commission payments of up to15 per cent, free tickets to Adele concerts and luxury holidays to Greece are on offer to mortgage brokers and


Who wins from penalty rate cuts?

From Morgan Stanley: Today the Fair Work Commission announced cuts to Sunday and Public Holiday wage rates. We see this a positive development for retailers given Sunday is increasing in importance as a trading day. Our analysis shows a theoretical boost to FY18 EBIT of 4-12% for retailers under our coverage. Sunday is big: We


LNG saved!

The LNG industry flackers have been busy. First we had Bartho telling us LNG was saved, now it’s the AFR: Pakistan, Colombia and Jordan are some of the unlikely saviours of an LNG production industry slammed by the collapse in oil prices. The three count among 2016’s new importers of natural gas transported by ship, to be followed


Shorten reaffirms 50% renewables target

From Reneweconomy: Opposition leader Bill Shorten has accused the Coalition government of policy vandalism on energy, and committed to an emissions intensity scheme that he insists will deliver Labor’s target of 50 per cent renewables in the country’s electricity system by 2030. In a landmark speech at the Bloomberg headquarters in Sydney on Thursday, Shorten


Who uses Australian electricity?

By Leith van Onselen The ABS yesterday released its annual energy account report for 2014-15, which revealed that Australian households have become more energy efficient: “Despite a small increase in energy use, Australian households are becoming more efficient in their use of energy”, said Lauren Binns from the ABS’ Environment and Agriculture Branch. “On average,


Macro Morning

By Chris Becker   While US stocks technically hit another record high, this should be measured in hairs, not leaps and bounds as European stocks retreated amid slowing momentum across risk markets. The USD was hit hard against the majors with all moving higher against “the King”. Oil is breaking out finally after a lower


More on crapex

Via UBS: Q4 capex dropped 2.1% q/q in Q4-16 (after -3.3%), still slumping 15.5% y/y Private real capex fell more than consensus again, down 2.1% q/q in Q4-16 (UBS: -2.5%, mkt: -0.5%), after -3.3% in Q3-16 (was -4.0%). This continued the ‘capex cliff’ with the y/y relapsing to a poor -15.5% (after -13.1%). By sector,


An economics lesson for the population ponzitiers

When foreign supermarket chains ALDI and Costco entered Australia, did Coles and Woolworths welcome them with open arms? What a silly question. Of course not. The entry of foreign competitors undermined their pricing power. So much so, that recent RBA research credited the entry of ALDI with a 13% reduction in grocery prices. Good for


Property money launderers have no better friend than Oz government

By Leith van Onselen For several years, this site has lobbied the federal government to extend Australia’s anti-money laundering (AML) regime, which currently only extends to financial institutions, to real estate gatekeepers including realtors, lawyers and accountants. These “second tranche” of AML rules have been in limbo since the federal government first promised to bring


Gushing praise for WA boomer stamp duty bribe

By Leith van Onselen News.com.au’s Julia Corderoy has penned a spurious article heaping praise on the WA Government’s plan to provide stamp duty relief to retirees that downsize: FINALLY, someone is doing something about the housing affordability crisis. Let’s just hope the rest of the states are brave enough follow suit. West Australian Premier Colin


APRA delivers threatening lettuce leaf to banks

Via Banking Day: APRA will insist on more consistent rules on the assessment – and reassessment of borrowers over loan serviceability, a measure intended to bolster other rules that, in effect, may restrain credit growth. In guarded language in a letter to all banks and ADIs yesterday, the Australian Prudential Regulation Authority said a revised