Cross-posted from The Conversation Amid the doom and gloom of recent world economic reports, Japan has provided a rare source of good news. In the first quarter of the year, its economy grew by 0.9%, indicating an annual growth rate of 3.5%. This is considerably higher than most comparable nations; the US is growing, but at a lower rate, and much of Europe is still in recession. Japanese growth is particularly welcome as the country’s economy has stagnated for much of the past two decades. Confidence is in short supply, and investment and consumption are lacking. Even zero interest rates...

By Leith van Onselen As noted earlier by Houses & Holes, today's sharp fall in the Westpac-Melbourne Institute Consumer Sentiment Index was an unwelcome wake-up call for an economy that has struggled to gain momentum despite -2.00% of cuts to official interest rates since November 2011. The Consumer Sentiment index fell for the second consecutive month, slumping by -7.3 points in May to just to 97.6. It was the biggest monthly decline in the index since December 2011, with sentiment now running well below the 100-point threshold seperating optimists from pessimists (see next...

This morning BREE released a half -yearly document that poses some very serious questions about Australian economic prospects. It's forecasts for a fall in the mining investment pipeline from $268 billion today to $70 billion in 2017 is, being kind, a bit of a concern. Yet neither the AFR nor BS has even reported it, let alone discussed it, though The OZ has managed a small story. They're busy splitting hairs over a surplus that has zero chance of ever becoming a reality. This could be for a number of reasons: political bias: they do not want to see any tough questions thrown at Tony's...

At last we're getting somewhere in official circles. The Bureau of Resource and Energy Economics (BREE) has released its April half report and, yes, there is an investment cliff in the offing. For the first time, BREE offers a forecast for the stock of  investment in the pipeline in the years ahead: BREE has modelled two scenarios based on this rating system: • A ‘likely scenario; which includes all existing projects at the Committed Stage and the projects assessed as likely to progress to the Committed Stage in the next five years. • A ‘possible scenario’; which includes all...

By Leith van Onselen Back in April, Kyle Bass, head of Dallas-based hedge fund Hayman Advisors LP, outlined to CNBC (above) why he is shorting the Yen and Japanese Government Bonds: Kyle Bass: I think it's really important to understand the magnitude of what they're embarking on. It's essentially doubling the monetary base. It is a giant experiment. Doubling the monetary base in two years is extremely experimental. But when you're backed into a corner, and your debts are more than 20 times your central government tax revenue, you're already insolvent. It's to the point that they have to do...

DEEWR jobs ads for April are out and were down 3.6%: The falls were widespread by state: And by industry: Vacancy Report May...

It seems a little bit of reality goes along way in Australia with the May consumer sentiment number crashing in the wake of the Federal Budget, down 7%. The full release is worth a read: This print pushes the Index back into a range where pessimists outnumber optimists for the first time since October 2012. It is the lowest read since August 2012. Over the last 2 months the Index has fallen by 11.7% to fully reverse the promising 9.0% increase we saw in February and March. Of course, the remarkable aspect of this result is that it is the first read of the Index since the Reserve Bank cut the...

The Kouk's perfect economy continues to underwhelm today with Myer's quarterly trading update the latest disappointment: Myer Holdings Limited (MYR) today reported third quarter total sales for the thirteen weeks to 27 April 2013 of $652.5 million, up 0.5 percent compared to last year. On a comparable store sales basis, sales were up 0.4 percent compared to last year, representing the fourth consecutive quarter of positive comparable store sales growth. According to the AFR, markets were expecting between 1% and 2.3%, versus the first quarter's 1.7% same store growth. Consumer confidence will...

Dunn and Bradstreet is out this morning with a  report suggesting quit e bit of stress in company cash flows: Business cash flow has slowed this year, placing further strain on a range of industries already experiencing low confidence because of weak trading activity and high operating costs. Businesses are waiting nearly eight weeks to be paid by other companies according to Dun & Bradstreet’s latest Trade Payments Analysis, with the average invoice payment time rising to 55 days during the first quarter of 2013. This figure compares to a national average of 52 days in the previous...

By Leith van Onselen The fallout from Treasury Secretary, Dr Martin Parkinson's, speech yesterday on budget forecasting processes has continued, with economists questioning the Treasury's forecasting abilities given the big writedown to budget revenues over the past year. The above segment from ABC's The Business summarises the debate well. As explained yesterday, the Treasury has effectively been caught-out by a sharper than expected fall in commodity prices which, when combined with the stubbornly high Australian dollar, has depressed growth in nominal GDP, adversely affecting tax...

Citi is out this morning with a note downgrading Australian equities to a sell: A Strong Run — Australian equities have started 2013 well and the local index has now hit our strategists’ year-end target. Tony Brennan, our Australian strategist notes that PE valuations in Australia have moved 10% higher than the two decade average which was largely a period of low inflation and interest rates. The recent rerating of Australian equities has been concentrated in the more defensive stocks. Global Search for Yield — Australian equities have performed well as the global search for yield has...

Tonight is a big night for stocks and markets more broadly because when Bernanke speaks he is likely to get a reaction. The reason I say that is because I have no doubt that the entire stock market rally is related to the Fed's QE operations and as such if there is a sign that the "taper" is coming then it seems likely that stocks might swoon. But what he is going to say is less clear than we may think because the battle continues to rage inside the Fed as to the appropriate course of action. As a sop to the hawks the Fed has announced it will change tack when unemployment hits 6.5% but they...

Find below or from our dedicated podcast feed (click the purple icon in the "Follow Us" sidebar to subscribe) a new podcast with Leith van Onselen and Gunnmatta examining recent released tax statistics covering the use of negative gearing in the Australian property market. The discussion is drawn from a much more comprehensive report available in the May MacroBusiness Members Report by clicking here for the Member's Pavilion forum thread. If you would like to become a member then...

Goldman Sachs yesterday released an uber-bullish forecast for US equities: End of US economic stagnation suggests S&P 500 P/E expansion In advanced economies, P/E multiples expanded by an average of 15% during the year before GDP growth returned to trend. Our year-end 2013 implied forward P/E of 15x would represent a 13% increase vs. 2012. Our S&P 500 forecast reflects a one P/E multiple point premium Reasons for P/E expansion include confidence in the medium-term outlook for US economic growth and the wide gap between equity and persistently low bond yields that we assume will be...

By Leith van Onselen Master Builders Australia (MBA) has forecast a big recovery in housing construction, although non-residential construction (including mining-related engineering construction) is expected to struggle. From Property Observer: The embattled residential building sector is forecast to recover strongly over the next three years, with the catalyst being low interest rates... Masters Builders Australia (MBA) forecasts the value of residential building work done, in real terms, to grow from $46.2 billion in 2012-13 to $60.9 billion in 2015-16. Over this same time frame,...

Cross-posted from Mark the Ballot. With a fresh Budget to assess, every polling house was in the field searching for a Budget bounce. And you would never read about it, but they found one. The combined message is one of a small bounce-let for the Government. (And this is where I feel a compelling need to utter the following mantra as a public service: don't confuse correlation with causation. Just because some polls went up, it still could be noise, and even if its real it doesn't mean the Budget made it...

Find below the iron ore price table for May 21,...

Global Macro/Markets: “The gold standard remains the best available monetary mechanism” - marketmonetarist.com On Whose Research is the Case for Austerity Mistakenly Based? - harvard.edu The "Austerity Myth": Gain Without Pain? - repec.org How bad could the crisis get? Lessons from Iceland - VOX Instead of Low Rates, Let's Have Bigger Deficits - Bloomberg New Era for Global Bonds: Everything You Know Is Wrong - CFA Institute North America: Drop in U.S. underground water levels has accelerated -USGS - Reuters The Unemployed Need Bold, Creative Moves from the Fed - The...

The S&P 500 couldn’t quite make it into positive territory, although momentum is clearly positive, with Bespoke Investments highlighting that the market has put on gains 61 out of the last 96 days. Interestingly, there has only been one year in history where the S&P 500 was more consistently positive. It also points out that the Nasdaq has made a higher high for sixteen straight days, which is the longest streak since 1999. The index closed at 1666.29, just a tick below the 200% retracement of the May to October 2011 sell-off at 1666.39 (see chart). A break here on a closing basis would...

By Leith van Onselen Please find below a speech today by Treasury Secretary, Dr Martin Parkinson, to the Australian Business Economists. The speech goes into great detail about the Australian Treasury's budget forecasting processes and record, arguing that the Australian economy has been buffeted by large shocks - both positive and negative - which have made forecasting budget revenues extremely difficult: We have: seen Australia’s terms of trade rise to record highs; witnessed the largest downturn in the global economy since the Great Depression; experienced sharp rises and falls in asset...

By Leith van Onselen Following-on from today's profit warning and announcement of job losses from Transfield Services, which follows similar announcements last week by Coffey, UGL and Worley Parsons, drilling contractor, Boart Longyear, has today lowered its earnings guidance and amid slowing mining activity. From the AFR: Drilling contractor Boart Longyear has said its revenue and earnings will be at the low end of analyst forecasts, which have already come down significantly this year as the company struggles with a weakening mining market... The company, now led by former Newmont Mining...

By Leith van Onselen Today, the Pascometer has published an interesting article outlining a proposal by the Association of Super Funds of Australia (ASFA) to tax superannuation lump sum withdrawals in order to prevent retirees from running down their retirement savings. From Business Day: The superannuation industry's peak body wants a 15 per cent tax applied to lump sum superannuation withdrawals, rising to 30 per cent for withdrawals over a certain, yet to be defined, limit... ASFA argues that it is necessary to encourage individuals not to run their retirement savings. “The primary...

MB has been contacted by Joe Hockey's office this afternoon denying the Shadow Treasurer has any intention of touching negative gearing, the third rail of Australian taxation. The missive from the office reads: Tony Abbott was clear last Thursday night, saying if a Coalition Government is elected it “will consult with the community to produce a comprehensive white paper on tax reform. We’ll finish the job that the Henry review started and this government squibbed. We want taxes that are lower, simpler and fairer and will take proposals for further tax reform to the following election.” Mr...

By Leith van Onselen My decision on election day has become easier after Federal Treasurer, Wayne Swan, today ruled-out making any changes to negative gearing rules, which cost the taxpayer around $4 billion currently. From News.com.au: FEDERAL Treasurer Wayne Swan has ruled out supporting any changes to the existing negative gearing arrangements... "We ruled out any change to the existing arrangements in our response to the Henry (tax) report," Mr Swan told reporters in Adelaide on Tuesday. "It appears that the Liberal Party have thrown open that whole discussion. It's entirely a matter...